Report: Sony Halves PS3 Costs

Analyst comments in a new Business Week article haves suggested that Sony have been able to halve the cost of PlayStation 3 production since the console’s launch in 2006 from around $800 to $400, primarily due to a reduction in the number of parts used. Although most new consoles are sold at a loss in the initial months, companies are usually able to gradually reduce production costs as components become cheaper and manufacturing processes are streamlined. The controversial removal of the PlayStation 2 “Emotion Engine” for backwards compatibility and the loss of several non-essential hardware ports from the recent 40GB version of the PlayStation 3 have been some of the more obvious examples of this process. Nikko Citigroup’s Kota Ezawa estimates that Sony Computer Entertainment (SCE) will see its losses fall from $2.1 billion to $1.4 billion this fiscal year, with the manufacturing savings likely to lead to profitability in 2009. SCE CEO Kazuo Hirai had previously suggested that profitability would be possible in the 2008 fiscal year. The article connects Warner Bros. Entertainment’s recent decision to exclusively support the Blu-ray format to sales and market penetration of the PlayStation 3. It also reports that Sony Group chairman and CEO Sir Howard Stringer will remain in his position for another three years.