Sony To Lose $400 On Every PS3 Sold

Sony will bleed at least $400 on every PS3 games console that goes on sale this weekend in the USA.

This means that at an an average purchase price of between $75.00 and $150.00 for each PS 3 game Sony is going to have to wait till consumers have purchased at least 8 games before they start to see a profit.

In the USA A 20-gigabyte version of PlayStation 3 costs almost $806 to make and will sell for $499, leading research Company iSuppli has said in a research note today. The 60-gigabyte model retails for $599 and costs $840 to build, based on an analysis of assembly and parts costs.

Console makers typically lose money on each machine in a bet they will make up the difference in sales of games. The size of Sony’s loss, though, is a greater than Microsoft Corp.’s deficit of $153 per unit when it started selling the Xbox 360 last year, iSuppli analyst Andrew Rassweiler said.

This is a magnitude more expensive,'' Rassweiler said in an interview.The ratio of cost to retail price is much greater here than it was on the Xbox 360.”

Sony is counting on the PlayStation 3 to maintain a lead in sales over the Xbox 360 and Nintendo Co.’s Wii, which debuts in the U.S. Nov. 19. The three console makers are battling for bigger shares of an estimated $20 billion worldwide market for video-game software and hardware.

Sony had similar losses on its PlayStation and PlayStation 2 consoles, said Jack Tretton, co-chief operating officer for Sony Computer Entertainment America. Both ultimately became incredibly profitable,'' he said in an interview.We really look at this as a 10-year product life cycle.”

Costs will come down as Sony boosts production of the console, Tretton said. The company, hindered by parts shortages that slowed production initially, is likely to produce as many as 1.5 million a month once assembly lines in China are in full swing, he said.

Costs for the PlayStation 3 include $89 for the Cell processor. The most expensive part is a Nvidia grahics card that costs $129, iSuppli said.

The machine also offers more computing power than rival machines, iSuppli said. The analysis doesn’t include the cost of the controller and other extra parts.

“It’s kind of like buying a supercomputer for the cost of an entry-level or mid-level PC,” Rassweiler said.