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"With the component cost and the retail price so close, it’s possible, Rassweiler said, that Sony is taking a very small gross margin or even a possible loss on

"With the component cost and the retail price so close, it’s possible, Rassweiler said, that Sony is taking a very small gross margin or even a possible loss on the console in hopes of making it back on games. “If your cost is within $10 to $20 of the retail prices, there’s very little chance you’re making a profit on the console,” he said." I feel like this understates it. Of course they're making their money on the games. These discs (or even better, digital DLs) cost close to nothing to spit out, yet sell for $60 each. Of course, Sony doesn't make get all of that profit, but come on, Sony isn't stupid -- it's obviously trying to produce a high-end, expensive console with plans on making money on the games.

seivan 13y ago
´These discs cost close to nothing to spit out, yet sell for $60 each.´ What's that supposed to mean? These discs have contents that took years to develop.
- bradddd 13y ago
  I think he's just commenting on the marginal cost of selling an additional unit after production.
- ihsw 13y ago
  Indeed, however the time and money isn't at the cost to Sony. Sony takes a cut of revenue from game sales.
- wdewind 13y ago
  Someone please correct me if I'm wrong, but my understanding was that Sony licenses the discs to the publishers, so in fact to Sony the discs do cost next to nothing (in which case you'd want to include the price of developing/manufacturing the console to make the discs not "cost nothing," not the cost of developing the games, which is on the publisher).
  - seivan 13y ago
    That actually makes more sense. Thanks for clarifying.
- superuser2 13y ago
  But Information Wants to be Free! If can duplicate it cheaply, it shouldn't have a price and no one should get paid for it. They can make money from selling t-shirts instead. You shouldn't expect to make a living just for creating things. /s
- barrkel 13y ago
  They don't cost Sony anything to spit out, but Sony takes a big cut of the sales. Developers even have to pay Sony for hardware, SDKs etc. to develop the content.
orbitur 13y ago
The key here is that they only recently started breaking even on the PS3, and it was released in 2006. I think they've learned their lesson.
- pyre 13y ago
  Part of the issue was trying to cram a BluRay player into the console at a time when BluRay players were new (and could cost $1k). HD-DVD hadn't even lost the battle when the PS3 came out. That, and going with the Cell processor probably really pumped up the cost.
  - jrockway 13y ago
    Blu-Ray "won", right? So it sounds like that was money well spent.
    - wmf 13y ago
      Yep. IIRC at the time Sony said something to the effect that they were willing to lose $4B in the short term to ensure that Blu-ray won the format war.
      - possibilistic 13y ago
        But what happens if and when digital video goes completely to a streaming/download model? And what about 4K/8K? Can Blu-ray as it stands even support that, or would there have to be yet another disc format? I'm wondering if perhaps Sony won a Pyrrhic victory here.
        jrockway 13y ago
        Ultimately, all the protons in the Universe will decay, rendering movies obsolete. I'm wondering what the point of anything is, knowing we will all become nothingness some day. (To be less abstract: they probably made back the money already. Everything else is gravy.)
        13y ago
arrrg 13y ago
Of course the discs cost next to nothing to make but that’s not the point. If you think like that you are completely misunderstanding the entertainment industry and their cost structure. Actually making the game (not the disc but what’s on the disc) is extremely expensive and the production costs of AAA games are actually exploding. Think of all the more or less non-automateable manual work that is involved in creating believable virtual worlds. Think of all the textures that have to be painted, things that have to be animated, lines of dialog that have to be written and voice-acted. Much of this is hard, manual work. There is no way to make it better except by paying more people more money to do it. The second thing that costs a lot is marketing, i.e. making sure that everyone and their grandparents actually know about the game and want to buy it, mostly because making AAA games is so expensive already, so it better be successful. It’s perfectly reasonable to be worried about the new consoles and the future of (AAA) games. Even last generation expensive games like the Tomb Raider reboot sold tons of copies but were nevertheless barely satisfactory in their financial performance. Think about what kind of challenge it must be to make a game for a console fewer people have and that also needs much better assets (i.e. is more expensive) because what’s the justification for making a next-gen game otherwise? The next few years will be extremely interesting for video games. I’m very much looking forward to see how that shakes out (though I wouldn’t necessarily want to work on AAA games). Will there only be few, safe and expensive mammoths like GTAV? Or safe and boring yearly updates to games like Call of Duty? Some of this is already happening. Just look at the bankruptcy of THQ. And on the other end of the spectrum there are tons of indie games popping up (which purposefully limit their scope – mostly by not creating photo-realistic virtual worlds – to get by with much less money). This is a terribly exciting time for video games and I wouldn’t be surprised if this industry looks completely different in ten years (the supposed life-span of these new consoles – maybe the last consoles?). All of this is not to say that Sony doesn’t take a hit on the console but plans to make money some other way, that is probably very true. But it doesn’t have anything to do with the fact that making a plastic disc costs a few cents.
- dylandrop 13y ago
  Yeah but the real question is how much Sony pitches in for development costs. From what I've heard, I hear that the dev company actually pays for all of that, but I'm not 100% sure since I can't find many sources. But if that is the case, then it has everything to do with disc costs.

seivan 13y ago

´These discs cost close to nothing to spit out, yet sell for $60 each.´ What's that supposed to mean? These discs have contents that took years to develop.

bradddd 13y ago
I think he's just commenting on the marginal cost of selling an additional unit after production.
ihsw 13y ago
Indeed, however the time and money isn't at the cost to Sony. Sony takes a cut of revenue from game sales.
wdewind 13y ago
Someone please correct me if I'm wrong, but my understanding was that Sony licenses the discs to the publishers, so in fact to Sony the discs do cost next to nothing (in which case you'd want to include the price of developing/manufacturing the console to make the discs not "cost nothing," not the cost of developing the games, which is on the publisher).
- seivan 13y ago
  That actually makes more sense. Thanks for clarifying.
superuser2 13y ago
But Information Wants to be Free! If can duplicate it cheaply, it shouldn't have a price and no one should get paid for it. They can make money from selling t-shirts instead. You shouldn't expect to make a living just for creating things. /s
barrkel 13y ago
They don't cost Sony anything to spit out, but Sony takes a big cut of the sales. Developers even have to pay Sony for hardware, SDKs etc. to develop the content.

orbitur 13y ago

The key here is that they only recently started breaking even on the PS3, and it was released in 2006. I think they've learned their lesson.

pyre 13y ago
Part of the issue was trying to cram a BluRay player into the console at a time when BluRay players were new (and could cost $1k). HD-DVD hadn't even lost the battle when the PS3 came out. That, and going with the Cell processor probably really pumped up the cost.
- jrockway 13y ago
  Blu-Ray "won", right? So it sounds like that was money well spent.
  - wmf 13y ago
    Yep. IIRC at the time Sony said something to the effect that they were willing to lose $4B in the short term to ensure that Blu-ray won the format war.
    - possibilistic 13y ago
      But what happens if and when digital video goes completely to a streaming/download model? And what about 4K/8K? Can Blu-ray as it stands even support that, or would there have to be yet another disc format? I'm wondering if perhaps Sony won a Pyrrhic victory here.
      - jrockway 13y ago
        Ultimately, all the protons in the Universe will decay, rendering movies obsolete. I'm wondering what the point of anything is, knowing we will all become nothingness some day. (To be less abstract: they probably made back the money already. Everything else is gravy.)
      - 13y ago

arrrg 13y ago

Of course the discs cost next to nothing to make but that’s not the point. If you think like that you are completely misunderstanding the entertainment industry and their cost structure. Actually making the game (not the disc but what’s on the disc) is extremely expensive and the production costs of AAA games are actually exploding. Think of all the more or less non-automateable manual work that is involved in creating believable virtual worlds. Think of all the textures that have to be painted, things that have to be animated, lines of dialog that have to be written and voice-acted. Much of this is hard, manual work. There is no way to make it better except by paying more people more money to do it. The second thing that costs a lot is marketing, i.e. making sure that everyone and their grandparents actually know about the game and want to buy it, mostly because making AAA games is so expensive already, so it better be successful. It’s perfectly reasonable to be worried about the new consoles and the future of (AAA) games. Even last generation expensive games like the Tomb Raider reboot sold tons of copies but were nevertheless barely satisfactory in their financial performance. Think about what kind of challenge it must be to make a game for a console fewer people have and that also needs much better assets (i.e. is more expensive) because what’s the justification for making a next-gen game otherwise? The next few years will be extremely interesting for video games. I’m very much looking forward to see how that shakes out (though I wouldn’t necessarily want to work on AAA games). Will there only be few, safe and expensive mammoths like GTAV? Or safe and boring yearly updates to games like Call of Duty? Some of this is already happening. Just look at the bankruptcy of THQ. And on the other end of the spectrum there are tons of indie games popping up (which purposefully limit their scope – mostly by not creating photo-realistic virtual worlds – to get by with much less money). This is a terribly exciting time for video games and I wouldn’t be surprised if this industry looks completely different in ten years (the supposed life-span of these new consoles – maybe the last consoles?). All of this is not to say that Sony doesn’t take a hit on the console but plans to make money some other way, that is probably very true. But it doesn’t have anything to do with the fact that making a plastic disc costs a few cents.

dylandrop 13y ago
Yeah but the real question is how much Sony pitches in for development costs. From what I've heard, I hear that the dev company actually pays for all of that, but I'm not 100% sure since I can't find many sources. But if that is the case, then it has everything to do with disc costs.