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Yoshida: After Three Years, PS3 Hardware Breaking Even

Yoshida: After Three Years, PS3 Hardware Breaking Even

June 29, 2010 | By Kris Graft

June 29, 2010 | By Kris Graft
More: Console/PC

After years of selling PlayStation 3 hardware at a loss, Sony Computer Entertainment Worldwide Studios head Shuhei Yoshida said that the company is finally at least breaking even on hardware sales.

"This year is the first time that we are able to cover the cost of the PlayStation 3," Yoshida told IGN. "We aren't making huge money from hardware, but we aren't bleeding like we used to."

When the PS3 launched in 2006, supply chain analysts at iSuppli estimated that Sony lost over $300 on every 20GB model sold, and over $240 for every 60GB console sold. Those losses came despite steep retail launch prices of $499 and $599 respectively.

In December, iSuppli did another teardown following the September 2009 release of the slimmed-down PS3 hardware. Boasting less-expensive components, the more cost-effective model was losing Sony around $37 per console sold, the analysts estimated, with new consoles selling for $299.

On the back of a product rebranding, a new marketing campaign and new more affordable hardware, Sony said that it has been struggling to keep up with demand. In May, major U.S. retailer GameStop said PS3 was out of stock an average of 80 percent of the time during the February-April quarter. Yoshida told IGN that Sony is "trying to catch up our production."

Selling a console at a loss is typical for Sony and Xbox house Microsoft. Console makers sell hardware below costs to establish an initial install base, then make money back after a time when economies of scale make hardware profitability possible -- and through sales of higher-margin software. Nintendo, however, makes it a standard practice to not sell hardware at a loss.

Yoshida added that Sony is not looking to further cut the price of the console in the near future, but rather taking a value-added strategy through hardware-software bundles, including a package that includes software, a PS3 and the PlayStation Move motion control system.

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