The PS4 deals are actually a profitable sales price for Sony, with the PlayStation 4 breakdown proving it’s not a loss leader based upon components alone. But there’s more to the story and you might be wondering about how the Xbox One compares to the PS4.
As previously reported by The Inquisitr , if you’re looking for PS4 deals Black Friday 2013 is unfortunately not the “perfect day” promised by Sony , although there will be some PlayStation 4 game deals available. Just be wary of any PS4 glitches , although the PS4 Blue Light of Death is not always the end of the world .
To offer a “loss leader” means a company is selling a product at a financial loss in order to make money in other ways. For example, the McDonald’s dollar menu tends to be loss leaders, but they make money on drinks and more expensive menu items. When it comes to video games the big three companies make their money on licensing fees and first-party software sales.
Nintendo introduced the concept of the loss leader to the gaming industry a long time ago, although the Wii and Wii U are supposedly sold at a small profit. The original Xbox and the Xbox 360 were very large loss leaders, causing Microsoft’s profits to dip severely into the negative for quite a while. But Microsoft did this in order to take market share away from Sony and Nintendo. But the PS3 hardware also cost Sony dearly at first, losing them around $300 per unit sold, which amounted to 232.3 billion yen in 2007. Even the PlayStation Slim was sold at a $31.27 loss.
A Xbox One and PlayStation 4 hardware cost comparison is difficult to make.The Xbox One sales price iss $499 while the regular PlayStation 4 sales price is $399. But the Xbox One comes standard with the Kinect 2.0 while the PlayStation 4 Camera bundle is a separate deal and also costs $499. The original Kinect sensor was made by an external company but Microsoft redeveloped it for the Kinect 2.0 to make it much more accurate, although it’s possible it’s now cheaper.
Both gaming consoles have BluRay ($28), 500GB hard drives ($37), WiFi, and one controller as standard, although the PS4 has a touchscreen built into each controller. The most expensive internal components tend to be the the combined CPU/GPU ($100) and the memory ($88), but both the Xbox One and PlayStation 4 hardware is largely made by the same company called AMD.
A PS4 breakdown by a company called IHS iSuppli estimates the PS4 deals are actually much more in favor of Sony this time around. The PlayStation 4 hardware is estimated to cost around $372 but a $9 labor cost (and that’s including the unpaid Foxconn interns forced to work on the PS4 assembly lines ) brings the total cost up to $381, which is only $18 below the PS4 sales price of $399.
But that doesn’t mean the PlayStation 4 sales price necessarily means the PS4 deals are currently profitable for Sony. The retailer has to get their cut out of the $399 and there’s the cost of shipping, marketing, technical support, and research and development.
While Sony hasn’t revealed exactly how much money they’re losing on PS4 sales, Microsoft revealed months ago it intended the Xbox One sales price to be profitable from the outset:
“The strategy will continue which is that we’re looking to be break even or low margin at worst on [Xbox One]. And then make money selling additional games, the Xbox Live service and other capabilities on top. And as we can cost-reduce our box as we’ve done with 360, we’ll do that to continue to price reduce and get even more competitive with our offering.”
Besides costing $100 more than the PlayStation 4, the Xbox One deals give Microsoft the profit edge. Since we haven’t managed to get our grubby mitts on a Xbox One yet we can’t estimate how much the components cost, but if you go by the PS4 breakdown about half the cost was the APU (a System On a Chip design that includes both the CPU and GPU ) and the memory. The Xbox One memory is GDDR3, which is far cheaper than the PS4 GDDR5 memory. Although the Xbox One has the added expense of embedded memory, and the CPU is about the same, the GPU is physically less complex so you’d assume it would be cheaper to manufacture.
Still, once you include all the extra costs the Xbox One is still likely to be a loss leader just like the PlayStation 4. But in the end it’s the games that make the system. The Xbox One launch titles outnumber the PS4 greatly, and EA just announced the Titanfall PS4 port is cancelled. Since many of the other games are multi-platform the biggest PS4-only exclusive at this moment is Killzone and the upcoming Uncharted:
Now that you know the estimated cost to Sony and Microsoft, what do you think about the Xbox One and PS4 deals?