Concrete statistics on "loss per console sold?"

[Cthulhu]

This ties into the E3 stuff a little bit, but I don't want to clog up the threads with talk of a lot of current and old systems.

Everyone likes to talk about how much money is "lost" per unit sold. About the idea that Microsoft loses money on each Xbox sold, Sony on each PS2, etc. I agree that they probably are indeed losing money on them, but the numbers I hear vary wildly and often reach ridiculous amounts.

Does anyone here have actual concrete, quoatable, tracable statistics for the amount of money that is "lost" on the purchase of console systems? Are actual figures available, or are we left with little more than wild speculation?

[poopnes]

This ties into the E3 stuff a little bit, but I don't want to clog up the threads with talk of a lot of current and old systems.

Everyone likes to talk about how much money is "lost" per unit sold. About the idea that Microsoft loses money on each Xbox sold, Sony on each PS2, etc. I agree that they probably are indeed losing money on them, but the numbers I hear vary wildly and often reach ridiculous amounts.

Does anyone here have actual concrete, quoatable, tracable statistics for the amount of money that is "lost" on the purchase of console systems? Are actual figures available, or are we left with little more than wild speculation?

Wild speculation I'm affraid. Though I think Microsoft is the only one still loosing money with each console sold.

[thehistorian]

Sony has always made a unit profit on each PS2 sold. In both of the press conferences for follow-up questions pertaining to the 2000 and 2001 stock report for investors, which were available online in audio files on Sony's website for months after the publication of their annual report, Sony openly discussed how the PS2 is profitable on each unit sold.

Nintendo has admitted that the GameCube's pricing would not initially follow it's rule of turning a profit on every console sold.

[nate1749]

I agree that they probably are indeed losing money on them, but the numbers I hear vary wildly and often reach ridiculous amounts.

Unit costs change constantly and sell price changes not so constantly. An xbox on launch cost more to make than it does now. Additionally hardware is constantly changing too, end users don't notice but if you open them up you would.

You're looking for a concrete answer and it really doesn't exist - at least not one that any company is going to publicly quote themselves on (and like I said, it changes constantly anyways). Although they may publicly quote an estimate on loss/profit per unit during a given quarter. Other than that all you would read is estimates on losses per unit in various publications.

Nate

[Cthulhu]

Yeah, I was sort of afraid that no real numbers would be available. :/

Other than that all you would read is estimates on losses per unit in various publications.

I've read estimates in some magazines too, but I don't remember which ones or what issues... would you by any chance be able to recall any?

[poopnes]

Sony has always made a unit profit on each PS2 sold. In both of the press conferences for follow-up questions pertaining to the 2000 and 2001 stock report for investors, which were available online in audio files on Sony's website for months after the publication of their annual report, Sony openly discussed how the PS2 is profitable on each unit sold.

Nintendo has admitted that the GameCube's pricing would not initially follow it's rule of turning a profit on every console sold.

I guess that extra $100 helped out. I always thought Sony lost money at first with PS2. I don't believe it took N long to turn a profit with the gC.

[Ed Oscuro]

Unit costs change constantly and sell price changes not so constantly. An xbox on launch cost more to make than it does now. Additionally hardware is constantly changing too, end users don't notice but if you open them up you would.

You're looking for a concrete answer and it really doesn't exist - at least not one that any company is going to publicly quote themselves on (and like I said, it changes constantly anyways). Although they may publicly quote an estimate on loss/profit per unit during a given quarter. Other than that all you would read is estimates on losses per unit in various publications.

Just a few things to point out/disagree with here - first off, console game development costs have gone up and they seem to still be increasing. The same is true of the hardware; just look at it. I don't know if this is a permanent trend, but if the PS3 is as expensive as they say it will be...ouch.

Now, for an answer...Microsoft is a big company, and estimates like this are never gotten throught the normal channels which would be PR directed/denied. Unfortunately I don't think any of us are well connected enough to get some figures from the folks at Microsoft, but if we were we could get some figures from somebody. Maybe somebody at the plants could do a bit of figuring on parts. This information is surely known inside the company, but that could be the subject of some manipulation for purposes of making better presentations, too. Well, there's my $.01 :)

[kevincure]

Kutaragi is known for designing game systems in a way that the chips can be consolidated as the system gets older, saving money in the long run. That's one of the main reasons Sony made such a killing on the original PS1. I don't doubt that PS2s are very profitable, even without game licensing, right now.

[lurpak]

the loss is initialy calculated on all sorts of factors, the majority of which in the early days is made up from development and marketing, production is rarely a loss as the production cost is quantified in the initial development plan. and at component level I'd be supprised if any console physically cost more than 20% of its retail price.

therefore no console sells a a production loss. so its silly try to estimate any of these figures, as time goes by the initial capital outlay is recouped with every console sold so any figures babnded about are immeadiatly wrong by the end of the next sales day, its just like an intrest on a loan, the full profits for the company only get realised at the end of the consoles marketable life....or is it..

As you then have to take into account loyality following, a lot of xbxx owners will undoutibly purchase x-box2s so rewards of xbox development will continue a return into next generation consoles and so on.

so specificaly if we stick with x-box losses, these figures again are rediculouse to try to estimate, since a lot of x-box development costs were not made by microsoft but by the companies that provide the third party components which is all based around PC technology and therefore already offset before the x-box was ever concieved.

its all a big hoohar about nuffin.

theres only loss if the console is a complete flop.

[nate1749]

theres only loss if the console is a complete flop.

Well not exactly. If microsoft didn't plan an xbox2, xbox1 would be considered a complete flop even though it sold well.

Plus people take qualitative factors and make them quantative. Market share, loyalty, future market conditions, etc. It's all guessing and even expert market analysts don't get it right.

Nate

[Captain Wrong]

This is a great topic. I for one am a little tired of the "conventional wisdom" that "Microsoft is losing tons of money on the Xbox" and "Nintendo always makes money on consoles." I hope someone can actually produce numbers to show what is what because, like so much else, these things always seem to be based on rumors, emotions and wild speculation rather than facts.