Historically when a new generation video game console is released, its manufacturer will sell it at a loss. They will continue this until they are able to produce the hardware at a less expensive price and start to recuperate their money through newer hardware and first-party game sales. It is a necessary evil for the gaming industry to endure, owing to the fact that new technology is usually more expensive than the public is willing to spend on it.
This trend has hit Sony’s PS3 console particularly hard this generation due to its Cell Processor and Blu-ray components – both are extremely new and costly devices.
According to iSuppli, each first generation PS3 cost Sony over $690 to produce. With a retail price of $499.99, Sony was losing almost $200 per system sold in 2007. Now, however, reports indicate that production prices have dropped and Sony can produce each PlayStation 3 at just over $448. This, of course, means that – with $399.99 and S499.99 retail PS3 packages – Sony is never losing more than $50 on their systems. In fact, if these numbers are accurate Sony is making money on the larger bundles. Projections indicate that by the end of 2009 Sony will be making money on all models of the PlayStation 3.
In reducing the prices on their systems, Sony has made a few small, but notable, changes to the PS3. First being that the number of USB inputs has been reduced from 4 to 2; and second being that some models are no longer “backwards compatible”. This means that they will not play games from the PS1 or the PS2.