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[argon]

That's for the premium pack.

http://www.businessweek.com/technology/content/nov2005/tc20051122_410710.htm

BREAKING IT DOWN. An up-close look at the components and other materials used in the high-end version of the Xbox 360, which contains a hard drive, found that the materials inside the unit cost Microsoft $470 before assembly. The console sells at retail for $399, meaning a loss of $71 per unit -- and that is just the start.

Other items packaged with the console -- including the power supply, cables, and controllers -- add another $55 to Microsoft's cost, pushing the loss per unit to $126. These estimates include assumptions that Microsoft is getting a discount on many components.

That was the case with the first Xbox console, which contained about $323 worth of parts and materials when released, but sold at retail for $299. It's certainly not going to help Microsoft reverse the trend of losses in its home-entertainment segment. In the fiscal year ended June 30, that unit lost $391 million on sales just shy of $3.25 billion. That's a little more than 8% of Microsoft's total sales of $39.8 billion.

Semiconductors alone account for $340, -- more than 72% of the materials cost -- iSuppli estimates. One key component, the IBM-designed microprocessor chip at the center of the console (see BW Online, 10/25/05, "Inside IBM's Xbox Chip") costs about $106. Both IBM and Chartered Semiconductor (CHRT) of Singapore are building the chip for Microsoft.

The article also looks at the possible PS3 manufacturing cost:

EVERYBODY LOSES. IBM also has designed chips at the heart of the competing video-game systems -- the Playstation 3 from Sony and Nintendo's forthcoming Revolution system, both of which are due next year. Crotty expects that Sony's loss on the Playstation 3 may be even wider, as the cell processor that IBM, Toshiba, and Sony designed for the system is more complex.

Estimates vary as to how much the cell processor will cost. Richard Doherty of Envisioneering Group in Seaford, N.Y., expects the cell chip to cost about 50% more than the Microsoft chip. "Based on what we've seen so far, the Playstation 3 could cost as much as $600 to make in today's pricing," Doherty says.

 

[lollerskates]

should have put "premium" in your title. misleading

 

[neptunes]

Games and Acessories FTW.

 

[JMPovoa]

Games and Acessories FTW.

Most definately.

 

[Mrbob]

should have put "premium" in your title. misleading

Well Xbox 360 is the premium sku.

The core pack is listed as Xbox 360 core.

 

[Gahiggidy]

 

[mckmas8808]

Wow so the PS3 will cost over $550!!!

 

[elostyle]

65$ for the Ram? Oh please.

 

[argon]

65$ for the Ram? Oh please.

512MB DDR3 + 10MB embedded DRAM.. seems plausible

 

[Shogmaster]

512MB DDR3 + 10MB embedded DRAM.. seems plausible

512MB GDDR3 alone would easily cost that.

BTW, EDRAM isn't part of that "RAM cost". EDRAM is part of Xenos cost.

 

[Sweedishrodeo]

unexpected? nope.

 

[TheDuce22]

Good thing nobody can buy them i guess.

 

[Cheerilee]

A Microsoft spokeswoman said that the company's plan calls for a "gross margin neutral" strategy through 2006, meaning that between the sales of consoles, game software, and accessories, it expects to essentially break even.

So assuming they get about $10 per-game... they want the early adopters to buy about 12.6 (or about $600 worth of) games?

Profits should follow in 2007.

Hear that! Confirmation! No Xbox360 price drops until 2008, at earliest!

 

[Cheerilee]

EVERYBODY LOSES. IBM also has designed chips at the heart of the competing video-game systems -- the Playstation 3 from Sony and Nintendo's forthcoming Revolution system, both of which are due next year.
...
Estimates vary as to how much the cell processor will cost.
...
"Based on what we've seen so far, the Playstation 3 could cost as much as $600 to make in today's pricing," Doherty says.

Hear that! Confirmation! Rev uses Cell processor, and may even be PS3-compatible! :lol

 

[shpankey]

That's for the premium pack.

http://www.businessweek.com/technology/content/nov2005/tc20051122_410710.htm





The article also looks at the possible PS3 manufacturing cost:

I'm sorry but unless they're privy to MSFT's negotiations with all their vendors, businessweek has no idea what they're talking about and these number's are just bullshit guesses they pulled out of their asses.

 

[argon]

I'm sorry but unless they're privy to MSFT's negotiations with all their vendors, businessweek has no idea what they're talking about and these number's are just bullshit guesses they pulled out of their asses.

BusinessWeek is not doing the estimation-- it is iSuppli, a market research firm specializing in cost analysis for consumer electronics.

 

[Deg]

i agree. None of this sounds plausible.

 

[monkeyrun]

fantastic MS losing billions of dollars for the gamers again

 

[mr_sockochris]

MS should have sold them on eBay instead of shops :lol

 

[Fuzzy]

So they're estimating that MS is losing $126 per Xbox 360 while they lost only $24 per Xbox when that was first launched? And MS expects to at least break even on the Xbox 360? :lol

 

[Tenacious-V]

So they're estimating that MS is losing $126 per Xbox 360 while they lost only $24 per Xbox when that was first launched? And MS expects to at least break even on the Xbox 360? :lol

Completely different circumstances this time around. Last time they were basically buying off the shelf parts from Intel, Nvidia, and the HDD was stock. Their prices were controlled by them and MS just bought it in bulk... This time around the cost will drop much better as they're not stuck buying it basically bulk retail.

 

[KeithFranklin]

So they're estimating that MS is losing $126 per Xbox 360 while they lost only $24 per Xbox when that was first launched? And MS expects to at least break even on the Xbox 360? :lol

I thought estimates for XBOX production cost was $450.

 

[maynerd]

Smart move by MS offering two SKUs all of the suckers who waited in line for a premium kit and ended up buying a core pack due to shortages. They ended up buying all of the accessories individually helped MS cut some costs down. Nice move MS.

 

[teh_pwn]

That's not bad of a loss for launch. After software sales and accessories, they might even break even at launch. Later on MS will make profit for once.

 

[Raistlin]

iSuppli says Microsoft loses $126 per 360

... and I gain about $300

 

[AJ_]

That's for the premium pack.

http://www.businessweek.com/technology/content/nov2005/tc20051122_410710.htm

The article also looks at the possible PS3 manufacturing cost:

Interesting. Merrill numbers are way off to the low side ($340) and I believe iSuppli is more valid source of the two. This shouldn't change dynamics as PS3 BOM should have same delta.

What I find tremendously curious is the PR approach that MS is taking. Kutaragi/Sony always turn taking losses into an exiting thing that generates respect towards how agressively they play the game.

I'm amazed that MS doesn't adopt similar dynamics. Having J or Moore come out before the launch to make strong statements how MS is in fact giving this console away and how gamers are going to get $150 worth "free goods" with every premium pack would have been excellent PR and positioned MS as "good doers" if executed well. (Case: Kutaragi & PSP launch).

 

[Juice]

That's a lot of dough, but because MS hasn't made quite as many boneheaded mistakes this time around with the system's design, it should actually get cheaper for them to roll them out over time, instead of just hovering above MSRP in perpetuity like the Xbox did.

The bulk of the price is in the semiconductors and that's what's going to get cheaper fastest. In a couple years, when the hard drive's base cost is what's holding it back, they at least have control over the issue now by being able to remove it altogether from the equation as the system descends into the budget pricing tier. Having the hard drive optional gives Microsoft the extra card of making every default system a core pack in a year or so, after all the hardcore gamers have had their fill, to cut costs further.

 

[Ghost]

MS should have sold them on eBay instead of shops :lol

:lol thats a great idea.

 

[LAMBO]

Sounds right, i couldn't believe people that were saying MS was already slightly profitting on every one sold.

 

[bycha]

$470 hardware before assembly + 16% manufacturing and distribution = 545 + 55 for items packaged == $600 -- $399 = $201 loss per system. And we don't touch marketing etc.
I find it hard to believe.

 

[PG2G]

I could have sworn Microsoft was losing over $100 per Xbox...

 

[bycha]

I could have sworn Microsoft was losing over $100 per Xbox...

It was. Again, cost of parts is not the cost of console to MS. And after fast drop to $199 MS losses were catastrophic.

 

[AJ_]

$470 hardware before assembly + 16% manufacturing and distribution = 545 + 55 for items packaged == $600 -- $399 = $201 loss per system. And we don't touch marketing etc.
I find it hard to believe.

Yep. Something doesn't add up here.

 

[Raiden]

$470 hardware before assembly + 16% manufacturing and distribution = 545 + 55 for items packaged == $600 -- $399 = $201 loss per system. And we don't touch marketing etc.
I find it hard to believe.

Well its Microsoft, they could give those 360's away for free. Besides when Halo 3 shows up i dont think we can talk about "loss" anymore :lol

 

[WordofGod]

65$ for the Ram? Oh please.

512MB DDR3 + 10MB embedded DRAM.. seems plausible

I agree with elostyle. How could 512MB's cost $65 each when MS is buying it in bulk (example: 1 million units @ a time)?

 

[argon]

Here is the source article directly from iSuppli.

http://www.isuppli.com/news/xbox/

The Xbox 360’s exploding BOM
Factoring in costs for the hard disk, the DVD drive, enclosures, the Radio Frequency (RF) receiver board, power supply, wireless controller, cables, literature, and packaging – the total BOM cost for the Xbox 360 Premium reaches $525, well above the retail price of $399. The high BOM cost for the Xbox 360 is not unusual. In the video-game business, equipment producers often market games consoles as loss leaders for more lucrative software and licensing fees. “It’s really not surprising for the initial cost of the console to approach or even exceed the retail price,” said Andrew Rassweiler, manager of iSuppli’s Teardown Analysis Service. The good news for Microsoft is that during the next year, improved yields for the IBM microprocessor and the ATI GPU should save at least $50 per unit, in addition to other cost reductions, Rassweiler added.

Video-Game console market expands
The other good news is that the Xbox 360, which was officially launched at Midnight on Nov. 21, marks the start of a new growth cycle within the video-game console market. After declining by 9.1 percent in 2005 to 28 million units, the introduction of the next-generation consoles will cause the market to boom to reach nearly 40 million units in 2006, not including handheld game players, iSuppli predicts. The figure below and attached presents iSuppli’s video-game console forecast.

 

[littlewig]

10,000,000 X $126 = $1,260,000,000

MS is going to lose 1.26 billion dollars on hardware alone, that's assuming all 10,000,000 are sold.

$126 after the retailers sell the system, or when MS sells it to the retailers?

Anyway, if all the software is $60, MS will need to sell 21 million games just to make the amount they lose, that's only in revenue.

Does anyone know how much money MS will see on each game sold?