Sony Projecting a Loss on PlayStation 4 Hardware

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Part of Sony’s draw for many fans was its lower price when compared to the Xbox One during its E3 revel. The system is priced at $399 which is a full $100 less than the Xbox One. This combined with a very strong showing at E3 caused fans to flock to preorder. It did so well with pre-orders that many retailers sold out of guaranteed systems without 24 hours and had to start reserving backordered systems. With all of the money that the company the company stood to make on pre-orders it seems shocking to know that Sony expects to take a loss in their sales.

Due to the lower price of the system, Sony is projecting a $60 loss on each PlayStation sold at the $399 price. The question of course is, why the company would sell so low if they would be projecting a loss. Even if they tacked on that extra bit of money, they would still come in under price compared to the Xbox One. The answer is simply that they had a different idea about they would recoup their investment.

Instead of relying simply on the cost of the system to make their money, Sony realized that they had other income coming in. They plan to recoup and no doubt profit in the end from purchases made with the system at launch. What Sony has realized that no one just a console. This isn’t the 90’s when a person could walk into a store, grab a single box, and come home with everything their kid needed for a merry Christmas. Companies simply do not package game systems in the same way any longer.

This is a genius move in many respects. Although they may be losing on the outset, because players will need other things in order to enjoy their game, the company is sure to make money on these purchases. This includes, first and foremost a game, probably two, perhaps an extra controller, and more than likely a subscription to PlayStation Plus. All of these little add ons help to make up the difference in the purchase of the system.

Sony Projecting a Loss on PlayStation 4 HardwareSony experienced heavy losses at the launch of the PlayStation 3 and this launch is being compared conservatively to that one. However, the company is very optimistic about their ability to recover the losses quickly and have already ordered more units with the idea that the system will outsell its predecessor and they may be right.

The PlayStation 3 was slow to catch on with the market as it came out with a very high price tag. The Nintendo Wii did much better in that year not because it had better games but because it cost far less and was able to corner a market of people who maybe didn’t have the money for the more adult systems but wanted to buy something. It seems that Sony has learned from that mistake and this go around has priced the system at a more reasonable number so that fans can purchase the system out right instead of waiting until after the holidays or when the price drops.

What also helps is that the PlayStation 4 has more PC like components. The PlayStation 3 had many custom pieces and just like a Mac vs. a PC, the custom pieces make for a sturdy build but a much more expensive machine. Rather than going that route, Sony picked up on using a more PC like building process which lowered the price and ultimately those savings were passed along to the players.

Whether or not the company will actually be able to make up the losses on the launch or not remains to be seen. There will be no official ruling into the fiscal report comes in for the quarter on whether or not they gained back what they spent on developing the system but there’s a good chance that this will be the case. Sony has a strong business plan and large following. There’s really no reason why they should still be seeing a loss in 2014.

Article by - Dusty W.
Insert Date: 10/3/2013

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