"A recent study by financial analysts at Merrill Lynch Japan suggests that the PlayStation 3 may cost up to $490 dollars to manufacture, with the company predicting that Sony will launch at $399 and take a $1.18bn loss in its first year on the market," reports GamesIndustry.biz.
"Merrill Lynch's report is based on the assumption that the Blu-Ray drive, Cell chip and RSX graphics processor will cost around $101 each, with the remainder of the components and manufacturing costs boosting the production costs to the $490 level."
Comment: It's standard practice to lose money on console hardware: suppliers get their money back from sales of games. However, Sony is taking a big risk with the PS3 in using technologies that are basically unknown (Cell, Blu-ray) and may not be ready for prime time.
Sony is also shedding staff and generally in a much shakier financial position than its main rival, Microsoft, which is happily losing money on the Xbox. (I guess Microsoft would argue that it's an investment in a start-up business, and start-ups typically lose money for two to five years. Windows lost money for longer than that.)
But Microsoft recently had nothing better to do with the odd $30 billion than give it back to shareholders, and it still has another $30 billion spare. That puts it in a rather different position to Sony when it comes to fighting a global price war.
