MS to lose $75 per X360

[ims]

Sorry if this is a repost. It's not the most reliable of sites but still.

http://www.gamesindustry.biz/content_page.php?aid=9320


Cheers

 

[Carl B]

Hey good find! I need to start going to gamesindustry more frequently again. This should help in determining the costs of the componentry inside PS3. I heard somewhere even at cost a 2.5" 20 gig drive is ~$60, anyone able to confirm or deny? That would put the 'core' of the 360 at roughly ~$315 to manufacture.

EDIT: Ok forget that - the drive probably costs MS more like $20 per.

 

[kyleb]

Wouldn't MS really be loosing more than $75 if it costs them $375 to make and they set the retail price at $300? I mean retailers don't pay retail price for consoles, do they?

 

[kyleb]

Hey good find! I need to start going to gamesindustry more frequently again. This should help in determining the costs of the componentry inside PS3. I heard somewhere even at cost a 2.5" 20 gig drive is ~$60, anyone able to confirm or deny? That would put the 'core' of the 360 at roughly ~$315 to manufacture.

I just used Froogle to find 2.5" 20gb drives as low as $32, I doubt MS is paying anywhere close to that.

 

[mckmas8808]

I think the $75 loss is after everything.

 

[Carl B]

Hey good find! I need to start going to gamesindustry more frequently again. This should help in determining the costs of the componentry inside PS3. I heard somewhere even at cost a 2.5" 20 gig drive is ~$60, anyone able to confirm or deny? That would put the 'core' of the 360 at roughly ~$315 to manufacture.

I just used Froogle to find 2.5" 20gb drives as low as $32, I doubt MS is paying anywhere close to that.

Psssh! Ok good - that's what I thought. I was lied to! I just searched for myself and I realize (obviously) that I should have done so before. Yeah, if there's retail drives for $32, then obviously MS is going to be paying more like $20.

 

[kyleb]

I think the $75 loss is after everything.

Why would you think that when the article claims:

Predictions by the analysts, reported last week in the Toronto Globe and Mail, suggest that Microsoft will pay $375 per unit to its manufacturing partners, with the final retail price of the console pegged at $299.

 

[kyleb]

Yeah, if there's retail drives for $32, then obviously MS is going to be paying more like $20.

I'd imagine it would be well less than that when ordering them in batchs of hunderds of thousands like MS is bound to do,

 

[Carl B]

Yeah, if there's retail drives for $32, then obviously MS is going to be paying more like $20.

I'd imagine it would be well less than that when ordering them in batchs of hunderds of thousands like MS is bound to do,

I don't know if I can follow you there though - it certainly didn't bring the price of the HDD in XBox down below that level. Because of the way HDD'd are built, the casing, and the amount of actual moving parts, it's hard to get them down below a certain price, regardless of size.

I used to think the floor for 2.5" drives was around $30, until I heard that $60 thing I quoted above. Still, even with this knowledge you've brought of 2.5" drives for retail at $32, I can't imagine that the cost to manufacture can improve much beyond the $20 point. I could be mistaken again though - someone on these boards may have the answer and be able to give us something a little more definitive.

 

[digitalwanderer]

How can I not be standing in line to get one at midnight of release night?!?!?

 

[ERP]

Wouldn't MS really be loosing more than $75 if it costs them $375 to make and they set the retail price at $300? I mean retailers don't pay retail price for consoles, do they?

Rather surprisingly it's pretty close during the launch period.

That's one of the reasons it's common to see consoles only available as a bundle from a retailer. There is a ton of markup on software however.

At least one console launch recently (last 6 years) there was talk that retialer cost would be a few dollars higher than actual retail cost.

 

[mckmas8808]

Well I guess you're right. 375 is the price to manufacture the console. I figure this to be pretty good.

 

[Inane_Dork]

I would have guessed MS lose more than that per console.

 

[Teasy]

$375 to make 360? I don't believe that for a second.

 

[Johnny Awesome]

Why not?

 

[Shifty Geezer]

Since when have 'analysts' ever been right? In all seriousness. I've only ever heard pie-in-the-sky suggestions, seemingly no more educated than many a forum post. If they have insight into costs of hardware, RnD etc., they ought to list them. Otherwise it's pure guesswork.

 

[Teasy]

Why not?

Just look at the hardware of XBox and XBox 360 vs the best PC hardware at the time of release. How can 360 be cheaper to manufacture then the original XBox?

 

[Frank]

If you tell a manufacturer that you want a contract to buy one million or more of his products over a few years time, he is going to propose the same thing to the manufacturers he is buying from, and so on. In the end, you can get it for about half the amount of a single one, or less.

 

[Teasy]

If you tell a manufacturer that you want a contract to buy one million or more of his products over a few years time, he is going to propose the same thing to the manufacturers he is buying from, and so on. In the end, you can get it for about half the amount of a single one, or less.

Yes and the same thing would have happened with the original XBox..

Or where you replying to someone else there?

 

[Acert93]

Wouldn't MS really be loosing more than $75 if it costs them $375 to make and they set the retail price at $300? I mean retailers don't pay retail price for consoles, do they?

I have been told that retail outlets usually make no to little money on the consoles themelves; instead they make a big cut in retail software. This is not surprising since this is the exact same model console makers follow.

Why not?

Just look at the hardware of XBox and XBox 360 vs the best PC hardware at the time of release. How can 360 be cheaper to manufacture then the original XBox?

I am not sure if you are argueing it is more or less. So this is not directed at you Teasy.

Anyhow, in general, it is unfair to try to draw lines to the PC costs. Just look at a GPU:

PC Video Card:
-GPU
.......+ GPU IHV profits above cost of R&D, advertising, drivers, and manufacturing
.......+ GPU High Bandwidth Memory maker profits above cost of R&D and manufacturing
.......+ Card maker profits, advertising, software bundles, shipping and market placement
.......+ Retailer profits

On a PC Video Card you have 4 major different guys taking their share of profits on a video card. That is a huge markup.

On the reverse consoles not only cut out most of the middle men, but retailers and console makers make no money on the HW, but the software.

They are just different financial models. Consoles makers make their money on software. PC hardware makers make their money on the hardware.

MS is also building a lot of these. That said, I would not be surprised if the Xbox 360 did cost $375 at launch. I do not know if the article is accurate (there are always a TON of rumors about pricing that never are verified and are often conflicting), but $375 sounds reasonable. A lot of consoles lose some cash on launch. $375 sounds a LOT better than what I heard about the Xbox. And the Xbox 360 hardware looks cost effective and good for consilidation, so $375 gives me hope they can actually lower costs this gen without writing another multibillion dollar check for losses They may only lose 1B this time