MS to lose $75 per X360
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Johnny Awesome
Veteran
It's actually pretty easy to estimate X360's costs.
Optical Drive
HD
Powersupply
Misc. Ports
IP licensing
Case
Chip Fab (by comparing it to similar size chips on 90nm process)
Memory
Flextronics Assembly Fee
Controller + Accessories
I might have missed something, but you should be able to do an estimate on the above.
Optical Drive
HD
Powersupply
Misc. Ports
IP licensing
Case
Chip Fab (by comparing it to similar size chips on 90nm process)
Memory
Flextronics Assembly Fee
Controller + Accessories
I might have missed something, but you should be able to do an estimate on the above.
Alpha_Spartan
Regular
For a comparison, the Xbox lost Microsoft about $150 per console. Microsoft wasn't kidding, they really are planning to turn a profit in '07. This should help along with the $10 extra royalties they will be recieving from $60 Xbox 360 games.
Microsoft lost $125 per console at launch (might've been $150, but I'm fairly certain it was $125). Allard has stated that the X360 costs more to produce than the xbox. We can conclude that either the x360 is priced over $50-75 higher, or this analyst is stupid. Since he says the xbox will be priced at $299, the same price as the original xbox, its safe to say he is stupid.
I'll try to find links for my $125 claim as well as the claim that the X360 costs more to produce (initially). I've read so many Allard interviews that it will be hard though.
I'll try to find links for my $125 claim as well as the claim that the X360 costs more to produce (initially). I've read so many Allard interviews that it will be hard though.
Alpha_Spartan said:
Where did you pull that $10 extra royalties from? The only info I have heard (a rumor at that) was MS LOWERED royalty fees to attract more developers.
The only numbers I ever heard about royalties was from Next-Gen many years ago and they were talking in the $6-$8 range (and even then the speaker would not give exact numbers). Adding $10 to that would be insane once you consider even Epic, an advocate that production costs wont spiral out of control as some have said, has said that costs will go up but more like 30%-50%.
Anyhow, a source on that information?
Johnny Awesome said:
I'd say Distribution, Advertising, Marketing, Logistics and probably a 101 other 'indirect' costs that should get added, There's alot more to the cost of a product than raw material.
And what about R&D costs, should they too? Or do they just get eaten up in some great finance wizards cooking of the books?
V.
Johnny Awesome said:
The problem with estimating costs is none of us know the manufacturers cost and how much they would sell an item to a customer with a contract for, say, 20M units over a 5 year period.
e.g. Look at an Intel CPU. You can look at a retail price and it may be $300. With Intel we are lucky because we can also get the price "per 1,000 units" for wholesale. That may be $225. And knowing Intel they make a HUGE killing on that.
So how much is Intel going to actually charge a company like DELL or MS for, say, 20M units? How about the same unit when it is an old model that they can shrink and milk profits on?
Economy of scale and contract costs are something that, unless you are on the inside of a business, is hard to get out. I know the companies I have worked for protect that information. While your competitors MAY have an idea of your costs, they only as sure as you let on. Once they know your real costs they can hurt you.
Anyhow, I am not sure how easy it is to determine the cost of the parts.
Alpha_Spartan
Regular
The majority of the Xbox cost came from Nvidia. MS was buying chips from Nvidia. This time, Microsoft owns the chip and instead pays ATi royalties. That's a huge savings since they have control over the GPU price which will go down over time.SanGreal said:
Alpha_Spartan
Regular
Game prices next gen will be $59.99 instead of the typical $49.99...at least on the X360 side. Some retailers already have game prices up for X360 launch games.Acert93 said:
Alpha_Spartan said:
Ok, but a $10 increase in retail does not indicate a $10 increase in royalties. Developers have been screaming for 2 years now about the increased cost of production of games and how that would increase the cost of games.
Unless there is some other information directly linking increased retail costs with increased royalties I am not sure we should start speculating that MS has increased their royalties by $10. That would be more than a 100% jump in fees.
It probably won't, but over the long run it sure will.Teasy said:
Vennt said:I'd say Distribution, Advertising, Marketing, Logistics and probably a 101 other 'indirect' costs that should get added, There's alot more to the cost of a product than raw material.
And what about R&D costs, should they too? Or do they just get eaten up in some great finance wizards cooking of the books?
V.
These are all good points, but I wouldn't wrap them into the 'cost per console' idea here as it's just manufacturing we're looking for. If Microsoft does their console accounting like Sony (or really anybody else would) then those costs have already been accounted for over the years the R&D was occuring. As for the indirect costs, since they're scalable anyway - ie Microsoft can determine how much to advertise, or to not advertise at all - I don't think we can use them to get a hard estimate as to the 'per console' cost.
I agree though that they will add to the cost of the console such that even if it were a break-even proposition, it doesn't necessarily mean Microsoft is actually breaking even.
if Microsoft spends like $375 to produce a X3600 and sell it for $300, MS will lose $75 per console, right ?
WRONG !
HOW MUCH has Microsoft invested in R&D to come to this product ?
probably you know a number reasobably accurate, but i do no.
So let´s say... US$1 billion ?
And they intend to sell , let´s say, 30 million units.
SO, 1bi/33.3 mi = $30,00
Please add $33 for each billion$ MS spent to develop X360.
Does anyone know how much have they spent ?
WRONG !
HOW MUCH has Microsoft invested in R&D to come to this product ?
probably you know a number reasobably accurate, but i do no.
So let´s say... US$1 billion ?
And they intend to sell , let´s say, 30 million units.
SO, 1bi/33.3 mi = $30,00
Please add $33 for each billion$ MS spent to develop X360.
Does anyone know how much have they spent ?
Alpha_Spartan said:
Yes, but I'm talking initially.
http://www.beyond3d.com/forum/viewtopic.php?t=23595
Wow if true its 50$ less than the xbox was to make .
Anyway some key thigns to look at
The cpu is under a 160m transistors correct ? That will be pretty cheap to produce by todays standards . The x800s are bigger than that and are on 110nm
The gpu is 330m transsitors correct ? but its in two parts which will keep yields up higher
The ram will be expensive off the bat but most likely not that expensive and ms is buying it in huge quanitys .
The hardrive is most likely 20-30 to make
I can see it coming in at 375$
Anyway some key thigns to look at
The cpu is under a 160m transistors correct ? That will be pretty cheap to produce by todays standards . The x800s are bigger than that and are on 110nm
The gpu is 330m transsitors correct ? but its in two parts which will keep yields up higher
The ram will be expensive off the bat but most likely not that expensive and ms is buying it in huge quanitys .
The hardrive is most likely 20-30 to make
I can see it coming in at 375$
The biggest part of the price of just about any product is profit margins. And I don't mean half of it, but more than 90% of it. In a high-tech market that is moving along as fast as the computer market, it might be less, but not by much. Even huge research budgets of hundreds of millions of dollars are peanuts, when you look at the prices and volumes.
Even for a company that produces most of the parts themselves, a very large part of the price is going to be internal profit margins. So, even if they would sell it at a loss, most of that loss would be in the profit margins of their own departments.
If you only look at the parts they have to buy external, the price is determined for the most part by how good their negotiators are. And everything else is only a loss compared to their own projected profit margin. And if they think it is too expensive, they might invest in a factory and build it themselves. That would count as investments, and works in about the same way.
Of course, that only works for the very large corporations.
Even for a company that produces most of the parts themselves, a very large part of the price is going to be internal profit margins. So, even if they would sell it at a loss, most of that loss would be in the profit margins of their own departments.
If you only look at the parts they have to buy external, the price is determined for the most part by how good their negotiators are. And everything else is only a loss compared to their own projected profit margin. And if they think it is too expensive, they might invest in a factory and build it themselves. That would count as investments, and works in about the same way.
Of course, that only works for the very large corporations.
Helstar said:
There is no way that Microsoft has spent $1 billion R&D'ing this thing. I guess $200 million, and even that seems high to me. They are not creating technology here - they are simply using other people's and creating the plan to bring it all together. A lot would have gone to that firm that designed the chip for Microsoft, and then a good bit to IBM to make it a reality - ATI shouldn't have been TOO much either as they were working on similar things anyway.
But like I said above I don't think R&D should be considered for console costs, even though it technically should, just because the costs have already been paid and the burden bourne during the current console cycle.
