A report breaking down the costs of manufacturing the Xbox One reveal that both Microsoft and Sony are breaking even on their now current-gen consoles.
The Xbox One has gone on sale for a significant markup on the Playstation 4 in most territories, but a component breakdown reveals that the console costs $471 to produce, only just shy of its $499 retail value…
In parts and manufacturing the Xbox One costs $90 more than the PS4, in large part due to the Kinect add-on which has an additional cost of $75. The Xbox One costs $471 to produce and retails for $499, meaning a $28 profit at retail in comparison to the PS4’s $18.
Microsoft is charging $100 more for its console than Sony is asking for the PS4, in large part due to the Kinect but also a more expensive Blu-ray drive and APU. The PS4 is thought to be a significantly more powerful console, although once the internal components and power supplies are totaled the Xbox One costs $7 more to produce with even factoring in the controversial Kinect add-on.
Neither of these totals take into account distribution so it may well end up that both consoles end up breaking even at retail, which is a far cry from previous console launches that have seen both manufacturers lose out massively from retail sales. When the Playstation 3 launched back in 2006, financial analysts Merrill Lynch estimated that up to $306.85 was being lost for every console produced. Console manufacturers take on these losses with the assumption they will make it back from game and accessory sales, as well as reduced manufacturing costs further down the line.
Initial reports seem to indicate then that both Microsoft and Sony are set to at least break even from system sales right out of the gate, supplemented as well as the traditional income from game sales and subscriptions to online services.
Should both consoles have gone pedal to the metal yet again and taken losses of more powerful machines?
Will they still be able to stay as relevant as the current crop of consoles have over seven years after launching?