Both Xbox One And PS4 Hardware Costs Below Retail Value

Written by Jon Sutton on Wed, Dec 4, 2013 11:15 AM

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?

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09:20 Dec-05-2013

k we all know by looking my pc is bottle necking i just wanted to know if i were to upgrade my mobo & ram to 8gigs of ddr3 2133mhz, in the future i will add more ram or should i get 16 gigs you debate & when released the rumored 12 core amd phenom. will that be enough horse power for my vid card ocd

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09:29 Dec-05-2013

8 gb ddr3 will be quite enough for the next 2-3 years
and get any FX-83xx processor, it will be be perfectly matched with your card

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01:10 Dec-06-2013

Damn man nice Galaxy card. I love them but I decided to get an MSI card when I built this rig. Horrible idea because I realized shortly afterward that I wanted a galaxy 760.
As for your machine, Mukulgupta is pretty spot on. +1 to him.

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10:31 Dec-10-2013

nope its 12 core phenom all the way then i wont have to ever upgrade again or at least for another 20 years

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20:12 Dec-04-2013

is my pc better than a ps4 or xbox one?

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20:21 Dec-04-2013

it's probably on par with or slightly better than the PS4, your 6300 is probably more powerful than the PS4 CPU, and the 7850 is on par with the PS4 graphics card.

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00:33 Dec-05-2013

Well a higher clocked 6 core vs a really low clocked 8 core
Yea he wins that one. As for the 7850, I dont know if its on par or not. Because it is a dedicated card running alone. Doesn't the PS4 have it built in as an APU? Or am I mistaken?

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04:49 Dec-05-2013

It does have an SoC type chip, so the 7850 is definitely better than the PS4's graphic portion of the APU it has. It is more like a 7850M

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06:19 Dec-05-2013

Mukul is right... PS4 GPU is along the lines of laptop HD 7850M and below desktop HD 7770... Xbox one's is even weaker because of single channel DDR3 RAM vs PS4's quad channel GDDR5...

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06:24 Dec-05-2013

*below desktop 7790

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06:15 Dec-05-2013

Well, your GPU is a OC version, and ... you can OC that gpu pretty beastly. However - when it comes down to optimization the PS4 takes the lead though.

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06:24 Dec-05-2013

true, but hopefully Mantle will fix that

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19:18 Dec-04-2013

I love how it costs less than 20$ to make a controller yet it is something like 60$ to but one, that is where they make up all the money. I don't know anyone who only owns one controller so that is 40$ they make right out of the gate on top of the console.

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20:49 Dec-04-2013

Pre-MLG Madcatz, woo!
Seriously though, if I needed a new controller, I went straight there.

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22:27 Dec-04-2013

That has been what I have been looking at just need to wait for a good reason to buy one :P

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18:18 Dec-04-2013

I was thinking of building this PC, just wanted to know what you guys thought :)
http://uk.pcpartpicker.com/user/J03Z95/saved/2D0o

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18:36 Dec-04-2013

Yes that is a damn fine rig considering the price... But have you considered looking at the R9-270X for just a bit more...? It is the successor to the HD 7870 and offers performance on the level of a Radeon HD 7950 Boost Edition...

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19:26 Dec-04-2013

I'll definitely consider it.

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18:56 Dec-04-2013

No SSD...?

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19:26 Dec-04-2013

Not to begin with but I'll probably get one at a later date

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19:20 Dec-04-2013

yup, all very good components. only thing is are you going to stick with the stock CPU cooler?

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19:28 Dec-04-2013

To start with, yes. But I'll get a different one once I start to think about OCing

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20:22 Dec-04-2013

good idea, a 212 evo will probably handle the heat.

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20:47 Dec-04-2013

Alright then, thanks guys :)

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18:05 Dec-04-2013

The console market, like it or not, is actually growing rapidly... So it will be no surprise if MS and Sony break even quickly from douchebox one and PS4 sales... But I would rather wait another year or so to buy one of these what with reports of the PS4 running like an oven and the douchebox one smoking like a faulty toaster...

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16:34 Dec-04-2013

weird stuff, yet makes sense under some circumstances and conditions. can you please share sources?

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16:08 Dec-04-2013

Well businesses do need to think about profit, all companies sell products a bit more than the cost to manufacture. They need to make money somehow.

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14:22 Dec-04-2013

So according to this article both Microsoft and Sony have lost billions of dollars from PS3 right??? Are you kidding me!!!

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15:05 Dec-04-2013

Yeah they did :P heres a link to the article.

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15:23 Dec-04-2013

Yep, it's fairly standard procedure at the start of a console's life, the aim is to cover the loss with game sales & accessories.

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14:18 Dec-04-2013

I love it how playstation 4 is cheap. Exept the controllers. we pay 4x more for 1 controller instead of 18 usd.
But still don't get why you are forced to buy kinect. if it wasn't included i'm sure the xb1 would be more populair (but not more than ps4).

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13:57 Dec-04-2013

the inside of the next gen consoles look like something from the 90's...

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15:42 Dec-04-2013

I don't realy think that there are a lot of people who care about the interior o the consoles. Some of them don't even care about the external aspect of the console, but there are people who buy the PS4 or Xobx One not because it's better in performance or if it has more features, just because it looks better!

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13:52 Dec-04-2013

The PS3 actually cost 790$ to make, but they sold it for 499$. They however made up this loss easily by the development kits that were bought by game developers. This generation is already looking better, since atleast they arent losing money.

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12:09 Dec-04-2013

They probably buy the components cheaper direct from the supplier without any commercial price rise that are seen in stores.

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11:25 Dec-04-2013

Reasonable profit on both sides I guess, If they weren't making a profit, next gen would be pointless or impossible. I mean next gen as in the one after PS4/Xbox One.

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11:27 Dec-04-2013

It may have been possible.As the last gen produced losses and still this gen was able to arrive.

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13:18 Dec-04-2013

But Sony would have to quit. They wouldn't be able to survive losing that much money again. They need the PS4 to be profitable and they need to sell a lot. If they don't, they are in risk of going out of business. I think Microsoft and Nintendo would have been able to make powerful machines because they have the money to do it. But Sony has been losing money since The PS3 launched.

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15:28 Dec-04-2013

Both Sony and MS are embedded far too much into the consumer fabric to fail. They both do too much stuff aside from the consoles. And they get a cut from the game sales.

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12:22 Dec-04-2013

Why impossible at launch of the ps3 it costs sony $800 to make but they were sold for $500

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11:55 Dec-12-2013

I know but, they've been losing to much money for to long now that's why it would be pointless for them to carry on, as for impossible, if they had not of started making a profit soon Sony could've possibly cut off funding for the PlayStation all together. As they sell televisions and phones and so on they would never shut down completely.

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