If you wondered why Microsoft's Xbox One has a higher price tag than Sony's PS4, it's not just because the Xbox comes with a Kinect camera, it's also because the Xbox One costs quite a lot more to manufacture in the first place.

At least that's what the report from AllthingsD is claiming. After a breakdown by research firm IHS and an analysis of the internal hardware, the manufacturing process and the materials used throughout its construction, it believes the Xbox One costs as much as $471 to produce, which means with Microsoft's $499 US price tag, it's taking in only a few bucks per console sold. Sony's Ps4 is comparaatively cheap, costing just $381 to produce. With a $399 price tag in the US, that's a minor loss for each console sold (and potentially a bit more if you factor in retail chain profits), though this is a tactic Sony has used before, hoping to cash in on cheaper hardware by making money back on the game sales.

What does “expensive” mean?

In the Xbox One's case, that extra $90 mostly goes on the Kinect, which is worth about $75. There's another $10 extra that went on the AMD APU in the Xbox One (over the PS4) despite the fact that its performance has been shown to be quite significantly less powerful than that of Sony's system.

That last $5 difference is a little harder to make up, especially when the PS4's GDDR5 ram is faster and more expensive than what you find in the Xbox One, which uses DDR3.

It's expected that over time, both companies will fine tune the hardware to be more cost effective, making it so that they can at least break even. 

KitGuru Says: I know both companies need to be competitive, but it seems crazy how much money they put into developing these machines and yet they make little to no money on them. 

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