Wii Hardware To Be Profitable At Launch

Next Generation reports on comments by Nintendo's Reggie Fils-Aime, stating that the Wii will be profitable out of the gate. It's been well-publicized that the consoles offered by Sony and Microsoft are subsidized by those companies. From the article: "Nintendo, however, has traditionally avoided the 'razor and blades' business model by selling its consoles above what they cost to make. Fils-Aime confirmed to Reuters that the Wii would carry on the tradition. 'We will make a profit on the entire Wii proposition out of the box -- hardware and software,' he said. 'That really is a very different philosophy versus our competitors. We are a company that competes only in the interactive entertainment space so we have to make a profit on every thing we do.'" The comment is undoubtedly meant to assuage analysts nervous about the relatively late release date and somewhat higher than expected price for the Wii.

Re:nintendo is a game company

[minus_273]

um, hello, nintendo is far more than a game company. The part of the company you know as nintendo is the games division. There are many many other things that it has its hands in like pretty much any other major company in japan. Nintnedo has its hands in things like realestae, finance, insurance and other random industies (at one time even a brothel).

In the realm of Video games, Nintendo INVENTED

[antifoidulus]

the video game analogue of "razor blades": the Atari 2600 was not originally designed so that anyone could write software for it. However, other people did(something for which Atari received no royalties for) and eventually the glut of titles(some pushed out by Atari itself) helped to doom the system in the 83 crash.

Fast forward 2 years and Nintendo comes along with their new machine but a different outlook: Nintendo will approve or dissaprove each game released for their system. To enforce it, Nintendo patented a special type of chip that had to be put in each video game before it would play on the NES, and was able to collect royalties on every game sold.

No surprise here

[Pacifist Brawler]

Nintendo continues it's strategy of not being dumb. Of course they want to sell the console for a profit. The 360 and PS3 count on every sale leading to X number of games before they start turning a profit, whereas Nintendo counts on every sale turning a profit and every game turning more profit. Selling consoles at a loss is a risky business. Yes, it gets your console out there, but you then need to sell a good number of titles. Selling consoles at cost is the smartest way to do business, because you don't assume a damned thing and you make money on any games people buy. But yeah, being slightly above that doesn't hurt at launch. Nintendo does one thing and does it well: Video games. It's not that they are in dire straights right now, it's that they know this market very well. They made the Gamecube profitable. They know this industry. Selling consoles for profit is brave in that it can hurt your ability to get up your market share. But losing money on every single console so you can sell more consoles and lose more money doesn't make a lot of sense, does it?

Re:nice to know

[UbuntuDupe]

You know, you bring up a good point I don't think a lot of people fully appreciate:

- and this should mean that the full-price games will be a lot cheaper, too, since Nintendo doesn't need to claw back money lost on the hardware.

Since Sony/MS are trying to claw that money back, it means that perfectly legal things that hurt their software license revenue will probably be targeted by them with lawyers who should know better. Imagine that because of the expensive PS3 titles, some kids in a dorm or the same college set up a system whereby the share their games with each other. Not copy -- just share the individual game. That's 100% legal. But then Sony will probably find some way to sue them on the grounds that it interferes with their business model.

Re:In the realm of Video games, Nintendo INVENTED

[Anonymous Coward]

I'm actually worried about a (minor) crash in the Videogame market centered around the PS3 due to how Sony has positioned themselves in this generation. At $600 the PS3 is going to start off selling very slowly compared to how the PS2 sold, at $60-$75 games are also going to be bough at a much lower rate then they were purchased on the PS2, and at $10 Million-$25 Million for development costs game developers are far less "flop tolerant" as they have been in previous generations. What this means is that there are (probably) going to be quite a few developers who are investing tons of money into games that are going to be released on the PS3, and the game is going to sell well below expected; imagine spending $25 Million on a games, with $25 Million on marketing (for a total of $50 Million) and only selling 500,000 units (for a return of $5 Million - $10 Million).

The crash I am refering to is that even very large (well known) publishers with massive franchises could dissapear if they released several games that underperformed; contrast this with how it was on the original Playstation and N64 where you were investing $1 Million on a big-budget game and were (pretty much) ensured that you'd get your money back.

Re:nintendo is a game company

[Phisbut]

By lowering the price from 250 to 150, they go from making 50 per console to losing 50 per console. But they sell 2 million rather than 1.5 million consoles.

Except that, just like the Xbox 360(1), and unfortunately (let's be realistic here) the PS3, the Wii will most probably sell out this holiday season. They won't sell more by lowering the price, because there won't be any more to sell. By selling it $250 instead of the expected $200, if they manage to ship and sell all the 4 millions of the units they promised, that's an extra $20,000,000 they get to invest back in games, online stuff and much more.

(1) Ok, I know the Xbox 360 didn't sell out in Japan, but it wasn't because of the price... MS could have priced it at $10 and Japan still wouldn't have bought it.

Re:nintendo is a game company

[xtracto]

y making a 'profitable', underpowered, overpriced console they are going to loose a lot of cross platform publishers.

Sir, agree completely with you in that the Wii will make some publishers loose, at their stomach of course.

Other than that, I cant find a relation between those two concepts. More publishers will be attracted to the Wii ifnot for anything else for the mere dev kit price, and as everybody says, those "cross platform" publishers have certainly used the GameCube already, so (as Wii bashers love to say) being the Wii a reboxed gamecube with a fancy controller they wont need a lot of effort to port their game to such platform.

And about your calculations, what makes you even think that the console costed $200 to make?, if I recall correctly one analyst predicted the price to be $180 after looking for the harware used so hey, they are screwing you more! muwahahah.

Not that I care, what I care is that the Wii is the ONLY console that will allow me to play something that I can not play in my computer. I know that maybe the HaloXXXMegaBox360-2 wont be available for my PC but at the end it is just another FPS played with the typical controller (w00t I've got a £10 PS2 like controller from GAME).

Also, the Wii stupid sport games that (I have been reading) a lot of people think are not as valuable as one game, is in fact what some of those non-gamers ...

(including, my mother, a greek friend who is archeologist and didnt even know how to turn on a computer when she started her master one year ago), my girlfriend (granted, she does plays GBA and mario party/mario tennis with me in 1964)) ... are looking forward to see, this 'half assed' games will allow ALL OF US (hardcore,softcore,noncore) gamers to *learn* to use the controller in a friendly way (how many times I have tried to master the FPS controller just to be 707411! PWN3D by my brother who is a Playstation fan.

The coolest thing (for me), is that it was since SNES that my mother played Pilot Wings and Mario Kart, but she found it too complicated, now with the Wii I have a chance to play along her again! and this time Nintendo is pushing to do everything they can to make her ENJOY the game =o).

Re:No surprise here

[Volante3192]

One thing to keep in mind for Nintendo is their cost is in yen.

The one time Big N had a losing quarter was during a period of currency fluxuations between the yen and the US dollar.

In Japan, the price is Y25,000 ($213) so they'd have to match at least $213, (it's more important that the foreign markets are priced higher, see above), so probably $225, but that's just a bizarre round number, so toss in Wii Sports and ratchet it to $250. Simple.

Added bonus is Wii Sports is a good showoff of the remote, it's a non-threatening game for console newbies, and it doesn't take away from other more lucrative titles like Zelda, Red Steel or Mario.

au contraire

[Manmademan]

This makes sense.. during the whole PS2 era, I've only bought maybe three new games in all that time. I usually only buy off the used racks or trade with friends, which I imagine doesn't put that money in Sony's pocket again.

On the contrary. By buying off the used racks, you're making it possible for those who purchase new to continue doing so. Joe Gamer is more likely to purchase Madden 200X at $50 new if he can trade in the last two new games he purchased for credit; credit which comes from you buying used games. So, indirectly, Sony still sees your money.

What happened to "Play together"?

[Wyrd01]

The $250 would be a lot easier to swallow if there was a second controller in the package.

I mean come on, it is the Wii ("We") right? Play together? Wii Sports and one controller makes no sense.

I can see parents buying this for their kids. The kid opens the box, sets everything up and then wants to play baseball, or tennis, with dad. Oops, we can't experience this fun new system together because the system only came with one controller. You can sit still on the couch and watch daddy play though.