Nintendo consoles turn a profit. Will the Wii U? If it does, it will be slight.
Even during Nintendo’s dark period when the PlayStation rose to global prominence while the Nintendo 64 and the Gamecube sagged behind, Nintendo was financially solvent. The Pokémon empire and the ever popular Game Boy certainly helped, but the real secret to Nintendo’s stability and success was the profitability of its consoles. Most game console makers sell their machines at a loss, recouping costs through software sales and licensing deals. Sony for example didn’t turn a profit on the PlayStation 3 for years after its release in 2006, whereas Nintendo was making almost $100 for every $250 Wii sold that same year.
Come November 18th, will Wii U continue Nintendo’s legacy? That’s a mystery. Speaking with Nintendo’s director of corporate communications Charlie Scibetta at the Wii U unveiling in New York on Thursday, I asked whether or not Nintendo would be turning a profit on the $299 Wii U Basic package this fall.
“I can’t speak to profitability with either SKU,” said Scibetta, “It’s razors and razor blades. I’m not prepared to talk about whether we’re going to try and turn a profit on the console or a profit on the games to make up for a loss on the other.”
It’s an unusual statement considering Nintendo’s forthrightness in the past about its hardware turning a profit. Part of the reason Nintendo had such a cataclysmic fiscal year in 2011 was the price drop of the Nintendo 3DS. When Nintendo dropped the 3DS to $170 in July 2011, it began selling it at a significant loss. A year later, Nintendo president Satoru Iwata proudly crowed to investors that the 3DS was now profitable.
Sources within Nintendo’s supply chain suggested in April that the Wii U costs approximately $180 to manufacture. The additional cost of packaging, distribution, and any pack-ins—like the HDMI cable included in both the Basic and Deluxe packages, and the copy of NintendoLand that comes with the latter—would necessitate that Wii U retail for no less than $300.
$300 may prove to be too much for consumers. Declining sales of both the PlayStation 3 and Xbox 360 in 2012 have shown that consumers aren’t willing to spend that amount on a game console. Nintendo’s confident that the tablet controller and services like Nintendo TVii are enough to convince people to spend. “We’re optimistic that we have the right pricing for Wii U. We’ll see if the public agrees with us. We think we’ve priced it competitively.”
Nintendo thought 3D was enough to get people to spend $250 on a new handheld. They were very wrong.
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