zarx said:
padib said:
zarx said:
Also a $100 loss is huge and could leave Nintendo in a really bad place, lets say that it moves 10 million units in it's first year at a $100 loss that is a loss of $1 billion! And that is without the cost of the huge marketing blitz which will be another $100 million. That could well wipe their entire cash reserves (assuming they haven't already lost them off the back of the 3DS by then) and unlike Sony or Microsoft they don't have huge profitable businesses to fall back on in the tough times. $50 is probably the most they can afford to lose in this economy.
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For this argument it's the attach ratio that matters. And I doubt they will go down to 100$. Maybe 75, 50 more reasonably but not 100 I don't think so.
If Nintendo can sell at least 2.5 of its own games per console, plus some 3rd party games, they should be back in the black. They also need to make a good profit on SDKs.
All in all it will be a tough ride for Ninty, but SW has always been their revenue stream so if they can push out HW at a loss to create a momentum for the SW, and then reduce cost (i.e. slowly gain back margin per console), they should be raking it in after some damage.
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Assuming this is accurate and Wii U games are priced at $60
They would need to sell 2.5 1st party games per console or 11 3rd party games just to break even on a $75 loss. That kind of attach rate won't be achieved for several years (it took the Wii a year including Wii Sports to get a 3.0 attach rate so really a 2.0 attach rate). And that is ignoring the cost of developing the games (1-20 million per first party game), advertising for both the console and the games (in the hundreds of millions a year) etc.
Nintendo can't really afford to be in the red for 3+ years, they are just not set up that way.
SDKs are not a good source of profit they sell in the low thousands of units, a few million $ isn't going to be a major factor...
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Unfortunately, you are not considering another high margin source of revenue for console manufacturers ... accessories.
Accessories have always had a decent margin, but I suspect that they are seeing unreal margins in the past generation. After all, consider that Nintendo sold the wired Gamecube controller for $20 and the Wavebird for $30, and today wireless controllers started at $50.
Beyond that, in 2006 Nintendo sold 0.72 first party games, 1.02 third party games, and 0.25 Wii Play units per system even though the Wii came with Wii Sports; which (probably) works out to being $30 to $40 profit from games per system sold. If you assume $20 profit per system for Wiimotes, Nunchucks and Classic controllers, Nintendo (potentially) received $50+ dollars of profit per system sold above what they made on the Wii.
