Sony Computer Entertainment: profit/losses timeline since 1996 to 2007

[famousringo]

bbsin said:

famousringo said:

 

Been paying attention to the weekly sales? Notice how Nintendo has been publishing more units of software than any other publisher for months now? There's a reason why some third party software publishers like to whine about how Nintendo consoles are only good for Nintendo.

And when a $50 game is sold and you get the licensing cut, the publisher's cut, and the developer's cut, that's a heckuva lotta dough.

It's obviously great for Nintendo that they make profit off their hardware sales, too, but they make way more cash off the copy of Metroid, SMG, Mario Party and Wii Play that a dude buys with his Wii than they do off the Wii itself.

Been paying attention to Nintendo's financial reports? Notice how in Nintendo's 2007 & Q2 2008 fiscal years they made 30-40 percent more profit selling hardware compared to software? ofcourse not, b/c if you did read their reports, you wouldn't be acting like you actually knew where Nintendo makes most their money now would you? Think about it, Nintendo made somewhere around $45 profit for every Wii they've sold at launch. The manufacturing and production probably have droped even futher since then. It can take millions to develop games, market EACH one, and then manufacture them. How much of that 49.99 is still left? Do you really think it's more than the 50-70 dollars made from everyone of those 20,000,000 Wiis and 66,000,000 DS sold? No one is saying that Nintendo software ISN'T making money, but it's the hardware that makes more money especially after Nintendo has stoped making Wii commercials. Not to mention that you have to add accessories such as controllers to the hardware mix aswell. They will eventually profit more from software late in the hardware's life cycle, but both the DS and Wii are obviously still going strong, and by the time that happens, all the NintendyFanboys and Soccer moms in the world would already be waiting in line for the DS2 or Wii2.

http://www.nintendo.com/corp/report/FY07FinancialResults.pdf

page 20.

http://www.nintendo.com/corp/report/2QFY2008.pdf

page 21.

1. You're confusing revenue with profit, as reverie mentioned.

2. Hardware revenues are software revenues when you bundle a game with your console in two major markets and charge more for it there than you do in the unbundled market. A Wii in Japan is about 10% cheaper ($25), and that accounts for a major piece of that $50 you keep trowing around. I'm betting that the revenues from bundled Wii Sports get tossed in the hardware column on these finanical reports anyway, though.

3. If we assume your $50 profit per Wii number, Nintendo would only have to make $10 per Wii game sold to make just as much profit off of their Q2 '08 software sales as they did off their hardware sales. Since Nintendo's getting the developer's, publisher's, and licenser's share of software sales, I think $10 of profit would be a severe underestimation considering that Nintendo makes so many multi-million sellers.

If you want to assume that Wii's are making $100 of profit now, that just means those games have to be worth $20 each, which seems quite possible to me.

4. Historically, I doubt Nintendo was making more profit off of $100 Gamecubes than they were off the millions or copies of Smash Bros, Mario Kart, Sunshine, etc. The Wii is somewhat of an anomaly in that Nintendo have not needed to thin out their profit margins on the console in order to promote sales.

5. You're correct that the value of controllers and other peripherals muddies the water in trying to make a comparison between hardware vs. software. And I'm not seeing any numbers in these reports which would clear that up. Is a Nunchuck sale files under 'Console' or 'Others?' Your guess is as good as mine. Same goes for the margins on these sold accessories.

6. As you yourself point out, Nintendo is just now coming out of the transition period where their new hardware is being adopted. As the userbase grows, the ratio of hardware sold to software sold will shrink. This is only the first ~20% or so of the Wii's lifecycle, and software will be getting more and more profitable as it goes on.

 

This TLDR post brought to you by: My Friday @ Work.