The Wii U will be sold at a loss

[Chark]

Play4Fun said:

Chark said:

Play4Fun said:

maverick40 said:
Apparantly, the Wii U controller will retail at approx $150. This is not a good sign profit margin of the console itself. Although you never know with Nintendo.

http://kotaku.com/5942876/the-wii-us-controllers-are-really-expensive

Controllers are sold for really, really high profit margins at retail. Just because it may be sold for $150 at retail doesn't mean it adds $150 or even $100 to the console bundle.

Yes and no. There isn't a set in stone profit margin that controllers have. They have just been used as an effective means of obtaining profit. At $150 the price is substantially more than a typical controller. Considering that price might place it out of consumer interest profits might be maximized by lowering the profit margin to encourage sales (supply/demand). Though I suppose they don't anticipate sales to occur unless in the case of a replacement. With a $150 price tag it is looking as if the controller is significantly more expensive than a typical controller. Even maintaining the same profit per unit would indicate an almost $100 price on top of a typical controller.

I never said or implied that the gamepad doesn't cost more to produce than a typical controller nor did i say/imply that there is a set in stone profit margin for controllers.

I agree that $150 would put it out of consumer interest in America/europe which is why I think it's smart that Nintendo are not selling them seperately at retail outside of Japan until 2013.

My post was aimed at posters who seem to think it would add  $150/$100 to the console budget.

Well that's the thing, it might be adding $150/$100 to the console's cost. We can't really tell, because profit margins aren't set in stone. I wasn't sayin you thought they were. The gamepad could be $150 as an attempt to provide a profit source for Nintendo, or it could be $150 because the price of the controller is high and therefore a lower price would sell at a loss. It is hard to judge the gamepad because there aren't good comparisons to work with. We will have to wait for a tear down, which due to its uniqueness and high price will happen in conjunction with the Wii U teardown.

The gamepad's high price is an idication that it has a high production cost at the moment. Controller profit margins are normally considered high. At $150 it indicates the cost of production is almost three times as much as a typical controller. Since it is so expensive there is good reason to believe the profit margin is lower than a typical controller, meaning that the gamepad's production cost could be well over three times the cost of a typical controller. This no doubt is a contributing factor to the overall production cost of the Wii U and could explain why it is selling at a loss.

On the bright side, Nintendo has essentially two expensive compenents in the Wii U, the console and the controller. Reducing the cost of production will fall on both compenents, allowing for a faster overall price reduction as opposed to a product relying on only the console's parts to become cheaper. The Wii U will, in my mind, without a doubt be profitable next year with a flexibility to have a price drop if needed depending on the competition/sales.