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Gilgamesh said:

"The 8GB model (the white one) will only have 7.2GB of usable space, and the 32GB model (the black one) will only have 29GB of usable space. When you set up the system for the first time, it uses up a monstrous 4.2GB of space!"

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Why so little space?

For users that won't do any digital downloads. If you're just playing retail games and the built-in services, the 3.5GB available is more than enough.

My Wii had only .5GB of space. I have every channel Nintendo put out, and over 30 games downloaded from VC and WW. While I do have a 4GB SD card, I was cleaning up the Wii last night in prep for WiiU and not wanting to move a bunch of content I won't need/want on my WiiU and I realized that nearly everything I had could still fit in that 512MB of space. I think I only had to leave out two of the larger WiiWare games. WiiU will have 7x that amount of space available in its Basic bundle.

I'd expect there are quite a few mass consumers who this storage option is more than ok. If its not, they can get a very cheap external HDD with say 200GB of space and defintely be fine.

On the Ps3 I had, if I removed the movies and trailers I had downloaded, I think I barely used 20GB of space over the 3 years I owned it. I had multiple full games and quite a few demos installed along with other services, game saves, DLC, and other stuff. Had I been diligent on removing demos, gamesaves (for games I sold), etc, I'm sure it would be less than 10GB.

Depending on how Nintendo handles the WiiU VC and Wii VC content, I may go entirely digital. If that's the case, I will get an external HDD. If WiiVC is never migrated to WiiU VC, I'll stick to disc games and never need an extra HDD. The 25GBs on the deluxe model will be more than enough.