| padib said: @ICStats. Over 10 years, there should be no reason why Nintendo continues to lose money on a yearly basis. The U will go down in marketing price, that's a given, and the library will only grow. So long as the games continue to be profitable, there is no reason Nintendo should cut the console's lifespan short. |
Don't be silly, Nintendo is a company that has $2 billion of SG&A costs. In order to not lose money on a yearly basis games have to not only be profitable, but generate over $2 billion of gross profit.
The U is not providing much profit; the past years have been supported by 3DS and still decent DS & Wii software sales but those are going away.
FYE2014 DS software - 10,290,000 units
FYE2014 3DS software - 67,890,000 units
FYE2014 Wii software - 26,160,000 units
FYE2014 Wii U software - 18,860,000 units
FYE2014 Total software - 123,200,000 units.
With those sales they turned an operating loss of ~$450 million.
Solve for average gross profit per game: 123.2M * X - $2B = -$450M
X = $12.58 gross profit per game unit.
Projected FYE2015 DS software - 0 units
Projected FYE2015 3DS software - 67,000,000 units
Projected FYE2015 Wii software - 9,00,000 units
Projected FYE2015 Wii U software - 20,000,000 units
Projected FYE2015 Total software - 96,000,000 units
Projected net profit - 96M * 12.58 - $2B = -$792M
1st thing to note is Nintendo is projecting 27 million (22%) drop in overall software, so expect more losses this year. A trivial calculation above shows they could lose ~$800M if they don't majorly improve operating costs or profit per unit.
2nd thing is Wii U has only a projected 1.1 million (6%) increase in software. This can't be pelasing Nintendo, and they can either a) majorly downsize their home console teams to break even, or b) invest quickly in a new console.
While Wii U itself may break even or become profitable, there is also opportunity cost. Supporting a console takes resources that could be invested to make something better.
