Why did the Gamecube fail?

[Jumpin]

Leynos said:
It didn't fail at all. It made a ton of profit where MS was losing money.

I'd dispute this.

Nintendo's profits were unusually low during the Gamecube considering the booming handheld business. Most of Nintendo's operational, marketing, and R&D expenses were for the benefit of the home console division. Gamecube couldn't have been making enough profit to account for those expenses.

THE EVIDENCE

https://www.nintendo.co.jp/ir/pdf/2005/051124e.pdf

This shows Nintendo had 515 billion yen in revenue, 115 to Gamecube meaning around 80% of the total revenue is from the handheld division.

Nintendo also showed that expenses were 405 billion with manufacturing and sales costs amounted to 300 billion yen, and internal expenses (employee salaries, and such) costing the other 105 billion (this is before corporate acquisition/sales costs/profits, exchanges, and taxation).

In order for Gamecube to break even, it would need somewhere around 80-90% profit margins on manufacturing+shipment+marketing, which we know is certainly untrue.

Handhelds were 80% of Nintendo's revenue income, and almost certainly had higher profit margins on sales vs (manufacturing+shipment+marketing). They definitely did not cost anywhere near as much on the internal side as handheld teams are typically far smaller than home console teams and most of the internal focus was on home console, not handheld.

Spread sheeting it under the assumption that Gamecube hardware and software had the same profit margins as handhelds (which isn't true, handheld definitely had higher margins), the home console division still makes a loss. But it's not rocket science to make this deduction, the home console division (115B) generates barely more money than internal costs (105B), while the handheld division generates nearly 4 times as much. Unless handheld hardware cost more to manufacture and ship than home console hardware (an absurd consideration), Gamecube can't be profitable.

IN CONCLUSION

The reality: the belief of "But at least Gamecube was profitable!" is a myth.

The home console division was making a loss, and it cut into Nintendo's massive profits made by the handheld division.

Last edited by Jumpin - on 07 October 2020