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Forums - Nintendo - The Wii U will be sold at a loss

miz1q2w3e on 24 October 2012

Not great news, but I'm not complaining :p



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Play4Fun on 24 October 2012
Chark said:
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.


The gamepad doesn't use any cutting edge parts. There are tablets out there with more components and better screens in them than the gamepad that cost less than a $100 to manufacture.

That's why i don't think it adds $100 or more to the console.

The gamepad's $150 price isn't really an indication of a production cost of around $100. That's what I'm arguing. Back in 2006, for example, we got a report that Xbox 360 controllers cost $11 to manufacture, yet they are sold for $50/$40 even today.

WiiU gamepad cost more to make than an average controller, so it will be sold for more than an average controller at launch, but I am as certain that it still has a high profit margin as i am certain that it costs less than $100 (i'm thinking around $50) to make.



Soundwave on 24 October 2012

I'm beginning to wonder though if the game business really is all that profitable for anyone, lol.

By and large after 10-15+ years in the industry neither Sony or MS have overall made all that much profit.

Nintendo generally has, but even they are hurting nowadays and with the handheld market likely to shrink the next few years, that's narrowing their profit window as well.

And you have publishers/developers going bankrupt left and right.



Play4Fun on 24 October 2012
ethomaz said:

The loss in due the expensive controller... to try equilibrate the things Nintendo made a cheap hardware for Wii U... the controller only should cost $200-250 for Nintendo (I guess).




Darc Requiem on 24 October 2012
Play4Fun said:
ethomaz said:

The loss in due the expensive controller... to try equilibrate the things Nintendo made a cheap hardware for Wii U... the controller only should cost $200-250 for Nintendo (I guess).


Despite it's name common sense, isn't very common it seems....



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MDMAlliance on 24 October 2012

Looking at the Wii U and what people are predicting what Sony and Microsoft will do with their next gen consoles, I am curious as what would be in store for us the generation after Wii U. It is quite evident by console history that power is not everything. By the time it is the next generation for consoles, maybe we will see ourselves out of a recession? Think we might see more systems like the Ouya popping up? Will iOS gaming (app gaming and whatever) really replace the handheld dedicated gaming consoles?
The Wii U, regardless of all this positive/negative news, is a system I am still interested in and am planning on getting.



Chark on 24 October 2012
Play4Fun said:

The gamepad doesn't use any cutting edge parts. There are tablets out there with more components and better screens in them than the gamepad that cost less than a $100 to manufacture.

That's why i don't think it adds $100 or more to the console.

The gamepad's $150 price isn't really an indication of a production cost of around $100. That's what I'm arguing. Back in 2006, for example, we got a report that Xbox 360 controllers cost $11 to manufacture, yet they are sold for $50/$40 even today.

WiiU gamepad cost more to make than an average controller, so it will be sold for more than an average controller at launch, but I am as certain that it still has a high profit margin as i am certain that it costs less than $100 (i'm thinking around $50) to make.

So is Nintendo's gamepad pricing just exploitation? I don't think it costs $100. I'd say $50 though. That cost tacked on to what the parts in the Wii U cost makes a difference.

I understand that you can have high profit margins on a controller, but there is most likely a point where the returns have to diminish in order to maintain not only sales, but profitability. I suppose with the gamepad, the majority of purchases might be for replacements, in which case they are charging a lot for them because their most likely customer needs it rather than wants it in order to continue playing....well with asynchronous. If that is the case then they are just trying to make money off of people who break their controller instead of people who want multiple ones. If not, they would still be making a decent sum of money at a cheaper price.

For instance, if they made the same net profit as a 360 controller, around $40. If they price the gamepad to make that $40 mark than they should price it about $40 over the production cost. Now at $150 that stands at $110, or at $100 that's $60. That is one expensive controller.

The other concept it to match the profit margin, or profit percentage, so at a $150 price with a profit margin of 450% like the 360 controller has, that's $33 or at $100 price is $22. So the controller, reasonably is between $22 and $60 or $33 and $110 in price to produce, quite the range and that's using 360's controller profit set up. Now I doubt it is $22, looking at the device itself but it isn't incredible expensive. Still that is one crazy retail price if it is $150. I don't see much justification in it unless they are banking on no one buying them outside of replacements.



Before the PS3 everyone was nice to me :(

phenom08 on 24 October 2012

As expected, preparing for the launch cost money.



TheShape31 on 24 October 2012
Soundwave said:
GameCube was sold a loss twice in its life cycle, once at launch (roughly $10-$20 loss/unit IIRC) and again when they dropped to $99 initially.

Proof of loss at launch?  Any links that quote reputable sources?

I only ask because this is the first I've ever heard of it.  And I've searched far and wide online in the past for factoids like that. 

Thanks.



Viper1 on 24 October 2012
TheShape31 said:
Soundwave said:
GameCube was sold a loss twice in its life cycle, once at launch (roughly $10-$20 loss/unit IIRC) and again when they dropped to $99 initially.

Proof of loss at launch?  Any links that quote reputable sources?

I only ask because this is the first I've ever heard of it.  And I've searched far and wide online in the past for factoids like that. 

Thanks.

I am the source.   And it was $9 for during the initial launch quarter.

I've not been able to track down any modern sources and most reports from the sources I read back then (and my own written article) are no longer online.



The rEVOLution is not being televised