^That. That makes me remember that when i was a kid it took me 5 hours to install battlefront.

That's not gonna happen.

Firstly, Nintendo has  consistently made more revenue from hardware than software, even in 2013. 

http://abload.de/img/hard_soft_revj3ptw.png

That in addition to the knowledge that Nintendo has  always made a profit up until very recently (low Wii, Wii U and 3ds sales; high software, hardware and investment R&D), allows us to conclude that software sales have never made up for hardware costs, including hardware R&D. 

Now you might say, well it is handheld sales then, that make up for it. But that isn't entirely tru e either. 

http://abload.de/img/nin_hard_rev9rqxd.png

Notice how the GC, while still netting less revenue than the GBA, was still pretty close. It wasn't until the DS was released and the GC became irrelevant that there was a huge dfference in revenue. Then the WIi made up for it. And it again, wasn't until the 3DS was released and the Wii beame irrelevent until there was another difference in total revenue. So it is a myth that Nintendo handhelds carry Nintendo's home consoles. They are pretty comparable in terms of revenue for Nintendo. This is despite the handhelds selling much more (albeit a t a lower price.) 

That leaves one last argument in the favor of home console hardware revenue not recouping R&D, as opposed with my alternative. The R&D costs of a home console vastly exceed that of a handheld and that of software development. Firstly, we need to address  the largest part of R&D - infrastructure. A huge portion of Nintendo's R&D budget is put into buildings. They spent $200 million on some of their newer buildings alone. Then you have software R&D, which is another huge portion of their R&D costs. At their peak spending, right before the WIi U in 2011-2012, Nintendo spent about $650 mil that year on R&D. If we say, a third of that budget was on Wii U hardware. That is about 200 mil spent on the Wii U in one year. Let's assume that is the average and not the peak. Then the WIi U cost about 600 mil to produce its hardware if we assume Nintendo started the brunt of its production three years before its release. That seems reasonable because much of its architecture was taken from the Wii/GC and much of the R&D costs were probably relevant to the tablet controller.  

Anyway, if we consider the 60 million in losses from selling 5.86 Wii U's at a "small loss" which probably translates to $10 / console. Then that would mean Nintendo would have to make an average profit of about $40 / console and sell 20 million Wii U's total to meet R&D costs of $600 mil, if we disregard inflation and exchange rates. Now, remember the WIi U was Nintendo's most expensive and also its  least profitable console. We are assuming that Nintendo's next console will take after the Wii U and not some of their other more successful consoles.  

Nintendo is already suffering from their wii experience. People gamers or not have the idea of a motion gaming console when reffering to the wii U/ wii which is one of the reason why the next N console should have a new name.

so in the living room I want a console with which we can play locally with 16 player and in order to do this they need a new handheld which would be as the gamepad.

And I can easily imagine a third product : https://www.youtube.com/watch?v=k3KCTOkHVhA


this would be a new era for gaming imo

Ofcourse hardware makes more revenue, but revenue != profit.

Games can make up to 70% gross profit, and hardware gross profit is usually in the range of +/- 5%.

~$4.0 Billion Hardware Revenue = +/- $200 Million gross profit on hardware.
~$2.2 Billion Software Revenue = ~$1.54 Billion gross profit.
Approximate total gross profit range is $1.3 ~ $1.7 BIllion.

Actual Nintendo gross profit reported in last FY?  ~$1.6 Billion so the estimate is right one the money.

~95% of Nintendo's gross profit comes from software.

Way to pull my quote out of context. I never stated that higher revenue => higher profits from hardware. The revenue statement was one in a sequence of arguments presented in my post to argue the likelihood of at least 0% gross profit (breaking even.) In fact, you are arguing my point now. A +/- 5% profitability on hardware is quite similar to saying that hardware research and development costs  are at the least covered by hardware sales. That was the point of my post. Now if Nintendo can reduce its software costs by producing hardware that enables that, it is a no brainer. Software sales will be more profitable on their hardware than their competition's. For reasons I illustrated: lower costs, saturatation of targetted consumer base on one platform, etc, etc. So what are some opportunity costs Nintendo forgives when it only produces software on its platform? A larger userbase to sell games to, and that is about it. 

This is not to debate the merit of Nintendo being an innovator, but more on their philosophy and evolution to their approach on HW. We can view this in generational pairs IMO.

NES-SNES

N64-GCN

Wii-WiiU

also

Gameboy era (89-04)
DS era (04-16?)

NES had a standard and its natural evolution was the SNES with more buttons. N64 was a bigger leap with 3D gaming and analog control. The small evolution to GCN was the separate C buttons now combined to form the right analog or now dual analog control. Wii was obviously a huge change and evolution to Wii U was more of an add on , so clearly nintendo rides the wave rather than come up with something new every gen.

You may or may not agree with this pattern, but judging by Nintendo's history IMO they will shake things up for sure.

Agree I do think Nintendo at their core is a "game and watch" company, they want to slowly divorce the idea of being tied to the tv.  A truly portable wii u, or fusion to make tv output optional.  I have a feeling the next console will be a souped up "gameboy player" but again its hard to predict what Ninty will do, judging by their pattern of HW releases they might shock the world again.

You made the point that "allows us to conclude that software sales have never made up for hardware costs".  My point was (a) that the fact that revenue from hardware is higher doesn't mean squat, and (b) you can't conclude anything about the hardware costs, or about covering the R&D costs from revenue.

You seem to think that +/- 5% Gross Profit on hardware means that R&D costs are covered.  This is incorrect.  R&D costs are not counted in Gross Profit.

Some accounting term reference (with Nintendo's numbers for last year)

Revenue = Income from sales. (571,726 million Yen)
Cost of Sales (COGS) = Costs related to production (components, manufacturing costs).  (408,506 million Yen)
Grooss Profit = Revenue - Cost of Sales. (163,219 million Yen)
Selling, General and Administrative expenses (SG&A) = all costs other than production, including R&D, sales, marketing, administration, etc. (209,645 million Yen)
Operating Income = Gross Profit - SG&A. (-46,425 million Yen)

You seem like a person that likes to do reserach, so I hope that helps clear things for you.  Gross Profit can cover the R&D only when you have sold enough units.

Example: If I spend $300 Million on R&D for a new product, and then produce the product for $290 and sell it for $300 I get $10 Gross Profit each.  Now if I sell 10 Million of my product, I'll have made $100 Million Gross Profit.  Overall, I'm still $200 Million away from breaking even.  I would break even after selling 30 Million units.

Since Nintendo announced that they are no longer losing money on selling Wii U, they've only sold maybe 3 or 4 Million units, so think how much Gross Profit they could have made.  $40 Million?  It may not even have covered the loss they made for selling Wii U at a loss before, let alone cover the R&D cost.

Their opportunity cost is potential sales to 25 Million userbase on PS4/XB1 and growing.

- Mario Kart Wii (101M userbae) = 35 Million sales.
- Mario Kart 7 (42M userbase) = 10 Million sales.
- Mario Kart 8 (8M userbase) = 3 Million sales.

Wii is best example that Nintendo games can have a large audience, much larger than core Nintendo fans buying Wii U.

What does "more profitable" mean to you in this context?

a) More profitable, as in gross profit per unit sold?
b) More profitable, as in return on investment (ROI) is higher?
c) More profitable, as in total profit?

Your arguments support (a) which is the least useful measure.  Publishing on multiple platforms supports (b) and , which is what a Nintendo investor would care about.

What do you thin about a BIG N ecosystem including a home console a smart phone a handheld and a tablet?


#Play how you want

you see there is already hype behind the idea ;p