But Nintnedo does not sell its consoles at a loss -- which is different than Microsoft and Sony.

Mike from Morgantown

The lack of logic in the OP is appalling, how can people even be discussing this?

Here is the pricing list for ps3 in 2006:

This is a breakdown from 2008 Dec

"Research firm iSuppli says that Sony continues to sell PlayStation 3 hardware at a loss, losing about $50 with each unit sold, each $399 system costing the company $448.73 to build.

According to the agency's previous research, however, Sony has significantly brought down manufacturing costs since the PS3 launched in November 2006, when it spent over $840 for the components in a $599 model, and $805 for the components in a $499 system.

To cut down on those costs, the company has taken advantage of smaller, cheaper chips, with the Cell processor's price down from $89 in 2006 to $46, and the Nvidia Reality Synthesizer down from $129 in 2006 to $58. Because smaller chips require less power, the systems now ship with a smaller and less expensive power supply, costing $21.50 instead of the previous $30.75.

Sony's decision to exclude the "Emotion Engine" PS2 CPU chip, which was used for backwards compatibility purposes with PS2 games, from its newer models also likely contributed to the cheaper manufacturing costs.

The company was able to further reduce costs by reducing parts -- when first released, the system was comprised of 4,048 parts, including those in the controller. Since then, the number of parts has been tapered by about 30 percent to 2,820, according to a report from BusinessWeek."

This second breakdown doesn't show how much the bluray drive costs, but you can buy one online for about 60$ now.

compare this to the Nintendo costs list

"According to analyst Koya Tabata from Credit Suisse, Nintendo’s manufacturing costs for the Wii have almost halved since the console’s introduction in 2006. The analyst cites a 45% decrease in costs hardware costs, however, that does not translate in 45% more profits for Nintendo, as fixed costs (such as packaging, transportation etc.), remain the same."

http://www.digitalbattle.com/2009/04/07/wii-manufacturing-costs-down-by-45/

that table above is hardware costs. so, 158- 45%=87+ extras (37)= 124

costs have only gone down 34$ in total according to these graphs, whereas the ps3's graphics card dropped 100$ by itself.

selling at a loss wouldn't even begin to chip away at the fortune they've racked up so far. a price cut- though not really needed- wouldn't hurt nintendo much

the prof00 said:
"According to analyst Koya Tabata from Credit Suisse, Nintendo’s manufacturing costs for the Wii have almost halved since the console’s introduction in 2006. The analyst cites a 45% decrease in costs hardware costs, however, that does not translate in 45% more profits for Nintendo, as fixed costs (such as packaging, transportation etc.), remain the same."

Actually, what is cited here as fixed costs can be variable. The price of a gallon of gasoline in the US is 62.5% of what it was a year ago.

Also, others have downplayed Nintendo's ability to get price reductions because of using older technology and thus all process-based reductions have already occurred and technology where either it is the only customer or where there are already so many customers that economies of scale have been maximized.


Mike from Morgantown

I don't understand your second paragraph..

The fixed costs of what was mentioned in that article was distribution, packaging, and other figures. I don't think those have changed much. Of course they've changed a little, but not that much.

DVD was already 2 years old (in Japan 3 years old) without competition (DVD is an unified format) and started outselling the VHS at fast rates... PS2 took advantage from it, unlike PS3, which had the Blu-Ray the same year the format launched, with competition (HD-DVD) and fighting the still widely popular DVD, Sony took a really high risk with the PS3...

cmon man, in the years shortly after ps2 dvd costs dropped by a lot. DVD drives were still about 60$+ and are now less than 10

The OP kinda also leaves out one thing -- Nintendo has tremendous leverage with part suppliers.

If they feel like part supplier is charging too much for a part, they can probably go elsewhere or more likely they can put heat on that part supplier.

Every part supplier would love to be in business with Nintendo given the massive volumes they sell at, I don't think any company is in a rush to piss them off. Nintendo in the past has been known to strong arm suppliers, especially when they are in a position of power. I don't think any company wants to anger Nintendo and risk a potential contract for Wii 2 and/or DS2. 

Beyond that I believe pretty much that the Wii wasn't even supposed to be $250 in the first place. I believe it was designed to be $199.99 from launch, but then Sony made the huge blunder of $500/$600 launch, and Nintendo figured they could get away with charging the extra $50. The rest of course is history.

You also have to wonder about the profit margin on the Wiimote + nunchaku ... they must be racking it in from that too. Wouldn't surprise me at all if a nunchaku costs Nintendo like $1-$2 to make. After the mass production of the Wiimote too ... they probably are making a handsome profit at $40 extra per pop. Ditto for that Balance Board that comes with Wii Fit, that production costs on that likely have dropped a lot as things tend to do when you're mass ordering like a bazillion of them. 

That's exactly my point, DVD had all the posibilities for a big drop because its condition (huggge sales, being the unified format, and having already 2 years on the market before PS2 launched), Blu-ray had a cost drop but not a substantial one like the DVD because the sales are good, but not DVD-like, the 1st year it was all about the HD-war which delayed more sales (consumers wanting to know the HD winner), and the format launched only months before PS3...

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@Soundwave

Returning to the Wii subject, i also didn't count the peripherals (wiimote, nunchuck, balance board, motion+, plastic add-ons, classic control) all of them are really cheap to make and they're charging a lot for them (and they're selling like crack)...

The thing is, Nintendo has a really strong business model right now, between all the hardware and main 1st party software, and even if the sales go down this holiday season they'll still be making more money than with the price cut (unless they go down by a half which won't happen)...