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Cost of 3DS parts estimated at under 62

Thu 24 Mar 2011 11:47am GMT / 7:47am EDT / 4:47am PDT
HardwarePublishing

Sources say price to retailer is 170.73 per unit

A report by Eurogamer has indicated that the estimated cost of the components of a 3DS to Nintendo is 61.76, with the price to retailers thought to be around 170, a margin of 108.

Once the UK's new 20 per cent rate of VAT is added to that 170.63, minimum break-even price is 204.86. Added retailer overheads and staffing costs soon push that price north of 230.

Eurogamer's estimations come from David Carey, VP of technical intelligence for UBM TechInsights, which specialises in maximum investment return in consumer electronics.

Whilst the estimate is just that, it certainly represents a significant price hike on a console which Nintendo openly admits will be sold at a profit from the get-go.

Compared to the launch prices of Nintendo's other handhelds, the 3DS represents a significant cost increase, but UBM's analysis seems to indicate that the rise is somewhat disproportionate to the costs involved. The DSi, for example, launched at 149 in 2009, but cost just 9.17 less per unit for Nintendo to produce. However, that model came later in a line where previous iterations had absorbed a great deal of R&D costs.

"Little known fact, the margin on hardware for retailers is incredibly small," EEDAR's Jesse Divnich told Eurogamer. "Retailers make the profit on the games and accessories. Typically retailers see a 20 to 25 per cent margin on the games and 40 to 60 per cent on the accessories."

That's a view echoed by Don McCabe, CEO of the independent CHIPS retail network.

"By the time you take into account the VAT and various other bits and pieces, [retailers charging under 200] will not make a brass penny piece. Even for an online outfit, it's still going to cost them money to sell it for under 200 quid."

McCabe sees that as detrimental, not just to the public, but to the industry as a whole.

"It means that consumers won't go hands-on with the machine," McCabe believes. "You don't get hands-on via mail order and supermarkets very rarely do demonstrations.

"What happens is, your early adopters are going to buy the machine come hell or high water. It doesn't matter whether it's 200 or 230, they still would've bought it. But early adopters will not make the machine. It's wave two and wave three that make the machine and the only way that's going to happen is if people see it, feel it, touch it. 3D is very difficult to get across in a TV advert or in a newspaper. People need to experience it.

"We saw it with the Dreamcast. A critically acclaimed machine, but only the early adopters took it on, and it died," he continued.

"For a machine to grow and be viable, it needs to go beyond the early adopters. The actions that the Tescos and the mail order people of this world take have a detrimental effect on that.

17 Comments

Kingman Cheng
Illustrator and Animator

943 156 0.2
Curse you VAT!

Posted:3 years ago

#1
VAT is only a smaller demon (its inline with Europe now).
The blooming fuel tax whereby mr.taxman takes home at least 80p out of 130p/L is even more scandalous!

Economic hardship solved if Taxman shaved off 20-30p!!

Posted:3 years ago

#2
Reductio ad absurdum.

David Carey probably got through his day's work producing this analysis consuming food worth less than 5. By his rationale, his day's work is only worth 5. His employers should take note of this at his next wage review.

Posted:3 years ago

#3

Alex Winton
Website Administrator

11 0 0.0
Comparing the 3DS to the Dreamcast is pretty questionable. The Dreamcast failed for a multitude of reasons, key among them being the incompetence of Sega itself. The 3DS sits afront a backdrop of two of the most successful gaming systems that have ever been made, with a massive new audience associating these products with an opportunity for gaming that they didn't perceive to exist before.

There's really no danger of the 3DS being a flop.

As for the parts cost, that's obviously only one part of the cost for the system before you get to the wholesale price for retailers. Before that, you've got R&D, assembly, packing and shipping. Compared to what Nintendo will have to have spent per 3DS unit to have the system in the shops, that 108 'profit' will be a highly inflated number over the reality of what they'll truly make back. It's kind of misleading to indicate otherwise.

There's no real question that Nintendo will want to use the early adopters of the 3DS to bolster their pockets at the start of their new financial year. For much of this first year, people buying the system will be paying off much of its R&D costs, and by next year there'll likely be a price drop that brings it below 200 for the consumer. You don't need to be a 80 grand a year analyst to be able to see that.

Posted:3 years ago

#4

Neil Millstone
Director

32 12 0.4
These kind of cost breakdowns based on taking the device apart are always really misleading, but they keep getting published!

Items conveniently missed out in this kind of breakdown:
- Industrial design
- Circuit board layout and design
- Software development costs for the firmware
- Cost of providing the free online services which come with the device
- Packaging, manuals, etc.
- Marketing/distribution/user support

Also, Nintendo have a roadshow which is travelling around the UK letting players sample the device. I agree that not being able to see 3D on a TV advert is a major problem for explaining to potential customers what the 3DS is about, but I think it's clear that Nintendo are aware of that.

The effect is so cool that I think those early adoptors are going to show their friends and soon they will want one too.

Posted:3 years ago

#5

Andrew Goodchild
Studying development

1,226 385 0.3
When you say price for parts, that suggests what the componants cost added up, ignoring cost of assembly (staff, premises, utilities), cost of storage (parts and finished units) and distribution for the costs per unit, and then marketing, accountancy, legal, research into OS improvements etc as fixed cost. And tax on profits.

Don't get me wrong. They will make a good profit. But then that is the reason fo a business existing.

Edited 1 times. Last edit by Andrew Goodchild on 24th March 2011 1:50pm

Posted:3 years ago

#6

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Not sure about the UK but in the US they are setting up demo kiosks at Best Buy with GameStop to get them soon too.

And I'm not sure how McCabe makes the connection of a high margin of profit from the BOM to consumers never getting a hands on experience prior to purchasing and how that translates further into no sales post-early adoption.

Posted:3 years ago

#7

Stephen McCarthy
Studying Games Technology

205 0 0.0
Jimmy@ I was able to demo it them by asking for it. they gave me the 3ds and I played it on the table ((they only had AR cards)) but i think it will not be more then that.... the DS download things went out of the shops very fast....

Posted:3 years ago

#8

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
I'm referring to full time demo kiosks. Are those not common in UK game stores? Best Buy and Wal-mart tend to have at least 1 demo kiosk for every game console (home and portable) while Gamestop does for most consoles (smaller store footprint so they can't display them all).

Posted:3 years ago

#9
Thaat's a profit margin of about 275%!?

All right, who's been letting their marketing department play Recettear?

Posted:3 years ago

#10

James Poole
Managing Director

36 0 0.0
This sounds like the same old nonsense about CDs only costing 50p, so why does this game cost $50. The real cost is the R&D that goes into making it, not the cost of the raw materials. There is little connection between the cost of making Avatar and the cost of a blank DVD.

Posted:3 years ago

#11
@Jimmy - Some stores have kiosks for various consoles. I know the DS Lite had full time kiosks. It seems they haven't done that this year with the 3DS, stores have just been sent a demo 3DS to show to customers.

Posted:3 years ago

#12

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Wonder if that's just a temporary thing or their long term plan for demonstrating the 3DS in UK.

Kiosks are just now arriving at those retailers I mentioned above in the US so I'm rather surprised at the difference in approach.

Posted:3 years ago

#13

Greg Wilcox
Creator, Destroy All Fanboys!

2,129 1,038 0.5
What? ANOTHER "This console costs 137 cents to make!" posting. Whee.

Look, when any of the big three game companies starts selling do it yourself kits (like those old crystal radio science fair deals for two bucks back in the day) and people start busting out the soldering skills before reselling their new consoles at an 8000 percent markup, THEN I'll be "shocked", "annoyed" or any other emotion these articles are supposed to generate.

Hey, maybe Nike can do that kit thing with its overpriced sneakers and Peter Luger can charge a lot less for a damn steak if they let you get into the kitchen and cook it yourself (or, hell bring your own beef)... whatever.

As for 3DS kiosks and demos, Nintendo is doing it crazy here in the US IF you know where to look. They have "Demo Squads" of a few people dropping in on certain local cities here in NYC and "Demo Pods" set up which are temporary setups in public spaces where people can try the thing out. Plus they're adding new Kiosks around the country as the launch window opens.

Posted:3 years ago

#14

Saadat Ali
Flash Games Developer

7 0 0.0
Nintendo are cheap B@%$#s! They never release console that can truly remain Nextgen for 4-5 years. 3DS only shines because of its 3D gimmick other wise 2 years old smart phones have more processing power then 3DS (-GPU maybe). Soon LG,etc are releasing glasses free 3D phones with 5MP 3D camera n stuff. 3DS will be outdated in 1st year of release! Only thing saving it is Software but can it last another 5-6 years?

Posted:3 years ago

#15

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Saadat, how young are you? The NES, SNES, N64 and GC were just as powerful, and in many case even more so, the competition.

Posted:3 years ago

#16

Patrick Frost
QA Project Monitor

387 180 0.5
Also Saadat, being behind in terms of graphics didn't stop the DS from being a fantastic system and probably the best gaming buy that I've ever made. The system is not a sum of it's parts and even if it was, you're missing out a key component: Nintendo.

Posted:3 years ago

#17

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