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Retail

Reggie: It only takes one game sale to make a Wii U profitable

Reggie: It only takes one game sale to make a Wii U profitable

Wed 21 Nov 2012 11:15am GMT / 6:15am EST / 3:15am PST
Retail

Loss-leading model quickly comes good for Nintendo

Reggie Fils-Aime has explained that the Wii U's loss-leading business model turns a profit after just one game is sold for the system.

Speaking to the Mercury News, the NoA president was quick to point out that the company wasn't making the bottom line sacrifices which some had thought it would by releasing its first console to be sold at a loss from launch.

"The business model doesn't change dramatically, in that as soon as we get the consumer to buy one piece of software, then that entire transaction becomes profit positive," Reggie said.

"In the end, the business model is still to drive the install base of hardware, and then to drive a strong tie ratio with all of the other software and experiences for the consumer. And if we're able to do that, then we will create significant profit for the company."

Details of Nintendo's cut from third-party produced retail titles are not public knowledge, but it's unlikely to be any higher than 30 per cent at most, suggesting that the loss margin on a new Wii U is minimal. With GameStop reporting that the attach rate for the Wii U is extremely healthy, at 2.4 per console sold, Nintendo is looking to recoup any console manufacturing losses extremely quickly.

5 Comments

Jason Pullara
Podcaster

28 70 2.5
... and since the console doesn't come with a pack-in, we're guaranteed at least 1 sale, thus the console is profitable from day 1.

Somehow Nintendo continues to impress with their business decisions.

Posted:A year ago

#1

Roberto Bruno
Curious Person

104 69 0.7
They could settle for two sales and produce some hardware that wasn't a joke for Autumn 2012, then.

Edited 1 times. Last edit by Roberto Bruno on 21st November 2012 6:15pm

Posted:A year ago

#2
I figured Nintendo were always subtly lying about this: the WiiU itself (basic) may be just breaking even (or losing $$$), but the deluxe model is surely turning a profit ... which is enough to make the whole thing profitable.

That said, like Reggie (or someone said), launch comes with lots of other costs (marketing) - so they just be breaking even on the initial market batches.

Posted:A year ago

#3
@Roberto: I'm *soo* curious to see how this turns out now. I guess I need to see what a "real" Orbis/Durango game looks like, because nothing I have seen (including the Samaritan demo) says "next-gen" to me.

If the rumours about the Orbis are true (rough specs, locking out used sales, pricepoints) I can see it being a disaster in excess of what is happening to the VITA right now.

Essentially, the gap between the Wii & 360/PS3 (specs-wise) was massive, and coupled with the resolution difference meant games LOOKED really different. There is NO chance a similar gap will be present between the WiiU and next-gen consoles, so it really comes down to what NEW features they offer - not just power. And its going to be REALLY hard for them to copy the WiiU properly, the same way the Wii unique features were copied.

Of course those consoles aren't even on the market yet, so...

Edited 1 times. Last edit by Michael Shamgar on 21st November 2012 7:32pm

Posted:A year ago

#4

Greg Wilcox
Creator, Destroy All Fanboys!

2,175 1,124 0.5
... unless you buy the Premium version that has the retail version of Nintendo Land inside the box...

Posted:A year ago

#5

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