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Nintendo still selling Wii U at a loss

Nintendo still selling Wii U at a loss

Wed 07 Aug 2013 9:17pm GMT / 5:17pm EDT / 2:17pm PDT
BusinessHardware

Mario maker confirms it is still recording a loss for each unit of hardware sold

Those holding out hope for a Wii U price cut to combat system launches from Microsoft and Sony may want to brace for disappointment. A Nintendo representative confirmed for GamesIndustry International today that the company's hardware is still being sold at a loss.

Earlier this week, Nintendo's annual report cited Wii U hardware sales as a major factor in the company's 36.4 billion yen ($387 million) operating loss. In the same document, Nintendo president Satoru Iwata promised investors the company will "strive to regain 'Nintendo-like' profits" in the current fiscal year.

Selling hardware at a loss is a decidedly un-Nintendo-like practice. Iwata made headlines last October when he first revealed the company would be losing money on each Wii U sold. However, the following month Nintendo of America president Reggie Fils-Aime downplayed the significance of the profit shortfall, saying "as soon as we get the consumer to buy one piece of software, then that entire transaction becomes profit positive."

The Wii U launched in November with a white $300 basic set as well as a black $350 deluxe bundle. However the basic set has largely been dropped, with retailers like Best Buy, Walmart, and Target only stocking the deluxe version of the hardware in their online storefronts. Nintendo disputed reports in June that the basic set was being recalled.

[CORRECTION]: The original version of this article misreported the launch prices of the Wii U.

29 Comments

Asif A. Khan, CPA
Financial Reporter

31 86 2.8
You got the launch prices wrong. It is $300 for basic and $350 for deluxe.

Posted:11 months ago

#1

Paul Jace
Merchandiser

868 1,273 1.5
You beat me to it Asif.

Posted:11 months ago

#2

Tim Ogul
Illustrator

335 462 1.4
So good news! They aren't losing very much!

Posted:11 months ago

#3

heirdt von braun
Marketing Specialist

22 8 0.4
I think this is a terrible situation for Nintendo and it's pretty much what happened to SEGA Dreamcast. Why aren't those aware people about Wii U existence as a console and not confusing it as an accessory buying it?, Aren't they waiting for PS4/Xbox One?. Where's EA, Bethesda, Namco-Bandai, and Square-Enix support?. Capcom remains silent after Monster Hunter Tri poor sales (400,000 units). Where's Grand Theft Auto 5 for Wii U?. Take2 will hardly support Nintendo under these circumstances, while SEGA on the other hand might support the company for a limited period of time with games like Sonic Lost World, an excellent title, but hardly a game-changer. Ubisoft also is supporting the console, but I'm afraid this will not last long.

Activision surprisingly has offered Nintendo a generous second chance considering Black OPS II sold only 19k-25k copies, they have promised Nintendo users several titles. The most important one is Call of Duty: Ghosts. However if you investigate enough about Xbox 360/PS3 title pre-orders you'll find out they are actually lower than Black Ops II, which means will be even harder to sell for Wii U, since installed base is much smaller.

There are too many parallelisms between Wii U and Dreamcast. For instance Dreamcast hardware was a big problem because they also sold it at a loss. The problem with this is the more you sell the more your outcomes are. Of course software sales compensate them and in the near future create incomes. However, in the case of Dreamcast it never happened, best selling title was Sonic 2 (2.5m), followed by Soulcalibur (1.3m), Crazy Taxi (1.21m), Shenmue (1.2m) and Resident Evil Core Veronica (1.4m). PS2 success was way bigger, specially with 2001 line-up, plus manufacturing costs were smaller because SCEI was manufacturing the chips and SEGA was buying them to other companies

Wii U situation is not much better, since New Super Mario Bros is the best selling title by far (1.98m), followed by titles like ZombiU (480k), Lego Undercover (430k), and Monster Hunger Tri (400k). SEGA Dreamcast lasted longer in the market and it's perfectly debatable to say these figures might be somewhat unfair or even misleading to compare with due to installed based. However Wii U hardware sales in Europe+Australia were alarmingly low: 10,000 units. Also several retailers in Europe have discontinued the Wii U, while in the USA some of them have dropped basic model. Which means if Nintendo's next-year's lineup doesn't solve the problem soon it's easy to assume they will stop producing the console as it only represents a financial burden.

What Nintendo needs to do is exactly what SCEI already did: Ask publishers and developers what they want. It's really that simple, they need to support their interests and not to think about first-party developers. They need to stop being egocentric and think about what really consumers (hard-core gamers) want instead of giving so much importance to broaden their audience. Casual gaming market is huge but in this moment is too saturated and it's almost impossible to compete with hardware and software prices, specially considering smartphones. Publishers will obviously demand AMD X86-64 and 8 GB of RAM as a minimum in order to minimise production costs since PC, PS4 and Xbox One have very similar hardware. This will ease production, fasten it and will need a minimal effort to port titles. I think it is the only way. Nintendo can still try to be creative and make something unique as long as they do what publishers want.

Edited 5 times. Last edit by heirdt von braun on 9th August 2013 2:18am

Posted:11 months ago

#4
I'm sure the deluxe set is profitable though and that would be most sales.

Posted:11 months ago

#5

Christian Keichel
Journalist

571 781 1.4
@ Heirdt von Braun
However Wii U hardware sales in Europe+Australia were alarmingly low: 10,000 units.
Misleading way to look at it. Just because NIntendo only sold 10000 units in the last quarter, it doesn't mean, that Wii U hardware sales were 10000. Retailers stocks are full, because initial demand for the Wii U didn't lasted as long, as retailers suspected, so there was no need to restock the console.
There are too many parallelisms between Wii U and Dreamcast. For instance Dreamcast hardware was a big problem because they also sold it at a loss.
This similarity shares the Wii U with the PS1, PS2, PS3, XBox, XBox360 (and most probably PS4 and XBox One), the difference is, that Nintendo isn't used to selling consoles at a loss, but according to Nintendo the loss is small, like the loss they took fom the 3DS after the price drop. It's nothing compared to the loss, Sony took on the PS3 or Microsoft on both of the XBox generations..
They need to stop being egocentric and think about what really consumers (hard-core gamers) want instead of giving so much importance broadening their audience.
The thinking, that only hardcore gamers are "really customers" is what drove the console industry over the cliff after 2006. Nintendo was the most profitable video games manufacturer/publisher in the years 2005-2011, they outsold their competition by a wide margin and made more profit from games and hardware, then Sony or Microsoft. They did it by addressing consumers beyond the hardcore gamer market. They were right and Microsoft and Sony were wrong, at least, when it comes to Return on Investment.
What Nintendo needs to do is exactly what SCEI already did: Ask publishers and developers what they want. It's really that simple, they need to support their interest and not to think about first-party developers.
That was exactly what Sony did with the Vita and we see were it ended, no First Party support and no Third Party support, regardless of the fact, that Sony built a console, that fulfilled what publishers and developers wanted.

Edited 2 times. Last edit by Christian Keichel on 8th August 2013 8:45am

Posted:11 months ago

#6

Tim Ogul
Illustrator

335 462 1.4
To be fair, the Dreamcast was hacked senseless in almost no time flat, which sucked a lot of air out of their software sales. The core games that likely would have bought several games pirated them instead, and while I'm generally loathe to blame poor performance on piracy, I think the Dreamcast is an example of where it made a fairly solid difference.

The Wii U is in trouble though, because it's not as good as the Dreamcast. The DC was great for it's time, it had Soul Calibur and it ran slick. The Wii U is mediocre for it's time, it sort of runs the same games people were playing last year on other consoles. If the Wii U had launched with every first party game they've currently been previewing, it might have done reasonably well, but even then they really should have stepped it up two notches on the hardware performance.

It might still succeed to some degree, since it's Nintendo and they have both Mario AND Zelda, but it really doesn't deserve to succeed.

Posted:11 months ago

#7

Bruce Everiss
Marketing Consultant

1,692 594 0.4
The last two console launches, WiiU and Vita, came from market leading companies, Nintendo and Sony. And they both bombed.
Looking around me at real people going about their daily lives I think that consumer behaviour has changed. They don't need an expensive dedicated piece of kit and expensive boxed games in order to consume interactive content any more. They can use their phone, which costs them zero as a gaming device (they pay a contract for a communications device and get the gaming thrown in) and play games that cost zero. They can buy a multipurpose tablet (or work gives them one) and play games for free. Not only that, they can play their games anywhere and any time. On the bus, in the pub, sitting on the loo, whilst watching TV.
And it is a fact that there are vastly more great, compelling games available for phone and tablet than there are for console.

If any future console (Xbone PS4) is going to not fail then it has to give tens of millions of people a compelling reason for making a significant investment. Fanboys will give them an initial market but is not enough to build a new console brand on.

Posted:11 months ago

#8

Daniel Hughes
Studying PhD Literary Modernism

436 496 1.1
@ Bruce

You can make that the last three console launches bombing, all coming from market leading companies. Don't forget 3DS just because it disproves your assertions and suggests that Wii U, and to a lesser extent Vita, can still be turned around and into successful systems.

Posted:11 months ago

#9

Dave Herod
Senior Programmer

517 734 1.4
Popular Comment
And it is a fact that there are vastly more great, compelling games available for phone and tablet than there are for console.
It's a fact, is it? Funny, that sounds like an opinion to me. This would be a fact:
And it is a fact that there are vastly more games available for phone and tablet than there are for console.

Posted:11 months ago

#10

Adam Campbell
Associate Producer

1,136 914 0.8
Those holding out hope for a Wii U price cut to combat system launches from Microsoft and Sony may want to brace for disappointment. A Nintendo representative confirmed for GamesIndustry International today that the company's hardware is still being sold at a loss.
Expected, but I'm wondering if they're making enough of a loss when the long term installed base for the hardware is a bit more important right now.

Also, Nintendo suggested that as single game sale with the console made it profitable in past statements, so to what extent does this have any extra impact at this stage? Which is an interesting question to explore.

Edited 2 times. Last edit by Adam Campbell on 8th August 2013 11:11am

Posted:11 months ago

#11

Bruce Everiss
Marketing Consultant

1,692 594 0.4
@ Daniel Hughes

3DS is just an evolution of DS. Launched in 2004, long before mobile even existed.
So DS was able to build to critical mass with little competition.

In the real world in which I live I see mobile games played on phones and tablets anywhere and everywhere. On the train and bus, down the pub. Anywhere there are people. I cannot remember when I last saw a DS being played in public.

Posted:11 months ago

#12

Adam Campbell
Associate Producer

1,136 914 0.8
In the real world in which I live I see mobile games played on phones and tablets anywhere and everywhere. On the train and bus, down the pub. Anywhere there are people. I cannot remember when I last saw a DS being played in public.
As a regular commuter, I often see the 3DS, Vita and phones being used as gaming devices. The phones and tablets are first, followed by Nintendo and followed by Sony. In reality, people are still playing dedicated devices, of course phones and tablets are ubiquitous and lend themselves to multiple functions in one shell.
And it is a fact that there are vastly more great, compelling games available for phone and tablet than there are for console.
There's a reason why people are still buying dedicated devices and to be quite frank, many people see the average games on 3DS/Vita as being better than some of the more 'premium' games on Android/iOS/Windows Phone.

I'm not trying to berate mobile gaming (one of by biggest areas of interest), because I feel there is quality to be found.

But some of the productions coming out of Sony, Nintendo particularly in addition to third parties on these platforms are incredibly well funded as well as being innovative and enjoyable - dedicated controls also a standard (useful for typical console style games) not an afterthought.

Posted:11 months ago

#13

Robin Clarke
Producer

297 681 2.3
The Nintendo DS was conceived to differentate Nintendo's handheld offering from mobile gaming in Japan.

Posted:11 months ago

#14

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Popular Comment
3DS is just an evolution of DS. Launched in 2004, long before mobile even existed.
So DS was able to build to critical mass with little competition.
Which is why it bombed when it launched, right?

It began to sell well when the combination of price and software satisfied the market. Merely having a similar name (or being some kind of extension of previous consoles) doesn't ensure success or else the Wii U would be selling incredibly well right now.

Bruce, you really need to stop the mobile is greater than console narrative with every post. It's getting ridiculous to the point you are making inane statements to support your ideas. Do you even read into your own logic?

Posted:11 months ago

#15

Nick McCrea
Gentleman

177 217 1.2
It's easy, if you identify as a core gamer, to dismiss the idea that traditional console is dying. But sometimes it's good to examine the argument a little and see how it might come about. It's not that the large numbers of core gamers have gone or are no longer interested in big budget experiences, but maybe the model for how console no longer works is something like this:

- it's losing some customers to the world of tablet / phone gaming. Perhaps those people who dipped into console gaming when it was all there was, but who are perfectly happy with what they can get on the new mobile platforms.

- it's losing some of the old core customers back to PC / Indie gaming; primarily those who are fleeing the 'mass-marketisation' of the main platforms. I'd count myself as one of these. The efforts to chase the mass market is putting me off. I'm more drawn to Steam than Kinect, and whilst I'll miss the big AAA budget console games (Halo et al), they're few and far between, and PC is a creatively rich and vibrant platform.

- The combined effect of the above (the former more the latter), coupled with the ever-increasing costs of content generation for big-budget games, change the economics just enough to make things untenable for most stakeholders in the platform. Chuck in a global recession, and the general hit on the purchase of luxury goods, and the picture gets worse.

Personally, I think the Xbox One and PS4 will succeed. I think there's a large market for a powerful, living-room centred game-focused device. But I don't rule out the possibility of failure, either. Bruce's case has merit.

Edited 1 times. Last edit by Nick McCrea on 8th August 2013 12:51pm

Posted:11 months ago

#16

Tim Ogul
Illustrator

335 462 1.4
Mobile phones aren't greater than mobile consoles yet, although they might catch up within a few years. I can't imagine a dedicated Nintendo/Sony handheld launching after this generation, although maybe a branded phone or something. Not now though, mobiles have a lot of games, but not yet of the same types as available on dedicated handhelds. I also think eventually mobiles will overtake home consoles, but not for at least five, maybe ten years. The Wii U isn't competing against mobiles or tablets, it's competing against the 360 and the PS3 and it's failing at that, and it's competing against the shadow of the One and PS4, and failing miserably at that.

Posted:11 months ago

#17

heirdt von braun
Marketing Specialist

22 8 0.4
1. No, sales in Europe + Australia are not misleading, they show demand is pretty low to none-existent. The latter is more probable
2. Software sales are less than half of Gamecube's.
3. As long as I know mister Keichel Wii was quickly abandoned while PS3 and Xbox 360 enjoyed a larger life-span with better third party support because these systems were much more profitable for them (publishers) than the original Wii. Very little companies made money with that console.
4. Strengthening customer service/Product design are two important factors, it certainly helps sales/publishers support, but does not guarantee you success. One of the biggest problems with Vita is pricing, specially compared to smartphones or even 3DS. As a result sales were very low, then publishers stopped supporting the console with the same effort.

Edited 3 times. Last edit by heirdt von braun on 8th August 2013 9:38pm

Posted:11 months ago

#18

Christian Keichel
Journalist

571 781 1.4
As long as I know mister Keichel Wii was quickly abandoned while PS3 and Xbox 360 enjoyed a larger life-span with better third party support because these systems were much more profitable for them (publishers) than the original Wii. Very little companies made money with that console.
For Sony and MS this generation wasn't profitable and I wouldn't call a console with 6 year life time something that was "quickly abandoned". There were lots of publishers, that made profitable titles on the Wii, companies like THQ went under in the exact moment, they abandoned the market, the Wii created. For a company like Ubisoft it was the exact opposite of what you say, as this quote from a Reuters article shows:
Guillemot said the company's casual games business was "extremely profitable" and helped to finance the initially costly development of games for next-generation consoles -- Sony's (6758.T) PlayStation3 and Microsoft's (MSFT.O) Xbox 360.

According to the Ubisoft CEO, developing a casual game costs anywhere between 1 million to 4 million euros depending on the number of platforms with which it is compatible.

By comparison, a normal game developed for the Wii costs 5 million to 10 million, and one designed for use with the PlayStation3 and Xbox 360 10 million to 20 million euros.

Casual games are expected to contribute 20 percent of Ubisoft's revenue this year, up from 10 percent last year, Guillemot said. Ubisoft has forecast revenues of about 825 million euros for its financial year until March 2008.
http://www.reuters.com/article/2007/08/22/us-games-ubisoft-idUSL2287657620070822
One of the biggest problems with Vita is pricing, specially compared to smartphones or even 3DS. As a result sales were very low, then publishers stopped supporting the console with the same effort.
The price of the Vita is way below that of a smartphone, so I don't know what you are talking about. Here in europe, the console is bundled with an 8 GB card and download codes for 10 games, the whole package is sold at the same price as a 3DS XL, but the console still isn't selling. This shows the price isn't the problem of the Vita, it's very competitive.

Edited 1 times. Last edit by Christian Keichel on 8th August 2013 11:04pm

Posted:11 months ago

#19

Roland Austinat
roland austinat media productions|consulting

120 59 0.5
@Christian:
For Sony and MS this generation wasn't profitable
I'd love to see numbers that back up the fullness of this statement.

Edited 1 times. Last edit by Roland Austinat on 9th August 2013 1:17am

Posted:11 months ago

#20

heirdt von braun
Marketing Specialist

22 8 0.4
a. Mr. Keichel I will not start a fight with you just will ask you politely to check Wii top selling games. I'm sure you'll realise not many publishers could sell as much as Nintendo did.
b. PS3 and Xbox 360 had a longer life span specially thanks to third-party support. Also because publishers were actually making money. Ask Activision, it's undeniable their games were some of the best selling titles this generation. Call of duty Black Ops II, Modern Warfare 3, etc. These titles are more or less recent and prove PS3/Xbox 360 relevance. Also Grand Theft Auto 5 will put them to test in very difficult times, and I'm pretty sure it will even boost hardware sales (1 or 2 million each).
c. As long as I know smartphones are being subsidised (this includes Europe) and the same does not apply to 3DS or Vita.
d. If publishers really believed Wii was that profitable why weren't many of them supporting the system since day one. Even before Wii U selling issues they denied the system any kind of support. It sounds a wee little bit suspecious. Don't you think Mr. Keichel?

Edited 1 times. Last edit by heirdt von braun on 9th August 2013 2:05am

Posted:11 months ago

#21

Christian Keichel
Journalist

571 781 1.4
@ Roland
I'd love to see numbers that back up the fullness of this statement.
Here we go:
http://www.vg247.com/2013/01/07/xbox-360-and-ps3-losses-total-8-billion-ex-sony-employee-paints-grim-future/
http://www.neowin.net/news/report-microsofts-xbox-division-has-lost-nearly-3-billion-in-10-years
check Wii top selling games. I'm sure you'll realise not many publishers could sell as much as Nintendo did.
This argument doesn't make much sense, just because Nintendo's titles were outselling the competition, the 3rd party titles weren't profitable? This makes no sense. As I showed you in my previous post, Ubisoft said their Wii titles were so profitbale, that they used the profits to finance 360/PS3 games. This list shows you the Wii million sellers up to 2011, as you can see there are 20+ games from third party publishers on the list, that have sold over a million copies.
If publishers really believed Wii was that profitable why weren't many of them supporting the system since day one.
Sometimes publishers make decisions, that are wrong in the long term - you are trying to convince me that that's the case with Nintendo right now - why shouldn't it be the case with other publishers as well? It's a fact, that companies like EA or Take2 weren't profitable for most of the time during this generation and these companies didn't supported the Wii in a big way. It's also a fact, that companies like Ubisoft and Activision were profitable during this generation, these companies showed big support for Nintendo systems during the last years.

Edited 6 times. Last edit by Christian Keichel on 9th August 2013 10:18am

Posted:11 months ago

#22

Dave Herod
Senior Programmer

517 734 1.4
As long as I know smartphones are being subsidised (this includes Europe) and the same does not apply to 3DS or Vita.
Not subsidised, they just have their costs hidden in a very lengthy contract. Some people seem to think they're paying 30 or 40 pounds a month for a phone service and getting a phone for nothing. Well, considering a sim-only contract costs about 15 a month for unlimited everything (less if you have limits on minutes/texts/data etc), that's 360 - 600 over a 24 month contract that's paying for the phone itself, which is absolutely extortionate to me. I'd rather buy my phone separately in advance.

This is where consoles could benefit, as MS already tried with the 360 - Sell the console for cheap but with a subscription contract to spread the cost over a couple of years. I'm surprised this has hardly been talked about so far.

Posted:11 months ago

#23

Keldon Alleyne
Handheld Developer

427 403 0.9
Here we go:
http://www.vg247.com/2013/01/07/xbox-360-and-ps3-losses-total-8-billion-ex-sony-employee-paints-grim-future/
http://www.neowin.net/news/report-microsofts-xbox-division-has-lost-nearly-3-billion-in-10-years
Now that is interesting. I knew the XBox and PS2 were making a massive loss but was done with the intention (from Microsoft's position at least) of gaining foot ground for the next (PS3/XB360) generation. This sort of information should be included just to show how ridiculous it is to try to suggest these losses are damning.

Posted:11 months ago

#24

Christian Keichel
Journalist

571 781 1.4
@ Dave
This is where consoles could benefit, as MS already tried with the 360 - Sell the console for cheap but with a subscription contract to spread the cost over a couple of years. I'm surprised this has hardly been talked about so far.
I think the problem with this model, is that it automatically leads to fewer game sales. If there are already fixed cots of $40-$50 per month for a subscription, the monthly budget for gaming will be more much more tight. This is especially bad for companies like MS or Sony, that rely heavily on 3rd party license fees. I imagine Sony's or Microsoft's 3rd party partners wouldn't be delighted about such a model.

Posted:11 months ago

#25

Dave Herod
Senior Programmer

517 734 1.4
@Christian

But we are talking about people who would have otherwise looked at the console and thought "too expensive" and not bought it at all. Then you wouldn't get ANY game sales from those customers. Surely some extra customers is better than none? I don't mean this model instead of the regular price, just as an alternative to those it suits better.

Posted:11 months ago

#26

David Serrano
Freelancer

298 270 0.9
@Christian Keichel
The thinking that only hardcore gamers are "real customers" is what drove the console industry over the cliff after 2006. Nintendo was the most profitable video games manufacturer/publisher in the years 2005-2011, they outsold their competition by a wide margin and made more profit from games and hardware, then Sony or Microsoft. They did it by addressing consumers beyond the hardcore gamer market. They were right and Microsoft and Sony were wrong, at least, when it comes to Return on Investment.
Exactly. Iwata understands console developers and publishers allowed the tail to wag the dog in this generation and it is simply an unsustainable business practice. I also suspect he understands that core developers and publishers abandoned the actual hardcore audience when they choose to exclusively focus on brodude action - shooter multiplayer fans. The actual hardcore audience meaning the long time core players who were responsible for the majority of console game sales in the 90's and early 2000's. All of those players are still out there waiting for somebody to serve their needs.

Sadly, while Nintendo's strategy was correct... the Wii U is still a gun designed to shoot silver bullets which won't be available anytime soon. This is what I find baffling.

Posted:11 months ago

#27

Christian Keichel
Journalist

571 781 1.4
But we are talking about people who would have otherwise looked at the console and thought "too expensive" and not bought it at all. Then you wouldn't get ANY game sales from those customers. Surely some extra customers is better than none? I don't mean this model instead of the regular price, just as an alternative to those it suits better.
Is it the case that these people otherwise wouldn't have bought a console, or is the kind of audience, that bought a PS2 in the years 2007-2010? The kind of person, that was satisfied with what this kind of console could offer: lots of well known franchises for a small price and a huge market for used games?
I think this kind of consumer won't buy many new games anyway and will be completely satisfied with what a 4GB XBox360 or Wii Mini for $99 is offering.

@ David
Sadly, while Nintendo's strategy was correct... the Wii U is still a gun designed to shoot silver bullets which won't be available anytime soon. This is what I find baffling.
Let's wait and see how well Nintendo's train of silver bullets - named Super Mario 3D World, Zelda Wind Waker HD, Wii Fit U and Mario Kart 8 - will work out in the end. It's a very packed Holiday/Post Holiday lineup. I think when MK8 arrives, we will all have a much clearer picture of how well Nintendo's strategy was planned.

Edited 2 times. Last edit by Christian Keichel on 9th August 2013 3:59pm

Posted:11 months ago

#28

Steve Goldman
Journalist.

81 92 1.1
Wii u will be fine

Posted:11 months ago

#29

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