Forbes: Nintendo making $6 profit on every Wii sold -- Joystiq

[Serinous]

While Sony and Microsoft dream of turning a profit on their consoles, Nintendo is doing just that. According to a new article from Forbes, the Big N makes $6 in operating profit from every Wii unit sold. Nearly 19 million units have been sold worldwide so far during 2008, earning Nintendo a tidy $114M in profit, taking that $6-per-system figure into account. That's not the extent of the interesting numbers in the article, though.

Forbes points out that, while Nintendo is turning a profit on hardware, the fact that its top-selling software is all first party means it is losing out on serious revenue normally brought in via licensing fees. Still, according to its figures, the magazine claims that there will be in the neighborhood of 100 million more pieces of Wii software sold in 2008 (220M) than the nearest competitor, Xbox 360, at 125M (PS3 is on track for 120M). One has to wonder, though, how many of those Wii games will be snagged from a bargain bin, given recent analyst data.

Source: http://www.joystiq.com/2008/12/01/fo...very-wii-sold/

This is crazy.

[Stevie Carnage]

That is interesting to see. It appears as though Nintendo, while maintaining a strong lead in hardware sales, along with the hefty profit made on each unit sold, seems to be winning, this could be a short lived victory. They don't seem to be making as much progress in the KEY area of software as the 360 or the PS3.

They're very right about Wii games. It's rare I see a lot of them at the full $50 price when I go into stores. There are usually a huge group in that $30-40 range, while the PS3 and 360 have most at the $55-60 mark.

[Avrum]

As far as software sales go however, while Nintendo may not make as much revenue because their games cost less, they are likely going to be selling a lot more software on the whole. Gotta remember that the revenue taken in is not pure profit, Mirror's Edge could sell more than Castlevania Judgement but depending on the numbers Konami could be making back more buck than EA. Make no mistake, a lot of Wii sytems are being sold and a lot of Wii software is being sold.

[TGO]

I posted in this thread, I'm sure of it

[seebs]

Note that Forbes is just quoting an analyst on the $6 figure. I don't buy it, myself. Nintendo never sells consoles at a loss. If they weren't losing money in 2006, there is no way they're only making $6 per console now at the same price. (Furthermore, the original plan had the console selling at $200...)

[TommyFewty]

Thats a tidy little profit for nintendo.

[PXG S3]

I don't know how much Nintendo sells (estimated amount per unit that is) to retailers, but if you use the $250 price tag, their profit margin is +2.4 percent. That does not seem like a lot, but that is. THAT IS A LOT.

But of course, the most lucrative aspect of this industry are software licensing and software sales. Doesn't Sony make like $10 per PS3 game or something. If so, that is a +16.7 percent profit margin (again, based of the retail value, not the value in which they sell to retailers

If I am wrong, PLEASE correct me.

[seebs]

There's no way I buy the $6 figure. Wayyyyy too low.

Nintendo doesn't sell at a loss. They planned to sell the Wii at $200 in the US with no pack-in; $250 with Wii Sports packed in means an extra $49.50 or so of profit per console at launch, and there is no way they are paying as much per machine now as they were then...

[PXG S3]

There's no way I buy the $6 figure. Wayyyyy too low.

Nintendo doesn't sell at a loss. They planned to sell the Wii at $200 in the US with no pack-in; $250 with Wii Sports packed in means an extra $49.50 or so of profit per console at launch, and there is no way they are paying as much per machine now as they were then...

That is not necessarily true.

Wii-mote = $40
Wii-mote/ Wii Play Bundle = $50
Wii Play = $10

Wii Play (9 games) = $10
Wii Sports (5 games) = $50?

A $6 profit may seem small, but that is a lot. More money is made from software sales and licensing/ royalty fees. Remember, they aren't selling the Wii at $250 to retailers. They are probably selling it (to GameStop, Wal-Mart, Best Buy, ect) for less than what the sticker price is for consumers. Nintendo sells it to retailers at a price, where they AND retailers can make a profit.

[seebs]

That is not necessarily true.

Yes, it is.

Cost to Nintendo of the pack-in: $0.50 or so.
Increase in price: $50.

They were going to be profitable selling bare Wii systems (no Wii Sports) at $200. If they are selling them with Wii Sports for $250, they are making $50 more per system, but their cost is not $50 higher.

A $6 profit may seem small, but that is a lot.

It is, however, very small compared to what we know about Nintendo's situation.

On day one, they were making money on this console. And even if the margin on the console would have been a few pennies, adding in Wii Sports means they're getting a big chunk of extra money for every console sold above what they needed to be profitable.

... and it's been two years. Their cost of manufacturing will be lower by now. Probably quite a bit lower.

More money is made from software sales and licensing/ royalty fees.

Of course.

But Nintendo doesn't lose money on hardware. And since we know that they were going to sell bare Wii systems for $200 retail, we know they're making the difference as pure profit.

Remember, they aren't selling the Wii at $250 to retailers. They are probably selling it (to GameStop, Wal-Mart, Best Buy, ect) for less than what the sticker price is for consumers. Nintendo sells it to retailers at a price, where they AND retailers can make a profit.

Of course.

So it might not be that they get the full $50 of the bonus money they're getting because of Wii Sports -- but there's no way the extra $50 is all profit for retailers.

[parallax scroll]

Given that Wii's main chipset (Broadway CPU & Hollywood GPU) are based on the 90s architectures of GameCube's Gekko CPU & Flipper GPU, I am not at all surprised that Nintendo is pulling a profit on each Wii sold.

[TDbank24]

That's awesome. One thing you can't deny about Nintendo is they never fail. Even if you think the console isn't up to par with the others they find ways to build interest in people and still sell. I'm really thinking about getting a Wii in a couple weeks