The hardware side of the console business is one of the lowest profitable electronic divisions. Companies like Sony and Microsoft only make a very small amount of money selling consoles because of the cost to produce them. They will make more money over time as the components become cheaper as the system ages.
However, Nintendo works diffidently they generally never sell that costs more to make than they are selling it for. The 3DS was the first Nintendo console that was sold at cost because they had to lower the price due to the fact no one was buying them at their original price point of $249. Today Nintendo announced the Wii U will be the second console that they will be selling at a loss.
Nintendo Senior Managing Director Yoshihiro Mori had this to say about the major change in Nintendo’s philosophy:
“Manufacturing costs are expensive, and we priced the machine at a level customers would accept, It’s important for us to develop a healthy business next fiscal year by combining sales of hardware and software.”
The speculation is that the major cost of the Wii U is tied up in the GamPad, and that is what is driving up the development costs for the system. It is unknown if both versions of the Nintendo Wii U (Delux $349 and White $299) will be sold at a loss.
Basically in this day and age you have to sell consoles at a loss when they are first released; Sony found out the hard way when they released the PS3 for $600. The good new is the older the system gets, the cheaper the components become resulting in companies being able to produce the consoles at a lower price. So within a year or two Nintendo could be selling the Wii U at a profit, but because we don’t know how much Nintendo is losing on each console it is impossible to know how soon they might be turning a profit on the console.
Nintendo did finish the press conference up on a bright note, stating that they do expect to sell “5.5 million Wii U consoles sold through March 31, 2013.”
