[Update] Nintendo Confirms Wii U Is Initially Being Sold At A Loss


[Update] Nintendo Confirms Wii U Is Initially Being Sold At A Loss

[Update] Nintendo’s transcript of the press conference confirms that the Wii U will be sold at a loss. In part the transcript reads:

“In addition to the yen’s continuous appreciation, the Wii U hardware will have a negative impact on Nintendo’s profits early after the launch because rather than determining a price based on its manufacturing cost, we selected one that consumers would consider to be reasonable. In this first half of the term before the launch of the Wii U, we were not able to make a profit on software for the system while we had to book a loss on the hardware, which is currently in production and will be sold below cost.”

Original article below.

According to a report from The Washington Post, Nintendo has confirmed that the Wii U will be sold for a loss when it launches on November 18th.

Nintendo’s Senior Managing Director Yoshihiro Mori made the announcement today during a press conference in Osaka, with CEO Satoru Iwata adding, “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 company did not state if they were planning a loss per Wii U unit sold for both the Basic and Premium models, which retail for $299/¥26,250 and $349/¥31,500 respectively, or if the loss would only occur on the lower priced Basic SKU.

While it is extremely common in the video game industry to sell hardware at a loss and attempt to make a profit off software sales, it is not something that The Big N traditionally considers as a good business practice. In fact, Nintendo has never once launched a system at a loss and prior to the 3DS price drop last year has never lowered their sale price below their break-even point.

Making today’s announcement even stranger, is that it seems to directly contradict statements made by Nintendo of America president Reggie Fils-Aime when the company announced the Wii U price point on September 14th. Speaking to GamesIndustry at that press event, Reggie specifically stated:

“In terms of profitability, we don’t comment on our internal byproduct P&L, but as a philosophy, we believe in making money on our hardware, even if it’s small amounts of money at the start. We don’t believe in losing a lot of money on hardware. I brought up 3DS – after the price cut, we were losing money on 3DS hardware and that’s what led to our posting our first operating loss ever as a public company.”

Nintendo certainly seems to be facing a bit of an uphill battle with the Wii U, and the revelation that it will be sold at a loss is sure to put some added strain on their struggling bottom line. The good news is that they have decades of prior profits to fall back on, making it highly unlikely that a few bad years will put much of a dent in their giant Scrooge McDuck-sized money vault.

Source: Bloomberg

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