AfterDawn: News

Nintendo makes $6 profit on each Wii sold

According to Macquarie Securities analyst David Gibson, Nintendo makes $6 USD operating profit on each Wii unit sold, making it the only "next-gen" console to make a profit on the actual unit.

The analyst also noted that Sony makes a decent sized loss on each PlayStation 3 sold and that Microsoft has the potential to break even on each Xbox 360 console sold, but still may not.



Besides making profit on each console, the Wii sells the most software of the new consoles, selling an estimated 220 million units for 2008. The PS3 and Xbox 360 are estimated to sell under 130 million units each.

Nintendo also capitalizes on its position in the market by selling 60 percent of the Wii games itself compared to only 15 percent for Sony and 30 percent for Microsoft. The Wii's top selling games are all developed by Nintendo.

Hiroshi Kamide, director of research at KBC Securities, Japan, added, "The key thing about Nintendo is they want their things to be at price points that anyone can respond to."

Written by: Andre Yoskowitz @ 2 Dec 2008 17:02

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• 12 comments

• Shegax

  This is misleading. Sure at first they would be seeing it at a loss. After much production though, and high volume orders...the price for such technology goes down over a couple years. The Wii is now in mature production...so the profits are more than before...even with price cuts. Common though, tell the people the truth. Understand manufacturing, and where the consoles are being made, in addition to lowering prices of chips, circuit boards, plastic molds...etc. With that knowledge I'd say this article is either based on old figures (a couple years ago) or propaganda from the industry itself.

  2.12.2008 17:41 #1

• chubbyInc

  They don't want the consumers to think they are doing too well. Then there would be questions raised on why they don't lower their system a little.
  
  Nintendo has been playing with the consumers for a few years now. Limited quantities on things to boost demand, but I guess thats worked so far.
  
  I'd like to know the actual cost for each console, not what their $6 operating profit is, that doesn't really mean anything. Then maybe we can figure out how much the stores are profiting and how much Nintendo really makes off each one.

  2.12.2008 21:05 #2

• bryston

  This tall tale reminds me that Hollywood, no matter how much they earn on a movie, their accounting practices still show them at a loss. So how do they (the studios) stay in business ?
  
  Jo
  

  Life is Grand !
  
  

  2.12.2008 21:12 #3

• SProdigy

  Originally posted by chubbyInc: They don't want the consumers to think they are doing too well. Then there would be questions raised on why they don't lower their system a little.
  
  Nintendo has been playing with the consumers for a few years now. Limited quantities on things to boost demand, but I guess thats worked so far.
  
  I'd like to know the actual cost for each console, not what their $6 operating profit is, that doesn't really mean anything. Then maybe we can figure out how much the stores are profiting and how much Nintendo really makes off each one.The key term here is "operating profit". I assume that means after all "expenses" such as labor, R&D, etc.
  
  I, like anyone else, likes cheaper prices, but why do we live in this fairy tale land where we think every corporation is trying to bleed us? Relax, the price will eventually come down. It's called supply and demand, plus we all know that the technology used in these consoles depreciates as well.
  
  It should be fairly obvious how much the retailers make off the consoles: $0 (or close to it.) As a former Best Buy employee, I can tell you that there are some items that even the employees do not get a discount on, because Big Blue doesn't make enough profit off of said item to offer a discount. Game consoles and Apple iPods come to mind. Even Wal-Mart, who prides themselves on being the top discount retailer, sells the Wii for $249.24, a mere $0.75 cheaper than Best Buy, Sears, Target, and... well, everyone else for that matter!
  
  So why do these companies sell the consoles? Easy: just like CD's and DVD's, once you have a console, you will come back to the store to buy the software; something the retailers DO make profit on.

  3.12.2008 12:12 #4

• jemaric

  does anyone really believe this

  3.12.2008 17:28 #5

• core2kid

  Originally posted by jemaric: does anyone really believe this
  No.

  3.12.2008 22:27 #6

• Shegax

  I respect that you work at BEST BUY. That gives you a up front look at the consumer. However, giving excuses why a company can't give you a dicount on certian Items, is defending the hand that feeds/er..cheats you.
  
  
  Quote:I, like anyone else, likes cheaper prices, but why do we live in this fairy tale land where we think every corporation is trying to bleed us?How about Why do we live in a fictional world, where corporations can and do screw us over time and time again, But tell us in our face that they have our best interest at heart? HA And we believe them!
  
  Nope, no excuses anymore. 6$ profit, even 8$ profit sounds very very fishy to me. And any company that says they don't make a profit, yet makes millions anough to come out with another "system" that once again makes no profits does not have my trust.
  
  Whether they do or not, really makes no difference to me. The biggest issue here is, these companies. (and corporations in general) Have lost trustworthiness. They have lied and bend the truth so many times over the years, that anything they say must be taken as suspect....and back up with other sources than just their own word.
  I'm not complaining about prices to much.

  3.12.2008 22:59 #7

• emugamer

  For any of this analysis, each individual Company needs to define profit as it is understood by them. Otherwise, it's all dribble.

  4.12.2008 10:52 #8

• SProdigy

  I said former employee BTW :-)
  
  Anyhow, I understand that we do get bent over most of the time, but unlike the US Federal Government, companies MUST make a profit to survive and can't operate in the red... or expect bailout money.
  
  It's when Hollywood tries to sham us with $30 Blu-Ray (or even $20 DVD's) that I get ticked. The media is incredibly cheap and they sell the same movies in China at a discount because of "piracy". That's reason to cause an uproar.

  4.12.2008 13:00 #9

• treyjazz

  Although the story is old (bear in mind that components go down in price as time goes on which would only further an increase in their net gain) this sounds more plausible.
  
  DS is where the big bucks are at for Nintendo. It is speculated that they make anywhere from 50-65USD on each unit sold in the US (more or less for other regions depending on their price points respectively).

  8.12.2008 10:15 #10

• IguanaC64

  It's generally been the case that manufacturers lose money on the consoles they sell. They make it up by charging royalty fees on each game. Back during the Sega Genesis, Sega would charge $15 for cartridge blanks for people to load their games on to sell. EA was the first company to manufacture their own cartridge blanks...I can't remember what EA paid for royalty fees after this, but Sega was pissed. They also make money on all the accessories and services they can sell you.
  
  So even if they're losing money or making some little bit of money on the consoles themselves...they make it up elsewhere.

  8.12.2008 18:18 #11

• core2kid

  Originally posted by IguanaC64: It's generally been the case that manufacturers lose money on the consoles they sell. They make it up by charging royalty fees on each game. Back during the Sega Genesis, Sega would charge $15 for cartridge blanks for people to load their games on to sell. EA was the first company to manufacture their own cartridge blanks...I can't remember what EA paid for royalty fees after this, but Sega was pissed. They also make money on all the accessories and services they can sell you.
  
  So even if they're losing money or making some little bit of money on the consoles themselves...they make it up elsewhere.
  An example of that, Microsoft sells the cheapest 360 for $199. Now I'm sure they lost a lot of money from RRODs and that the console probably costs more than $199 to make but they make their money from selling the wireless for $99 and the 120GB HD for $150.

  8.12.2008 22:49 #12