Nintendo makes a profit on every Wii sold from day one | Hacker News Reader

Nintendo makes a profit on every Wii sold from day one

gamespot.com

17 pointsConradHex30 comments

This is an old article but it's a long held Nintendo policy. They took the same route for the Gamecube and N64. The N64 really suffered as nintendo chose RAMBUS ram which rose in price near fabrication and they had to halved the memory to 'make money on day one'.

Because the Wii is largely an upgraded NGC it was easy to make money from day one as hardware R'n'D costs were a lot lower.

If you live in North America then there is a shortage of Wii's because the dollar is weak and Nintendo can make more money in Europe. Europe recently passed N. America in terms of number of gamers and money spent on games so I don't see this 'shortage' issue changing for quite a while.

Having said all that Sony are not in a bad position either. the PS2 and PSP are still selling stong. the PSP has recently picked up in N America and Japan (more then just the latest Final Fantasy can explain) and PS3 will continue to be refined to make it cheaper and more reliable.

>If you live in North America then there is a shortage of Wii's because the dollar is weak and Nintendo can make more money in Europe.

North America != USA. In Canada, not only is our dollar not weak, we have plenty of Wiis to go around.

Is this incorrect? http://www.google.com/search?hl=en&q=1+Canadian+Dollars+...

Or am I misunderstanding that your currency has approximately the same buying power as ours?

Also, I bought 5 Wiis and resold them the day after Christmas last year. For the smart consumer, they're not in short supply.

yes it is at now par, but it wasn't always: http://finance.yahoo.com/currency/convert?from=CAD&to=US...

I know this is an old article, but I think it's interesting in contrast to the admission by Sony in their annual report that they've lost $3 billion selling PS3s.

The Nintendo business model makes a lot more sense to me.

Except the part about (possibly artificially) not having enough supply for an absurd amount of time. You can only sell software to people with the hardware, it makes sense to get the hardware out there.

Scalability problems are not just for the web :)

Correct, but with billions of dollars at stake it seems like they should have been able to figure it out. They made almost $5 billion in cash last year. This isn't a little startup trying to do something scrappy. If I was an exec I would be concerned why my company can't figure out how to make enough widgets 1.5 years after launch.

When the competition (Sony and Microsoft), are losing a ton of money, I don't think Nintendo are that worried to be honest. They've clearly won the current game system wars, both with the wii, and the ds.

Producing enough consoles to meet demand isn't an easy problem I'm sure.

Bottom line is Nintendo won, make a ton of money, and people want their products.

I submit that they're meeting demand precisely. They still are winning the sales wars, in all markets, every month. The idea of a "shortage" is a myth.

Plus, they're being smart and shipping units to Europe instead of here, given that they make more yen on the forex.

Every time I walk by the Wii shelf at Target it's empty. They sell for more than retail on eBay (and being bid on heavily). Demand isn't being met.

But is meeting demand 100% always the best goal to have? An increase in production is an increase in cost. Spending $10 million to sell 1 million units over 2 months is better than spending $20 million to sell 1 million units one month and 500k units the next.

The demand curve is the same as the marginal benefit curve and the supply curve is the same as the marginal cost curve. You produce at the equilibrium in this type of market since it produces the best result for both the company and society. This is introductory microeconomics.

It's probably a bad thing that I know so little about economics that I can't say for sure if you are disagreeing or agreeing with me. I'm leaning towards disagreeing, but I'll have to remedy that knowledge gap sometime this weekend.

Without knowing the actual costs, it's impossible to answer. Usually consumer electronics get cheaper when you make more of them.

I would have bought one if not two (for a gift) if they were available. Now I'm not buying any. They not only lose out on the unit sale, but all subsequent accessory and software sales. So even if making an extra 500k per month cost them marginally, they have 500k more possible sales for all their Wii software and accessories.

I don't really care that much, it's just the first time I can remember this happening in CE. Companies usually wake up and fix supply issues. Nintendo of America is as confused as I am:

http://www.joystiq.com/2008/04/24/nintendo-of-america-passio...

Yeah but they're selling them here (In europe) for a lot more cash instead.

Then raise the price. They are selling higher than list on eBay still, which shows things aren't quite balanced.

Maybe it's something else then. Perhaps Europe are more likely to use the online capability or buy the download games or something... Or perhaps there's some US boycott going on by Nintendo?

Perhaps Nintendo believes that if people think the Wii is cheap but scarce, then they will be more likely to buy at the earliest opportunity -- unlike the PS3 or 360, which can be picked up at any time?

Here in Canada, every Wii shelf is full.

Perhaps demand is being manipulated in the US?

Also easy enough to get in the UK.

In Mexico, where Wiis sell for MXN $4999 (roughly USD $486), they're rarely out of stock. New and/or popular game titles retail for nearly MXN $800 a pop.

(Getting the game you want can be difficult at times, though. Maybe because high prices lead to low turnover which in turn necessitates low inventories. Maybe due to other endemic inefficiencies.)

neither is marketing. :-)

I think this comes back to Nintendo trying to avoid risk. Similar to how they don't want to sell the hardware at a loss, they want to make damn sure that the production facilities producing the hardware are worth the cost in the long term.

They probably figure that the money lost due to not quite meeting demand is less than the risk to ramping up production to meet demand that may drop sharply over the course of a year or two. And it's not like starting up a production facility is a small task.

Yes, but you can't ramp up manufacturing so easily. And the weakness of the us dollar drove all available Wiis to Europe.

No puns were intended in writing the above. Damn Nintendo's Wii!

I thought it was a ballsy move to name it "Wii"

Well, the problem is manufacturing facilities don't scale smoothly. They probably thought that building another one would give them way more production capability than they really needed, and end up costing them a fortune.

They were clearly unprepared for having the top two systems at the same time.

I've heard Nintendo is having problems moving software titles for the Wii because so many people are content playing Wii Sports.

Can this be validated by actual data or am I just rumor-mongering?

The picture is changing quickly. In the fall there was an article about attach rate. It was something like 7 games per Xbox, 5 games per Wii and PS3. In December, Wii outsold Xbox 8 to 7 (I had to read the statistic twice because it's 8 games per system _sold that month_, not 8 per system in existence).

http://www.destructoid.com/wii-owners-bought-8-games-per-sys...

Haha, I can see that. My friend has 10 or 15 Wii games but all we play is Wii Tennis :)

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