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For the first time in many years and several generations of its video game consoles, Nintendo is going to sell its next-gen system at a loss, the company this week informed its investors. Microsoft Corp. and Sony Corp. do sell game consoles at a loss, but for at least two generations Nintendo consistently made money not only on software, but also on hardware.

“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,” said Satoru Iwata, the president of Nintendo, during a Q&A session with investors and the analysts.

While Nintendo did not reveal how much does it lose on every Nintendo Wii U system, it did admit that this fiscal year it will not report profits typical for the company. The company further said that to bring “Nintendo-like” profits back, it will need to transform its business structure in line with the times, which includes expansion of its digital business to increase business efficiency and profitability in general.

Nintendo expects to sell around 5.5 million Wii U game consoles as well as 24 million of video games for Wii U worldwide by March 31, 2013, the company revealed in its financial release this week. It is noteworthy that by the same date the firm plans to sell another five million of its previous-generation Wii game systems. By contrast, Nintendo expected to sell 12 million Wii game systems in the second half of its fiscal 2011 (October, 2011 – March 31, 2012), which means that at present Nintendo is either very conservative about Wii U success, has production issues with its next-gen console or plans to intentionally limit the amount of consoles it will sell to trim losses.

Nintendo Wii U is based on a custom IBM Power microprocessor equipped with 1GB of system memory as well as a modern custom AMD Radeon HD graphics processing unit with high-definition graphics and video support that is equipped with 1GB of graphics memory. The consoles come with 32GB or 8GB of NAND flash storage and an optical drive to read custom discs.

The main feature of the game console is its unique Wii U GamePad controller with 6.2" touch-screen that also features an accelerometer and a gyroscope, a rumble feature, an inward-facing camera, a microphone and speakers that can be used to play both classic Gamecube/Wii games as well as specially designed titles that take advantage of the screen. Each Wii U console will be partnered with a new controller and can also use up to four additional Wii Remote or Wii Remote Plus controllers. The system is also backward compatible and can play all Wii games and use all Wii accessories.

Nintendo Wii U console will land in the U.S. on November 18, then in Europe on November 30, then in Japan on December 8, 2012. In the U.S., the basic bundle will cost $299, the premium bundle be available for $349. In Europe, the basic white version will be sold for €299/£249, while the deluxe black will carry €349/£299 price-tag. In Japan, the white and black Wii U will cost ¥26250 and ¥31500, respectively.

Tags: Nintendo, Wii, Wii U, Business

Discussion

Comments currently: 8
Discussion started: 10/26/12 07:20:16 PM
Latest comment: 10/29/12 05:15:48 PM
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1. 
We should add they will sell the consoles with loss in North-America, Euro does worth 30% more.
1 0 [Posted by: Martian  | Date: 10/26/12 07:20:16 PM]
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2. 
How much the Euro is worth has no real bearing on Nintendo's expected losses. Do you think Nintendo did not take into account the strength of the currency in each region where they plan to sell the console?

By the way, I realize you were just trying to take a cheap shot at the fact that the American dollar is doing poorly (I'm not an American, so I don't care). Besides, Nintendo will probably sell the console for ~30% more in Europe, so your comment is pointless either way.
0 1 [Posted by: Kashim  | Date: 10/26/12 09:08:49 PM]
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I was trying to take a cheap shot on the practice that manufacturers simply sell everything for the same amount of USDs in the USA for as many Euros in Europe, which means they actually get 30% more value for their products sold in Europe.
2 0 [Posted by: Martian  | Date: 10/26/12 09:52:28 PM]
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Actually that has to do with extra taxes in those countries, so no, it's cheaper in the states because taxes are cheaper. No one makes the exact profit of every sale in every country, there is a huge percent that goes to retail, and prices are raised based on taxes that need to be paid.
0 2 [Posted by: mmstick  | Date: 10/26/12 10:11:56 PM]
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Actually taxes are charged on top of those prices.
2 0 [Posted by: Martian  | Date: 10/27/12 08:02:16 AM]
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Dont they add in the VAT into the price, / since its suposed to be added by the manufacturer, and not calculated at the register.
0 0 [Posted by: cashkennedy  | Date: 10/28/12 03:52:10 PM]
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VAT variances cannot cause 30% difference (especially that Nintendo claims they lose money on every sale) and sales taxes are going to be charged on top of these prices for sure, which is ~5% in the US and ~20+% in European countries. It results in ~60+% difference in real prices.
0 0 [Posted by: Martian  | Date: 10/29/12 05:15:48 PM]
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3. 
Yes, but can it be hacked?!????
0 0 [Posted by: TAViX  | Date: 10/29/12 02:10:43 PM]
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