Nintendo in profit on each Wii sold

Every Wii nets Nintendo $6, but the PlayStation 3 and Xbox 360 don’t produce any profit for Sony and Microsoft, a market analyst has claimed. David Gibson from Macquarie Securities said in a Forbes magazine report that – unlike its competitors – Nintendo has “figured out how to make money from its console sales”. That's …

[Joel]

If Microsoft break even.....

....then presumably they aren't counting the support/replacement costs for the Red Ring of Death on the XBox360. My son has had his returned 4 times under warranty, and the warranty period was extended on all 360s because of the number of problems.

That's got to bite into the bottom line.

Anyone know what proportion avoid this problem?

Have any?

[Anonymous Coward]

This is news?

I am not a game-head, a penguin fan, but even I knew that the Wii's hardware spec is nowhere near what the other's are, additionally it is fairly obvious after a few articles "on da net" , that the Wii uses cheaper components.

[Anonymous Coward]

Clearly misleading.

"Every Wii nets Nintendo $6, but the PlayStation 3 and Xbox 360 HARDWARE does not produce any profit for Sony and Microsoft, a market analyst has claimed."

I have corrected it for you. Given that Wii game sales are pretty dire (most Wii owners just have WiiFit and WiiSports), Nintendo don't make that much from game sales. However PS3 and 360 make large amounts of money for Sony and Nintendo from game licencing, in particular the PS3 for Sony, where the ALIGNED console attach rates are extremely good, as is it's digital distribution returns.

[Toastan Buttar]

Xbox Live Experience

The new Xbox Live Experience is going to change the console landscape in a big way. I initially thought Microsoft were throwing money away on the Xbox 360, but I now see it as a loss-leader for getting people online where they can really go to town on extracting your money from you. Nintendo's online world is nowhere near as aggressive in its sales pitch, but congrats to them for making a decent profit from hardware.

[Spinner]

Is that all?

I would have figured the figures would be a lot more skewed than that. The Wii is essentially gamecube 2.0 with a fancy controller, so unless they were really taking a beating on the Gamecube, $6 out of $250 seems a bit small.

And as for Microsoft, the only way the 360 hardware is not turning a loss is if those figures exclude the $1 billion that they have set aside for hardware faults. Then again, maybe they saved quite a bit of money by making the hardware defective in the first place...

For the record, I have a 360 and a Wii, hence why I will leave bagging out Sony to others.

[AndyC]

Er...

Think you are a bit late on the news on this one. Neowin reported this in 2006 and I'm sure if memory serves correct that Nintendo actually announced this when the first released the console.

http://www.neowin.net/index.php?act=view&id=36524

Try to keep up el Reg ;)

[Tim Miller]

Re: Clearly misleading.

Ah, the old myth that Wii software sales are low. The fact that the top ten constantly has Wii titles in it, often beating big multi-format releases, gives a good idea whether this is true or not.

[Simon Neill]

But don't forget...

"I have corrected it for you. Given that Wii game sales are pretty dire (most Wii owners just have WiiFit and WiiSports), Nintendo don't make that much from game sales."

And 3 extra remotes and 3 extra nun chuck attachments and the special wii sports attachments that turn your controler into a golf club and the charging stand and the jacket things........ Nintendo are surely raking in the money.

[Paul]

Re: Clearly Misleading

I think Ars would like to disagree with you: http://arstechnica.com/news.ars/post/20081107-xbox-360-bests-rivals-on-games-sold-per-console-metric.html

The Wii is currently second to the XBox, with a much higher percentage of first party games, adding considerably to Nintendo's bottom line. Given that total Wiis sold is just below the combined total for the 360 and the PS3, I would say the big N is raking it it.

However I do also agree that $6 seems mighty low for a margin on a console that has been out this long, was making a profit at launch, and hasn't had a price drop.

[Mark Broadhurst]

Simple Maths

Nintendo make money on consoles and less games per customer sold but dont make money on games.

Microsoft (apparently) break even on console and sell loads of game and make money on them.

Games keep paying consoles only sell once.

[bobbles31]

Olds

This can't count as news, for anyone that has even a remote interest in consoles through the years Nintendo consider it a cornerstone of the business not to lose money on the console itself. its what separates them from the others.

I own all three and strangely the one I would give up last is the Wii, (even though I hardly play it) and the one I would give up first is the XBOX. (Even though I have played that the most in the last three years) It just feels old already and it is too loud. The Playstation also feels like it has more potential in it, I can't explain it, I just don't feel like I have seen its best yet and that somehow its best would be better than the Xbox's.

P.S. not a fanboy, just a critical gamer.

[Michael B.]

Re: Clearly misleading.

The attachment rate on the Wii is above that of the PS3 (5.3) at 5.5 and the XBox is the leader at 8.1. So the 1st and 3rd party games will still be making a pretty profit too for Nintendo, which somehow has garnered the reputation that nobody buys games for it.

[Ian Michael Gumby]

Large difference in technologies...

What makes the WII experience is in their unique interpretation of the game console and hand units.

Give them kudos for that because it does allow for other types of games than remembering complex codes to get a player to make a fancy flying kick or what not.

But if we look at the PS3, we have a bit more complex circuitry under the hood along with Blu Ray players built in. The cell technology chip sets are pretty fascinating and if you wanted, you could actually boot up Linux on the PS3 as well as run IBM's IDS database. The cell chip technology has some interesting capabilities and I believe is also available in blade format from IBM for some of their higher end blades.

This investment doesn't come cheap and the platform may lose money now, however in moving forward to the next generation, the PS3 has an advantage.

What would the profit margin of PS3 had they just stuck with DVDs and not used Blu Ray? Would they have made money per unit at the expense of future technology and gaming options?

Just a thought...

Tux because on a PS3, you can load of Linux, a real production grade database and do something with it besides playing games. ;-)

[Andy]

re: Simple Maths

Where do you get the idea that Nintendo don't make money on games? Of course they do, and big 'must have' titles like Wii Fit pay twice over.

The consoles' online strategy will undoubtedly be the next battleground, but there's no historic precedent for the first to market being the most successful. Ignoring the fact that the Wii has a huge captive audience for online content, better services will continue to evolve as the big three get to grips with their customers' expectations.

Just as early search incumbents such as HotBot lost out to Google, the successful early online games portals have no reason to expect to maintain their lead. Audience share now does not equate to audience share tomorrow, particularly in the fickle world of gaming.

[Graham Jordan]

How much..

Do M$ make off the subscription service? Must be a fair whack. I'm not very good at maths so excuse me if I royally fuck this up.

If only of users subscribe to the gold service thats roughly 18 million users paying £5 a month.

£5 x 12 months = £60 a year.

£60 x 18m = £1,080,000,000.

Thats a fair whack if XP calculator did that right.

[Anonymous Coward]

@ Ian Michael Gumby

"Tux because on a PS3, you can load of Linux, a real production grade database and do something with it besides playing games."

Yup, with 256MB of RAM the world is your oyster

[James Sherwood]

@ Mark Broadhurst

Contrary to your comment that "Nintendo make money on consoles and less games per customer sold but dont make money on games," it actually does, at least according to Forbes' article.

The report stated that Nintendo makes its own games and - although they generally cost less than titles developed by third parties for the Xbox 360 or PS3, "so far the gambit has paid off" for Nintendo.

[Anonymous Coward]

@Ian Michael Grumby

"Give them kudos for that because it does allow for other types of games than remembering complex codes to get a player to make a fancy flying kick or what not."

You of course realise that the PS3 has motion sense too, tehnically better, in that it can sense movement in extra directions. Whilst some games it adds little (or messes things up, in the case of Lair, a otherwise good game), some games, like Warhawk, it's a VERY good control method.

[Anonymous Coward]

News?

Analyst reads financial statements SHOCKER.

Commenters believe corporate gloating SHOCKER.

It is amazing that all the facts and figures are readily available, but conventional wisdom seems to be based on blogs and third hand reporting.

But hey, it wouldn't be a fanboy war if facts were involved, would it?

[Anonymous Coward]

Microsoft won't be making any money for a VERY long time.

THey have to make up that 1.6Billion for RROD, then the $4Billion for Original XBox development, then the further 2.8Billion for 360 Development.

Of course they will try and fool numbskuls and shareholders by hiding all those losses in previous quarters, and then claiming that subsequent quarters that they are profitable, however that does not work for my finances, nor should it work for theirs.

I think Sony are in the best shape this gen, the development costs for PS3 and loss leader funding has been more than funded by the profits over the last 8 years of PS2 and PSP sales, and they can sweep up the PS2/PSP/PS3 game licencing monies, along with Blu-ray royalties. It's clear this gen is shaping up to be another 8 - 10yr stint, so in essence, it's only just begun... The Wii is losing stream (look at the tumbling monthly sales numbers), and the 360 despite it's recent lift off the back of the price cut, will be also short lived.

[Ben Bufton]

I have all 3...

... but I'm not buying ANYTHING online unless it's marked up in pounds and pence...

Gamer points? What a con.

[Anonymous Coward]

Re: XBOX RRoD

It has been stated by several Microsoft insiders, that they expect every single 360 ever made to require an RRoD repair within 18 months of manufacture. That is why they budgeted $1 billion, it's the cost of replacing every xbox console (or repairing 33% of them 3 times).

[Kevin]

@Michael B.

Beats me why people think the Wii don't sell games my cousins own 20-25 games for it.

Only reason I can think of is that people look at sales papers like from Bestbuy and Circuit city and see like 1/10th of a page (if that) each week total for Nintendo's systems, 9/10ths of the page to Xbox, and Sony has its own page usually for the PS3 and PSP. So if you look at the sales paper and see that you almost think the systems doing fairly poor

@Ian Michael Gumby

I can boot up linux on my DS... My one buddy done it on his Xbox... Linux on a console is not a big selling point I hate to say and does not make it productive...

[Dominik Stansby]

@Ben Bufton

"I'm not buying ANYTHING online unless it's marked up in pounds and pence..."

Uhh.. have you been on the PS3 store? Everything on there is in pounds and pence..

[Iamfanboy]

good graphics do not make...

Wal-Mart and all its subsidaries have decided that the Wii wins this generation of consoles, with soon to be double the space allotted to either PS3 or 360 games, and when a retailer with Wal-Mart's strength decides something, that's a pretty damned big weight to have in your corner. Since the local Wal-Mart sold something in the range of 70 Wiis this weekend until they ran out, compared to about 30 360's and 6 (!!) PS3s, I can't imagine why Wal-Mart would decide THAT.......

Consider this: Game-makers look for the largest audience to program games for, and 35 million consoles is a HUGE audience. Witness that Call of Duty 4 was PS3/360, but CoD: World at War was available for all three systems.

Plus, I think that the online aspect of the Wii is quite interesting, with the ability to download classic games from the past.

One thing I learned a long time ago is that good graphics do not make good games. Example: Age of Conan is practically unplayable, but quite pretty; give me Diablo II any day of the week over it.

[Henry Wertz]

SOP for Nintendo.

Yeah what bobbles31 said. Even with the NES, it was more distinctive for what it didn't have than what it did -- it was nicer than the 2600, but not as advanced as other competition coming out at the time (I can't name any off the top of my head, because Nintendo and Atari crushed it thoroughly and quickly.) Wait.. Sega Game Gear. OK. (Note if you compare the whole canon of NES games with these competitors, NES looks good because programmers found every trick they could over the years after the ex-competitors were off the market... at the time they actually competed, the competitors had slightly better specs and graphics but were costlier.) SNES? Same. They got *enough* specs so they could make nice games on it and no more, to keep price down and profits up. It was KILLED spec-wise by some systems. Same with Wii -- it's essentially a clocked-up GameCube, it's got enough muscle to make decent-looking games, they consciously avoided pushing high-definition gaming because it just doesn't add to the fun factor and greatly increases the cost.

It's a smart move. My last game system was a N64 I won in high school, but if I were going to get a system I'd probably get a Wii. I play games for fun, if I want to geek out on how high-def game scenery is, I'll look at screenshots on gaming websites, and if I want to *play* those I'll get a souped up gaming computer (and probably try to force the games to run under wine, I hate Windows.)

[Rat]

Old News

This is old news. The only way for Nintendo to survive was selling consoles for a profit. Sony and Microsoft both have other business and could lose on both hardware and software and not care much about it. I don't think Microsoft ever made any money off selling the original Xbox. But videogames are Nintendo's only business, and if the Wii didn't succeed then we'd have some HD Mario games.

Nintendo also leveraged their grasp on our childhood memories by means of the Virtual Console: “one console to rule them all, one console to download them, one console to keep them all and into your HD screen play them”.

Now they should sell —for a profit— classic pads based on the original ones. Dusty cart blowjobs won't be missed that much.

[Stephen]

As usual

You're all quoting the US stats as if they were indicitive for the entire world...

They're not.

[Anonymous Coward]

re: SOP for Nintendo

"Sega Game Gear"

I think the equivalent Sega console at the time was the Master System, an ugly semi-pyramid thing in red and black. It resembled the Tyrell building from Blade Runner, I'm sure there's a special geometrical word to describe that shape. Rhombus, or something. It had a mixture of cut-down Sega arcade titles and the Alex Kidd character. You could put sausages into the cartridge slot, although it did nothing and just made the console greasy.

There was also a lot of noise about the PC Engine, which was a big cult amongst people who regularly imported games (which was trickier and more hardcore back in the late 1980s than it is today). It had lovely graphics but was very expensive. I think it was launched internationally as the TurboGrafix something or other, but it was too expensive and it didn't have Mario.

The Game Gear was a portable equivalent of the Master System, and went up against the Atari Lynx and the Nintendo Game Boy. I remember it being more popular than the Lynx (at least in the UK), but vastly vastly less popular than the Game Boy. That's another case where the Nintendo option was technically inferior (the Game Gear and Lynx were colour, and the Lynx was, I believe, 16-bit, at a time when "16-bit" was a kind of magic phrase), but practically better, and with a better software library. And a really good version of R-Type that was playable on that tiny screen.

[paul]

Game attach rates are old skool

Downloads are nearly as important - they are big money makers (no distribution costs, manufacting , returns etc etc)

PS3 full games can be bought on the PSN. Wii has the virtual console which rakes it in for little outlay for nintendo. Xbox gets its money from subscriptions.

Basically all consoles are doing well because the whole video game industry is booming. (even with credit crunch , people stay in more). Despite what the xbots say, no console not even the 360 will dominate. Im glad , competition is great.

P.s. for the geeks - Tux on a ps3 is getting better. 256mb Ram has now been added to buy allowing the graphics memory also 256mb to be used as swap.

There are video decoding methods using the CELL now. Mythtv runs quite nicely on it. But no 3D graphics (yet) - anyway its a damm sight faster than xebian for my original xbox. (But that did have a very nice video output)

[Tom Richardson]

@Ian Michael Grumby

You can boot up Linux on a Wii, that's no great feat mate. I think engineering a device that enterprising hackers *aren't* able to get Linux running on would be more of an achievement.

[Shakje]

@Ashley Pomeroy

I remember Sonic 2 being harder on the GG than the MS because the first boss had bouncing cannonballs you had to jump over or duck under and you couldn't see them as well on the GG screen (they bounced out of the screen, but not on the MS). GG was good with some really good titles..

After that there was the Mega System and the Mega CD (32-bit!!!). One of my mates had a NeoGeo (his dad was rich), which was amazing. Oh and then there's the Saturn.

[Anonymous Coward]

@Ashley Pomeroy

It's zigurat.

[James Pickett]

Oh yeah?

Xboxes breaking even? Not at £129 they're not, although that still seems a lot for a door-stop.

[NEUR0M4NCER]

The reason Nintendo wins:

Software. Plain and simple. Nintendo is as strict with its licensing as Apple (but gets no flack??). When Nintendo had gotten so strict that they were throttling developers, in swooped Sony with the PS1 and insanely lax game vetting, and had a MAJOR success. Now Ninty's putting as much effort into its releases as it did in the late eighties/early-nineties, it's back on top. Sony/MS are now fumbling with emerging technologies (HD, WebContent, MotionControl), while Nintendo have stuck to their guns (pretty much) and just sells fun.