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Reggie: Wii makes $$$ immediately

Nintendo not waiting around for market share, production efficiency to make money on next-gen console; cash will be made "out of the box."

By Tim Surette, GameSpot

Posted Sep 14, 2006 4:54 pm PT

The idea with most first-party gaming companies is to get a foothold in the market no matter the cost, even if that means selling hardware for less than what it costs to make. Microsoft has admitted to losing a significant amount of money for each Xbox sold--Microsoft's Robbie Bach believes the company's gaming division won't turn a profit until the 2008 fiscal year. He's not alone, as many industry insiders believe the PlayStation 3's guts and production costs are more than its $600 price tag.

The reasoning behind taking a hit in the wallet is that profit margin on software sales theoretically outpaces that of hardware. In addition, as manufacturing processes streamline and costs of goods are reduced, the price of making machines decreases drastically--however, companies need the financial security to survive the initial beating.

Nintendo, on the other hand, took a completely different approach, and didn't want to stay in the game only to take a financial loss from day one. Instead of focusing on high-definition graphics and some of the extras that make technophiles drool, the company opted to try to expand its reach through simplicity--that is, innovate and capture the attention of the mass-market crowd rather than the hardcore gamer who is willing to spend money on a console, HD setup, and other accessories.

The result of that choice, says Nintendo of America president Reggie Fils-Aime, is instant profit.

"We will make a profit on the entire Wii proposition out of the box--hardware and software," Fils-Aime told Reuters. "That really is a very different philosophy versus our competitors. We are a company that competes only in the interactive entertainment space, so we have to make a profit on everything we do."

Nintendo expects to sell 6 million Wiis through March of next year, but analysts expect even better numbers. Michael Pachter of Wedbush Morgan Securities told GameSpot, "I keep hearing that they will crush the 6 million unit number (by something like 2 to 3 million). That would be good for everyone."

It's not just the price of the hardware that gives Nintendo an edge in the money game. Development costs for the Wii are expected to be a fraction of development costs for the Xbox 360 and PS3.

THQ CEO Brian Farrell, whose company is supporting the Wii with four games by the end of March 2007, explained the financial advantage of making games for the Wii. "[The Wii] wasn't a whole new programming environment," Farrell said. "So we had a lot of tools and tech that work in that environment. So those costs--and again, I hate these broad generalizations--but they could be as little as a third of the high-end next-gen titles... Maybe the range is a quarter to a half."

The Nintendo Wii goes on sale in the United States on November 19 for the price of $249.99. Sony's PlayStation 3, which goes on sale November 17, will be offered in two specs--a lower-end $499 model and a high-end $599 model. Microsoft's Xbox 360, which has been on sale since November 2005, is currently available in $299 and $399 versions.

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466 Comments

  • nate1222

    Posted Jan 22, 2008 4:19 pm PT

    All three consoles rock for different reasons. Right now, I'm a 360 man. But the Wii makes me drool. The BC, access to Old School Classics and the fact that the development costs are so low that more companies will jump to create games for it. The guys at Nintendo probably played the SMARTEST strategy this-gen.

    Most 'hard-core' gamers are going to hate the Wii. By nature, they're 'tech-heads'. But, I believe, that graphics have become as good as they NEED to be last-gen (PS2/XBox/GC). Right now, games need to become cheaper to design, easier to pick up and give gamers access to the lengthy list of past (often great) titles.

    Most people are either 'casual' or 'core' gamers. 'Hard-core' gamers deny themselves sex and/or social lives. Most people enjoy gaming, but they don't want it to consume them. Movies and music are fairly cheap ($15 for a CD, $10-$20 for a DVD). If games don't become more affordable, it can potentially kill then off. Think about it: development costs are through the roof right now-if a title doesn't sell 2-3 million copies, the dev. and publisher takes a hit. Too many hits? Staff members are in UNemployment lines. A console that's pretty popular and cheap to develop for greatly reduces the likelyhood of a fall out.

    I don't believe that console gaming will "die". But I believe thay its existance will depend greatly on bringing its costs down and making gaming as 'normal' as music and movies. Nintendo is the only company even trying to do this.

  • Gamer_dude_666

    Posted Oct 30, 2006 1:58 pm PT

    rock on nintendo i mean **** graphics and stuff but with the WII controller your gonna have a much more fun expirence

  • saugh

    Posted Oct 27, 2006 10:48 am PT

    Smart move, although it kinda hints that the Wii isn't such a technological leap as its said to be.

  • chaos_dragon06

    Posted Oct 26, 2006 8:34 pm PT

    Nintendo is great.

  • TheStealthGhost

    Posted Oct 25, 2006 5:02 pm PT

    Nintendo rocks and will always rock!

  • wanderer818

    Posted Oct 24, 2006 6:07 am PT

    "Wii is good, ps3 is good, xbox 360 is good so stop complaining and get a life. I dont think any of them give a crap anyway, they just want a big fat profit in the end."

    uh, no **** they're called businesses for a reason, but you need to make good products to make a big fat profit in the first place.

  • HARRYericPOTTER

    Posted Oct 21, 2006 10:16 am PT

    Woot! Enough said. I'm getting a Wii, I'll gladly support their profit making ideas. ;-)

  • gamefantasy

    Posted Oct 20, 2006 1:52 pm PT

    Wii will win the console war

  • josephmadde2005

    Posted Oct 14, 2006 12:00 pm PT

    Man if theres one thing Nintendo can do it's print...er make money.

  • Myriam_D

    Posted Oct 9, 2006 10:48 am PT

    Read this, read some comments, and the big thing that's got me excited with ze Wii is that yes as someone stated, you can have much bigger budgets with more stuff if it costs less per thing. Still, one other thing is that I once heard a commentary (I think it was from the Monkey Island guy, then again, I've seen more than one) that stated that unlike other art industries like movies and books newer, first timers (think upper tier, lower tier) have it ROUGH making head way. (It's too risky to make good, original games if they could fall flat anyway, so they have to build themselves up on cheap clones and stuff (One big sales failure for them and they could topple). This could give them a leg up, meaning more fresh ideas on big consoles, meaning more good companies, means more good games, means PAAARTAAAYYY! Besides, less cost means less risk means people will worry less about lost money and FINALLY... That means people will move out of the norm in order to catch attention with little risk. Makes me wonder how many new genres might pop up out of this... Or old ones, I miss Duck Hunt. *pout*

    Well, that's my $0.02-Best to ya (all of you, even doubters and fans of other systems (P-S-Wii! P-S-Wii!)

    Myriam.

  • demancio

    Posted Oct 9, 2006 10:22 am PT

    could nintendo be back on the way to the top with this smart market move?

  • cubelover38

    Posted Sep 30, 2006 7:39 pm PT

    affordable system, affordable games, exercise while playing i guess ill be sleeping in the car on the 18th

  • Shaoran_Lee

    Posted Sep 28, 2006 9:45 pm PT

    This is a good thing. Nintendo is thinking in a large number of possible customers, by selling this new interactive way to play games in a low price (compare to the other two consoles). I think Nintendo will sell the 6 million consoles and is going to be the beginning of a new gaming experience...

    Go Nintendo Go!!!!! Wii for everyone!!!

  • FATMAN87

    Posted Sep 25, 2006 4:11 pm PT

    its a good deal anyway

  • Science2000luke

    Posted Sep 25, 2006 2:55 pm PT

    True, they are businesses, and they have done a hell of a good job making us think that videogame universes are worth thinking about. But the reason why we play and think of videogames is because they make us happy, so all the better if you can get happiness for $249.99! Heh, to think that glamorous computer gaming software can bring about joy...

  • cyborg100000

    Posted Sep 25, 2006 1:30 pm PT

    Wii is good, ps3 is good, xbox 360 is good so stop complaining and get a life. I dont think any of them give a crap anyway, they just want a big fat profit in the end.

  • randombutter

    Posted Sep 25, 2006 9:13 am PT

    We will get Wii sports free (IIRC), which includes Tennis, Bowling, Baseball and Golf(?). I also think it was said that we will get one wiimote and nunchuck only, but I am sure Game, Eb and Gamestop will do package deals with more controllers and games.

  • asdzzx999

    Posted Sep 25, 2006 7:22 am PT

    I have two questions that is it ture that when we buy the WII, it will give u 4 free games, and another question is how many control will we have when we buy the WII?

  • gam3r3OOO

    Posted Sep 24, 2006 5:17 pm PT

    The thing I like about nintendo is they are the innovators. Here we have Sony and Microsoft who like to keep improving the graphics (almost exclusively as if that was the only thing that matters in games). Its like this: when you play your first FPS or RTS you've pretty much played them all (the games are the same but with a different plot). If you have a game with the same playing mechanics and controller once you get used to the graphics you get used to it. For a console to be awesome something has to be extrodinarily different from the last one. I remember the jump from SNES to N64 was pretty sweet. But now from xbox to xbox 360; I'm not seeing anything too revolutionary yet. Makes me wonder what they will come up with next for the system after the wii. Maybe people will come to expect that games have more realistic controls?

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