Though Nintendo understandably had to take a major loss on 3DS handhelds after the initial response to the console’s release was unexpectedly tepid, their decision to do the same with the Wii U, prior to launch, has generated quite a bit of concern. While we’ve already documented that Nintendo’s sales number projections were in a near free fall after the 3DS launched, things have stabilized since then, but nonetheless Nintendo needs to right the ship fast.
Part of that strategy, it appears, has been to take a loss on each sale of the Wii U, but, conversely, make it so the sale of just one console game turns that loss into profit. Or at least that’s what Nintendo of America President Reggie Fils-Aime wants people to believe.
The initial decision to sell the Wii U at a loss was a byproduct of today’s casual game consumer — those who adopted the Wii despite never having owned a game console. In order to make a price tag that was both palatable and profitable just wasn’t going to happen, especially considering the Wii U’s revolutionary GamePad controller. The Wii could come in at an understandable price because the moving parts and tech were affordable — this GamePad controller alone, however, is not and could have inflated the Wii U price tag substantially.
And so Nintendo had to take a loss on each sale of the Wii U — which thus far seems to be selling quite well (if pre-order numbers are to be believed) — but with the aforementioned game sale swooping in to save the day.
As Fils-Aime explains, “As soon as [they] get the consumer to buy one piece of software, then that entire transaction becomes profit positive.” And since, except for the packaging of Nintendo Land with the Deluxe Set, all Wii U owners are going to need a game out of the gate, that essentially guarantees each Wii U sale will be profitable.
“In the end, the business model is still to drive the install base of hardware, and then to drive a strong tie ratio with all of the other software and experiences for the consumer. And if we’re able to do that, then we will create significant profit for the company.”
It even goes much deeper than that, as Reggie explains in his quote above, but the most important thing to note is that Nintendo has created a contingency plan to combat the loss. Now hopefully they can keep interesting content coming beyond the 50+ launch window titles.
So Wii U owners, how many games did you purchase alongside your new console? Was it smart of Nintendo to deliver a more affordable price tag, but by extension take a loss?
The Wii U is available now.
Source: Mercury News