Fils-Aime: Wii Hardware Profitable at Launch
Nintendo of America president Reggie Fils-Aime says Wii hardware will be profitable from the start.
Typically, videogame console manufacturers sell their hardware at a loss, making up for losses through accessory and game sales. Consoles only become profitable on their own once significant cost reductions are implemented in the manufacturing process, which usually happens well into the hardware’s lifecycle.
Nintendo, however, has traditionally avoided the “razor and blades” business model by selling its consoles above what they cost to make. Fils-Aime confirmed to Reuters that the Wii would carry on the tradition.
"We will make a profit on the entire Wii proposition out of the box — hardware and software," he said. "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 every thing we do."
Back in June, Nintendo president Satoru Iwata said that the company’s goal was to make a profit on every Wii unit sold: “It is a strange notion that a game console always leads to mounting losses in the beginning. We can’t promise we won’t even have a one yen loss, but we are not expecting an enormous loss."
Microsoft loses an estimated $125 on each hard disk drive-equipped Xbox 360 premium pack bundle. In February, Merrill Lynch figured that the total cost for PlayStation 3 components approaches the $900 dollar range, including a $100 hard drive.