But Nintendo is still losing money on each unit
The Wii U is the first Nintendo home console to be sold at a loss at launch. I’ve already spoken to a number of people who are skeptical that such drastically dated hardware could possibly cost so much to make, but that’s just the thing — the hardware is not dated. It’s a new machine with new parts, and it so happens that it’s not immediately profitable. Why would Nintendo lie to intentionally make itself look bad?
Regardless, it’s only natural to be curious about where all that green went. CNN Money wanted to dig a bit deeper, so it had UMB TechInsights tear down a Wii U and estimate the cost of the individual parts. The GamePad alone is valued at $79.25, while the main console comes to $148.25, resulting in an approximate total of $228. You’ll notice that’s less than the $300 MSRP for the Basic Set.
The thing I don’t like about such breakdowns is that they never paint an accurate picture of total expenditure. That $228 total doesn’t factor in the actual manufacturing process, pre-loading the OS, packaging, additional pack-in materials, shipping, and so on. Then you must consider that retailers make a profit off of markup, meaning the units are sold to them for less than MSRP. CNN even acknowledges that its estimate doesn’t consider the up-front costs of R&D, though that won’t stop some people from crying that Nintendo must be screwing them over somehow.
Still, this estimate is not entirely useless. I don’t doubt that Nintendo will be able to reduce the costs within a few months, which ought to allow for a healthy amount of breathing room should the need for an emergency price drop arise.
There’s also the elephant in the room: the GamePad. A significant portion of the Wii U’s cost is eaten up just by the controller. Could Nintendo have ditched the GamePad from the get-go and used the extra money to beef up the core hardware? Would it have been a better idea to try to match Sony and Microsoft on features at the risk of producing a console indistinguishable from the competition? Those are questions I’m sure many of you will lob around as long as the Wii U remains struggling.
How Nintendo loses money on every Wii U [CNN Money via Wii U Daily] (Thanks, Tito!)
