Gaming consoles for Sony and Microsoft took years to become profitable, mainly because those companies chose to install state of the art graphics, CPU’s and other components. When it comes to the Nintendo Wii U just one game title needs to be sold in order to churn out a profit.
Nintendo has long worked under the strategy that it would create games for the entire family and therefore maintain lower end components that do not lead to major loss leaders. However, this is the first time Nintendo has chosen to sell one of its gaming consoles for a loss in order to generate swift sales upon release.
To put the Nintendo strategy into perspective, Microsoft took just over five years to churn out a profit with its Xbox visions, while the Sony PlayStation 3 didn’t turn a profit for four years.
Speaking to the Mercury News Nintendo of America president Reggie Fils-Aime explains:
“As soon as we get the consumer to buy one piece of software, then that entire transaction becomes profit positive.”
What isn’t clear is whether or not the higher end $349.99 Deluxe Set helps offset any console losses experienced by the company. The deluxe set includes cradles, dock and extra storage.
While the Nintendo Wii U is a bit more expensive then its original Wii system it does feature a larger optical drive and a bigger processor die. By sticking with larger components the company can push down manufacturing costs.
The loss leader pricing for the Nintendo Wii U appears to have been the right strategy, the company’s nearly doubled pre-orders at Gamestop compared to its original console and the Wii U is sold out at stores around the country well ahead of Christmas.
Nintendo believes it will sell 5.5 million consoles by the end of 2012.
[Image via kotaku]