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back to article Nintendo set to make a loss on every 3DS

With the 3DS price cut imminent, it is claimed Nintendo will lose money on every console sold. The company is also forcing cuts on its employees, reducing salaries by up to fifty per cent. According to Bloomberg Japan, the new 3DS price point means Nintendo will incur a loss on every console sold. We've already talked about how …

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Anonymous Coward

oh dear

Perhaps nintendo aught to "form an alliance with microsoft" too

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doing it right

OK, it may not be selling so well and they are forced to drop the price but at least they aren't screwing over the early adopters. Many other companies would have done nothing for them.

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Joke

Sure,We Lose Money On Every One. But...

...we make it up in volume.

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Boffin

Unambitious maths

Given the cost of import duties, sanctions, VAT, the cost of distribution itself, plus in-the-box accessories, manuals, packaging and warranty coverage, it's not really a huge stretch to suggest Ninty are pushing the 3DS to be a loss-leader. The money in the games industry has long been with the games themselves, which cost a lot less to produce and have far bigger margins.

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Ninty too generous...

20 free games for early adopters? That's pretty generous! I'm always staggered at these stories where the price of a product drops & the early adopters cry & demand a re-fund etc. In my view if you buy something and then the price drops, be it the next day, week year, then tough!!

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Stop

@OrsonX You are not understanding the model

Most consumer products that you buy contain a profit margin in the product itself and the manufacturer, distributor and retailer all take their respective cut from that, and everyone (theoretically) makes a profit. Happy days.

The videogame industry is different. Videogame consoles are often sold at a loss on the hardware by the manufacturer and the way they make their money is from software sales from games developed by themselves (1st party titles) and by a licencing fee from anyone else that wishes to make games (3rd party titles) for the manufacturers consoles.

What the manufacturer needs then, when selling a videogame console, is as many people buying the console as possible, as early as possible, so that games manufacturers can have confidence that it is going to be a success that they can make money from, and thus the manufacturer can get their licence fees from the games developer.

If the manufacturer gets it wrong and can't shift enough consoles, then not only have they made a loss on each console, but they then don't have enough software developers paying licence fees or end punters buying games, to make any money at all.

With all that in mind, it then makes perfect sense for Nintendo to give 20 free software titles to early adopters to keep them happy and buying future Nintendo products. It also makes sense for them to drop the price of the console, even if it means making a loss on the hardware, if it drives up the number of sold consoles and therefore software development licence fees that games manufacturers have to pay them (As much as £10 of each console game you buy is the licence fee)

It isn't a reasonable analogy to compare games consoles to the sale of flatscreen TV's for example. Flatscreen TV's pricing is based on everyone in the chain making a profit, whereas games console profits are in the software sold. The likes of Nintendo need to get the early adopters onboard and keep them happy, generation after generation of console and also drive demand through volume sales.

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Pint

understanding the model

Interesting reply, cheers!

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Cost per unit

"We've already talked about how the hardware parts of a 3DS cost just £60 and with the new price of the console still more than double that, it would seem someone's been doing some ambitious maths."

I vaguely remember an old quote about why medication costs so much, when it only takes a few pennies to make each pill. The reason being the first pill cost millions.

Its not just the cost of the hardware. Its the development costs they were going to make back. Cost of the software. Assembling. Packaging. Distribution. etc.

If you think you can build and sell handhelds for 60 quid, go on.

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A point that a lot of people miss...

Agreed. I think it's nonsense that a site like iFixIt or some such looks simply at the BOM for a product, concludes that an iPad or 3DS costs only 20¢ in parts, and then sites like The Reg quote that as some Holy Number that is a sin to surpass.

Additionally, last I checked it may be unfashionable, but not yet illegal, to make a profit on a device.

That is not to say, of course, that the 3DS was not, shall we say, on the premium end of pricing (Nintendo admitted as much at launch), but market forces have moved the Hidden Hand and Nintendo has reacted, as it should, by bringing the price down to what the market will bear.

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A loss (of profit) on every 3DS

Perhaps that's a half truth they've let slip. I highly doubt they're selling at a loss like Sony did with the PS3 originally so perhaps it's a loss of massive profit they're talking about. Still, with the millions and millions of Wii consoles sold they can afford to lose some money for quite a while given that the price stayed as high as it did for so long.

Wii U? I'm not too impressed really. The graphics are brought up to current standards with a gimmick of touchscreen controller that could be useful and work well in some games but I really hope they hire someone that can come up with a better name by release or for their next console.

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FAIL

Stupid Nintendo...

Yes.

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Trollface

Oh poor executives....

How can someone live with only 600.000 a year? How do you feed kids like that? Oh man.....Damn Nintendo.

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Paris Hilton

I thought this was normal?

They minimise profits on the consoles, to mark up the now overpriced games to make their money.

Why do you think they're paranoid about people knobbling consoles (xbox, PSx) to "deprotect" them, even if the end user has no intention of pirating games? They're using them as cheap computers.

So, due to THEIR self-imposed pricing model, they're trying to make us feel guilty because outright blaming us didn't work?

Boo hoo. Watch how hard I cry.

Paris, because it's the closest to a tear there is.

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Nintendo set to make a loss on every 3DS

They must be so pleased with me, then.

I've not bought one.

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Kudos..

for the big wigs taking some cuts. I have heard this is pretty typical in Japan, though, the company heads actually taking responsibility for their mistakes and the health of the company.

Here in the US, companies that have trouble, the CEOs and bigwigs get huge pay *raises* for "sticking with the company during this troubled time, and trying to turn it around" or some such excuse, even in cases where the bigwigs clearly caused the problems (as opposed to cases where the company's done everything right and sales have just dropped due to the crap economy.) They make damn sure they have a "golden parachute" clause so if they do get fired or quit, they get a huge cash payout. The people who get huge pay cuts, lose benefits, or get fired, are the ones who actually do the work for the company.

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Hardware costs

So did the console design itself, market itself, walk to the stores by itself?

There's a margin of profit, there's a margin of R&D costs and so on.

A Blu-ray disc costs pence to make, but you think the content on it was made for nothing? of course not.

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JDX
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it would seem someone's been doing some ambitious maths

Because obviously you pay for the bits, and then they magically get glued together, packaged in a pretty box, shipped across the world, and distributed to shops, for free.

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Anonymous Coward

Responsible

At least the head honcho is taking some responsibility for it.

The novelty of the 3DS grabs many, but at the end of the day its still kinda like the same ol' shite.

Everyone I know with a NDS has a R4(or similar) card and wouldn't have bought the DS otherwise.

The games just aren't al that.

As for the 3DS, the 3D isn't amazing and it's a bit of a pain having to hold it in the sweet spot. And then its the same old junk games.

Can we forget all this half assed 3D, gyro, movement etc BS and just get back to making some decent addictive games?

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Childcatcher

Salarymen

"Head honcho Satoru Iwata is even taking a huge reduction in pay, Kotaku reports. His salary - currently about £1.2 million a year"

Interesting that the head of Nintendo "only" earns £1.2 million a year. Wonder how much he would demand to be paid if it was a western company.

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Surprising

3 years ago, Nintendo were the geniuses who brought us the Wii, and managed to get the next gaming paradigm... How fast things change.

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Anonymous Coward

Killer app not out yet

The problem with the 3DS is, the killer app isn't out yet.

I'm still waiting on the Animal Crossing 3DS title.

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Anonymous Coward

Well...

As long as it is the millionaires taking 50% cuts I am not angry because I am sure they will scrape through.

As long as the poor sods at the lower end aren't getting financially massacred.

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Don't tell me people are wising up...

...to NIntendo's bullshit? Re-releasing decade-old games and tacking on additional 3D gimmicks, remaking the same games over and over and over, not giving a shit about the quality of their online service, etc, etc?

Perhaps with their next console they'll get back to actually maki-oh, wait....Wii U.

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Anonymous Coward

Woah

"reducing salaries by up to fifty per cent"

Except at management and executive levels.

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Reading Comprehension?

Try that article again sir :)

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Wising up

People no longer want to pay a couple of hundred pounds for a handheld and then 40 quid for a game on it.

It's the curse of the Apple 59p game. The number of kids I've seen playing stuff on iPod Touches recently when in the past it's been a Nintendo DS of some sort is frightening.

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Holmes

Purely out of interest...

If they've finally managed to stop those pesky R4 cards working on the 3DS? As others have mentioned, it seems every man and his dog has one in their old DS!

I bet if they have, 3DS sales will stall until they get cracked/hacked...

AC, well that's kinda obvious!

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Anonymous Coward

Could be!

Personally, I'm wondering if my trusty old R4 will run 3DS games on a non-3D DS....

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Coat

Maybe...

...it's because "3D" technology is the biggest gimmick around, and too many punters are wise enough not to shell out their hard earned for it.

This commenter will certainly not be bothering with a 3DS, no matter how they appeal to my sense of nostalgia with Ocarina of Time and Pilotwings. I shall not be a nintendo slave! I'll stick with my existing DS lite and original DS and miriad games. Er....

Mine's the one with the copy of Nintendo magazine, December 1999, in the pocket.

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well..

I'll save nintendo a few quid then, and not buy one.

I'm still not sold on the whole 3d thing. I've played with a 3DS, and i thought it was actually pretty good. Also, as i see it, the issue with 3d is that its hard to advertise, what with our 2d televisions, 2d posters etc etc.

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JDX
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3D's a fad

Bet they said that about colour TV too. And HD TV.

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