The launch of Nintendo’s Wii U console has been the biggest news to hit the gaming corners of the internet in years, and as with any console launch, it’s already experienced its share of highs and lows. Both the exclusive and cross-platform titles have been met with generally positive reviews, however technical issues, console hacks and some cases of hardware bricking have crept into the news as well. As Nintendo will no doubt be focusing on leveraging the console’s strength and ironing out the flaws in the coming months, the question of how profitable the system will be is still anyone’s guess. The runaway success of the Wii raises expectations, which can either prove to be a help or a hindrance in the long run. Interestingly, Nintendo has announced that the consoles will be initially sold at a loss, however their business model gives us some insight into how they plan to compensate for this.
Prior to the Wii U’s launch date, Nintendo president Satoru Iwata announced that the console itself is not expected to turn a profit for the company. The reason for this was a business decisions that favored a competitive price rather than one that accurately reflects the overhead cost of producing the console. While this might seem illogical to some, the Wii U is on par with the current generation of 1080p consoles, so having the hardware priced to match the competition is crucially important. However, hardware sales are only part of the picture. The system is (hopefully) a one-time investment, however it’s the software sales that keep the gears turning. In a recent interview with Mercury News, Nintendo of America president Reggie Fils-Aime noted that the Wii U is not being sold at such a deep loss that breaking even or even turning a profit is impossible. In fact, the sale of one game is enough to bring the numbers back into the green.
This definitely bodes well for Nintendo, since the majority of people will buy at least one game to go along with their console. This is especially true for those who purchased the standard model, which did not include a pack-in game. The deluxe model came with Nintendo Land, though it is likely that a vast number of people purchased a game or two to go along with it. First-party software titles typically yield strong sales, and there is a solid roster of cross-platform titles and ports, so it wouldn’t be unreasonable to expect Nintendo to at least break even in the first quarter after the launch of the Wii U. This could mean that the new console will fare similarly to the 3DS, which started seeing the profits rise after being on the market for over a year. It’s anyone’s guess how well it will do, but the news from Nintendo leaves us cautiously optimistic.