Wii U will be sold for a loss at launch

Up until recently every Nintendo console that launched was able to be sold for a profit, with the 3DS this changed and now again with the Wii U the system will be sold for a loss at launch. This time though Nintendo are declaring their hand right away.

Nintendo consoles have traditionally been profitable because Nintendo’s used less powerful and cheaper parts, now with the Wii U GamePad, that’s likely to be real expensive part of the console.

So if Nintendo is selling the console at a loss, is it going to put more financial strain on the company?

During a recent investor meeting, Satoru Iwata, Nintendo President and CEO, had this to say on the matter.

[quote]”In addition to the yen’s continuous appreciation, the Wii U hardware will have a negative impact on Nintendo’s profits early after the launch because rather than determining a price based on its manufacturing cost, we selected one that consumers would consider to be reasonable. In this first half of the term before the launch of the Wii U, we were not able to make a profit on software for the system while we had to book a loss on the hardware, which is currently in production and will be sold below cost. Our loss has therefore widened during the second quarter in spite of bringing the Nintendo 3DS hardware back to profitability. Although we expect our financial performance to be revitalized, under these circumstances, unfortunately we cannot say that we will achieve “Nintendo-like” profits within this fiscal year.”[/quote]

So Nintendo are biting the bullet and are willing to suffer a short-term loss on hardware to put the Wii U at a reasonable price.

Iwata also added that the Nintendo will return to high profit margins next year after a successful Wii U launch. Nintendo is expecting to ship, and to sell, 5.5 million Wii U consoles between launch and March 30th 2013.