Nintendo Set to Sell Wii U Game Console at Loss – Company

From X-bit Labs: For the first time in many years and several generations of its video game consoles, Nintendo is going to sell its next-gen system at a loss, the company this week informed its investors. Microsoft Corp. and Sony Corp. do sell game consoles at a loss, but for at least two generations Nintendo consistently made money not only on software, but also on hardware.

“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,” said Satoru Iwata, the president of Nintendo, during a Q&A session with investors and the analysts.

While Nintendo did not reveal how much does it lose on every Nintendo Wii U system, it did admit that this fiscal year it will not report profits typical for the company. The company further said that to bring “Nintendo-like” profits back, it will need to transform its business structure in line with the times, which includes expansion of its digital business to increase business efficiency and profitability in general.

Nintendo expects to sell around 5.5 million Wii U game consoles as well as 24 million of video games for Wii U worldwide by March 31, 2013, the company revealed in its financial release this week. It is noteworthy that by the same date the firm plans to sell another five million of its previous-generation Wii game systems. By contrast, Nintendo expected to sell 12 million Wii game systems in the second half of its fiscal 2011 (October, 2011 – March 31, 2012), which means that at present Nintendo is either very conservative about Wii U success, has production issues with its next-gen console or plans to intentionally limit the amount of consoles it will sell to trim losses.

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