I didn't say I was. I was simply asking Captain Smoker to think beyond his simplistic response to the simplistic request for an App Store Nintendo.Didn't think you'd be on the "Nintendo needs to go third party" bandwagon, jvm.
You can be more adventurous, and make some educated guesses. We'd have fun discussing that, and I mean that seriously -- not as a joke.I thought I got this wrapped up in the gross profit part.
They usually sell their hardware with income, 3DS & Wii U are not following this route.
You can make your own calculations how much money they earn with hardware (usually) and how much this is when they sell 10.000.000 to 20.000.000 of hardware units.
Furthermore, their financial reports don't give me any hardware margins of course, that's why I can only argue with the overall gross profit, which also includes the software.
Really? Who the hell cares? It's a message board where people write long, passionate essays about the things they care about. Feel free to do the same.I didn't want to write an essay since the OP is already quite big.
That's one thing I concluded.
I actually tried to figure this out by subtracting their own software sales from the chart at got something like 2 $ to 5 $ per game.
But I didn't have all my Nintendo software shipment data at hand.
I added this sentence in the OP:13) even though this charts are about revenue, it is pretty clear that everytime a system is launched, in the 3 following years, their gross profit increase a lot. It means the hardware is really important for the profit margin. If the software is 90% of their gross profit, they would have abandoned hardware production a long time ago because it wouldn't change gross profit. Besides, the following years of console launch wouldn't make any difference in gross profit, or the last years of a system. Look how the graphs grow and declines accordingly with hardware cycles.
That's one thing I concluded.
I actually tried to figure this out by subtracting their own software sales from the chart at got something like 2 $ to 5 $ per game.
But I didn't have all my Nintendo software shipment data at hand.
This would be my 14 conclusion. If thats true, IOS issssss baaaaaaaaad for this industry. Apple royaties are much bigger than Nintendo, Sony and Microsoft. Besides the games are cheaper there. If thats the case, people dont have any idea about this market and this whole goooooo mobile will destroy Square Enix pretty fast, unless people starts buying games in IoS or android for 40 dollars.
Haha, you're right, I'll consider this.You can be more adventurous, and make some educated guesses. We'd have fun discussing that, and I mean that seriously -- not as a joke.
Suppose Nintendo never had to invest in hardware, hardware support, accessories, and network infrastructure ever again. Suppose, instead, they could put their massive warchest of money toward blowing the doors off everyone with their software quality and stable of imminently recognizable properties. Suppose they also started buying up other established properties that they began developing and exploiting ruthlessly. Long term overhead goes down significantly, where do you think that leaves them?
In this thread: People don't read that Nintendo always made profit with their hardware.
Exception:
3DS = wasn't profitable / currently profitable
Wii U = currently isn't
Just another thing, Nintendo needs to sell 759.319.667 games per year at 5 $ in the App Store to account for the same hardware revenue. And 30 % goes to Apple. (Comparing last fiscal year)
If you lose 60% of your income it doesnt matter that 10% of your people were making that 60%, the other 90% of your people are going to suffer no matter what.
If you lose your biggest player, the team is going to suffer even if you get a new guy.
Except the 3DS is profitable, right NOW, and IIRC Sony expects the PS4 to hit the even mark if not profitable soon as well right? Your statement is just flat out false.
I think its time to just admit that the logic behind the "Make their games for smartphones" nonsense is... well.... nonsense, and not based in, or on any form of arithmetic at all. Just a bunch of people shouting random stuff about today's latest craze. I think most people knew it wasn't that simple anyway, but its interesting to look at the numbers and see just how hilarious it is. With the way people have been going on, you would expect it to be a no brainer. However when you look close enough, you find yourself having to make some serious leaps of logic and concessions just to make the idea of going mobile only competitive.
This has been the rule for over 15 years, and a rule that Nintendo has always broke. Just because they're playing by conventions now doesn't mean it's permanent.
I personally bet the Wii U will become profitable next year.
We don't have and can't get gross margins on hardware specifically. We know they can generate significant losses, but we do not know how significant the profits can be, nor what proportion they make up. All we know is they are naturally lower than software margins.Considering this, you can say that people saying that Nintendo should abandon their hardware is quite a crazy idea, because it makes up to 60% of their business.
Not at all. This is faulty logic. A $100 price drop has more or less the same impact on the bottom line for a profitable or unprofitable product. The same amount less revenue per product sold, the same writedown on inventory, and the same impact on the bottom line. Thus the process of deciding when to cut the price is the same, ie.People saying that Wii U should be 200 $ or less is wishful thinking and not really an option considering this. It's their fault though, because they should've planned this better (and other things like marketing, etc.),
but ok, this is quite an unpredictable market if you want to predict long term sales.
The 3DS is selling at a lower clip than its predecessor. If the successor continues to see similar decline in overall sales, simply being profitable isn't enough for investors, especially if it is less profitable than the past. Blackberry, Nokia, and HTC had many profitable years despite declining sales, for instance.Except the 3DS is profitable, right NOW, and IIRC Sony expects the PS4 to hit the even mark if not profitable soon as well right? Your statement is just flat out false.
I think its time to just admit that the logic behind the "Make their games for smartphones" nonsense is... well.... nonsense, and not based in, or on any form of arithmetic at all. Just a bunch of people shouting random stuff about today's latest craze. I think most people knew it wasn't that simple anyway, but its interesting to look at the numbers and see just how hilarious it is. With the way people have been going on, you would expect it to be a no brainer. However when you look close enough, you find yourself having to make some serious leaps of logic and concessions just to make the idea of going mobile only competitive.
Some of your conclusions aren't supported by the data on offer. As has been brought up by others.
....
Spending $1 billion now (to shift an extra 10 million units) is the same as spending $1 billion later. It may even accelerate production costs downward. You have to weigh the pros and the cons. Its not simply a case of "its losing money, we can't cut the price". The PS3 is an example of a system that was sold at a huge loss, and then generated more losses by cutting the price. But it was vital to act quickly to set it up for any future success in the marketplace and ultimately the best course of action to try and recoup some of the losses in the long term was to keep the system viable in the short term. Sony wouldn't still be making consoles today if they hadn't acted fast (IMO, obviously).
1.) We know that Nintendo hardware has never been sold at loss, otherwise it's highly unrealistic that they generated 37 years of operating income. Maybe some hardware was sold at loss at some points (GCN for example), but this was outweightet by the GBA.Some of your conclusions aren't supported by the data on offer. As has been brought up by others.
ie.
We don't have and can't get gross margins on hardware specifically. We know they can generate significant losses, but we do not know how significant the profits can be, nor what proportion they make up. All we know is they are naturally lower than software margins.
Do you really think that they could generate 35 years of operating income if the hardware wasn't profitable?We have no idea if the hardware division, despite providing the majority of revenue, is profitable based on the OP.
If it's not profitable, despite greater revenue than software, then a switch to third party SHOULD AT LEAST BE CONSIDERED.
And EA is the closest comparison to Nintendo, a lot of strong franchises and a traditional video game company. Their mobile revenues in the last fiscal year have benn 274.000.000 $, that's how much they earn with one big hitter like Pokemon in a fiscal year.
Not according to their slide presentation:EA had $383 million in mobile revenue in the last year, a 28% increase in revenue over the year before.
I'm discussing Q2 2013 to Q2 2014.Not according to their slide presentation:
http://investor.ea.com/common/downl...084a&filename=Q4FY13_EarningsSlides_FINAL.pdf
It's 370.000.000 $ if you include handhelds, feature phones and all the stuff. And the increase is 55%.
Just another thing, Nintendo needs to sell 759.319.667 games per year at 5 $ in the App Store to account for the same hardware revenue. And 30 % goes to Apple. (Comparing last fiscal year)
We have no idea if the hardware division, despite providing the majority of revenue, is profitable based on the OP.
If it's not profitable, despite greater revenue than software, then a switch to third party SHOULD AT LEAST BE CONSIDERED.
You think that trend won't continue? Hardware and software costs aren't going to get magically cheaper. Especially not with Sony and MS in the game. It's impossible to make N64/GC type hardware now and expect it to sell. The hardware landscape is completely different compared to the 90's. It's useless to bring up charts from back then, that was a completely different world.We know that 3DS wasn't profitable and Wii U isn't, that's why they have their first operating losses.*
*Plus the fact that software is more expensive to produce.
The main problem with the third party strategy is that Nintendo is not set up for this. Without the need to support a platform there's no reason for them to release a broad range of software anymore. Rather they would focus on the most profitable software (Mario, Zelda, Pokemon) and ditch everything with low returns on investment. Developing stuff like Fire Emblem or Xenoblade would probably not be approved anymore, thus making Nintendo something more like EA or Activision. However it would change the way Nintendo is run in such a massive way, that it's far from certain this would allow Nintendo to maintain their incredible quality.
Maybe you read more than just the beginning of the OP next time.Just because hardware 60% of revenue, doesn't mean its profitable, don't mix revenue with income with profit. I assume they are losing money on hardware due to marketing / logistics , etc.
This is just trivial short-term-thinking in my opinion (as BengaBenga explained).And I also think they'd sell more Nintendo games on PS4 and XB1 over the next 5 years than they will on WiiU (total hypothetical thats unable to be proven), so the whole 'providing a platform' to sell their software theory I dont think holds up in the WiiU vs. Sony vs MS sceanario.
100m users, vs. 15m users (just using some numbers that people float for potential lifetime sales) , is doing nintendo no favors on Hardware or Software revenue/income/profits.
And yet we see that Xbox One and PS4 are almost profitable at launch.You think that trend won't continue? Hardware and software costs aren't going to get magically cheaper. Especially not with Sony and MS in the game. It's impossible to make N64/GC type hardware now and expect it to sell. The hardware landscape is completely different compared to the 90's.
Yes and they pay 3$ to 7$ licensing fees.I know this notion gets thrown around a lot, but logically it's just the opposite. Nintendo has more pressure to double down on their popular franchises when they are trying to prop up a failing hardware. Because stuff like Fire Emblem has no chance in hell of selling consoles, when even Mario is barely doing it. If they just made software for ps4/xb1, they could use the profits they make off of Mario and Zelda to make the more niche stuff, or heck, maybe even some new IP for a change. Their software dev costs might even go down a bit since both Sony and MS offer far better development tools.
Just because hardware 60% of revenue, doesn't mean its profitable, don't mix revenue with income with profit. I assume they are losing money on hardware due to marketing / logistics , etc.
And I also think they'd sell more Nintendo games on PS4 and XB1 over the next 5 years than they will on WiiU (total hypothetical thats unable to be proven), so the whole 'providing a platform' to sell their software theory I dont think holds up in the WiiU vs. Sony vs MS sceanario.
100m users, vs. 15m users (just using some numbers that people float for potential lifetime sales) , is doing nintendo no favors on Hardware or Software revenue/income/profits.
Furthermore, while all these companies made millions/billions of losses in the last years (aside from Activision), Nintendo sustained profitable over it's whole history, so their model works quite good.They might sell more software, as undoubtedly the install base for Xbone, Ps4 and Steam will be way beyond Wii U - but I think that only applies to their big names. I don't think the audience that buys Pikmin or Fire Emblem is scalable to a non-Nintendo install base.
However it's very likely that the profit margin will decrease dramatically for Nintendo. First of all they will have to pay royalties but more importantly they'll have to learn to devlop games for different hardware, when Nintendo has zero experience developing games outside of their own hardware (hardware that's developed in very close collaboration with the software teams nonetheless). This will surely affect the bottom line.
Aside from that Nintendo will have to learn how to compete with EA, Activision, Ubisoft, etc with regards to marketing and product placement, which is also something outside Nintendo's expertise.
And yet we see that Xbox One and PS4 are almost profitable at launch.
It depends on Nintendo, you have to consider that graphical jumps are going to be smaller and smaller, thus you don't need the beefiest hardware to create good visuals. It's going to be important who has the overall best console concept and software offerings.
Yes and they pay 3$ to 7$ licensing fees.
Let's be realistic, calculate how much games they could sell per year, not to forget that they need at least 1 or 2 years of restructure, it's not like they switch a button and that's it.
Dat Gross profit. Hardware making up 60% of their revenue is insane. Going third party would kill them and lead to so many layoffs.
But you forget that Super Mario 3D World sells hardware too, which opens up their whole ecosystem.(...)
They're software sales are directly tied to how much hardware sells. If their hardware sells like the Wii, software sales explode. The Wii U? Look how much NSMB has sold so far, about 1-2 million. That's not much. That's like a LBP game. 3DW will probably end with a similar amount. If these games were multiplatform, they would be selling 10 million easy. That's way more profit, even including royalties. If Skylanders or Lego games can sell crap loads on Sony/MS machines, then there is no reason Nintendo games can't.
The last restructure was the first big restructure in 9 years.When was the last time they spent a big chunk of money to build facilities?
Well, they profit off of the 3DS.
One of Wii U's problems is that it doesn't sell well so they probably don't get good contracts for mass-production.
When was the last time they spent a big chunk of money to build facilities?
Yes, this is certainly something they should consider too.The question is why don't they build western studios....
But you forget that Super Mario 3D World sells hardware too, which opens up their whole ecosystem.
1 Hardware = More Software + More Royalties + More Accessories + More Digital Sales
That's how Nintendo works, you completely ignore the synergy effects.
And now imagine how profitable this is if the hardware itself is profitable too, it's not the case for the Wii U currently, but for the 3DS.
Furthermore, NSMBU was at >2.000.000 in March 2013.
The last restructure was the first big restructure in 9 years.
Yes, this is certainly something they should consider too.
I hope that Iwata, since he's the CEO of NoA currently, realises that now.
I'm also really curious what N.E.R.D. is working on, they mentioned Cloud services in the Iwata Asks.
This whole topic is not just about the Wii U, these are short-term effects.You're asking me to imagine a lot of things because they aren't actually happening. There is no way for the Wii U to make profit per unit unless they increase the MSRP. Because they aren't selling anywhere near enough to get bulk cost reductions at the factories. And yes, that's with NSMB and 3DW on shelves, so no those games obviously aren't selling hardware. No hardware sales = no software + no royalties + no accessories + no digital sales. Some synergy there.
Basically Nintendo needs to release an extremely cheap system next time that is very profitable from the get go. Because the other two options are releasing an expensive console that will just get them killed by Sony and MS, or they could take a loss which it seems is the biggest cause of their problems the last few years. Of course this is completely Nintendo's fault for going for that energy efficient nonsense. The Wii U could have easily been profitable at launch.