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Analyst: Wii Hardware Gets Nintendo $6 Per-Console Profit

According to new analyst estimates, Nintendo makes about $6 in profit on each Wii console it sells, and its software gross margins of 65 percent -- higher than the 50-60% for the Xbox 360 and PlayStation 3 -- are helping its continued high profits.
According to new analyst estimates, Nintendo currently makes about $6 in profit on each Wii console it sells, with a higher than average gross software margin helping to make the hardware company continually profitable. Traditionally console manufacturers have sold consoles at a loss or break-even price at launch. Ideally, the company can gradually lower the cost of parts and manufacturing, aiming to make a small profit later in the product’s life cycle. However, though it always avoids specifics, Nintendo has always aimed to profit on hardware from day one. Macquarie Securities analyst David Gibson tells Forbes that a profit figure of $6 is likely to be accurate for the Wii. He also notes that Nintendo first-party publishes 60% of Wii games itself, compared with 30% for Microsoft and 15% for Sony, and puts a gross margin on game software sales of 65 percent -– compared to between 50 and 60 percent for Microsoft and Sony. A low price point for hardware has also been a modern tradition for Nintendo consoles. But although the Xbox 360 Arcade bundle now sells for less than the Wii, Nintendo demonstrated no intention to reduce the Wii's price further. Indeed, initial results from the Black Friday weekend in the U.S. show that Wii consoles are still selling for higher than the recommended retail price on auction site eBay.

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