Is Nintendo getting squeezed out?

[see colon]

I know I'm sure not going to spend even $99 on a GC (actually don't have any place to put it and I find them ugly), to play Animal Crossing [girlfriend just thought those commercials were the cutest thing ever!] and RE4.

Were either of those games released on the PS2 or Xbox, I'd have bought both of them.

nintendo didn't make RE4, so it really makes no sense to mention it in this context. especialy when it's going to be released on ps2 next year.

 

[Carl B]

Rancid, that's all good and I'm glad you feel that way, but remember that as it stands now Nintendo's software equals 1st party profit levels rather than 3rd party profit levels, and frankly I don't think too many of their games WOULD be snatched up were they to go multi-console. You think you want to play Zelda on XBox, but... well, things change. I can't explain it - but if I ever wanted to play Sonic before, I can tell you I have no desire now that it's cross-console. I can't explain why, because I don't know, I just don't want to.

Anyway as for me, I love my Gamecube, it's true - and no doubt I'm in a minority.

Still, any Nintendo nostalgia I'm afflicted with aside, how has SEGAs software sales been since the changeover?

 

[Legend]

the general mindset is that Ninty is loosing. while in fact Ninty is the most profitable of the three console makers. still, GC didn't yield as much as hoped for, and their profit is declining for a while now. they don't have an immediate problem but things are uneasy.

anywhoo, things can suddenly change in the gaming industry.

 

[Teasy]

Yeah, but how much of Nintendo's money is made from handheld console sales and how much from software licensing sales?

Software licensing fee's aren't the only thing that makes money for a console maker. Especially a console maker with such large sales of there own games. Nintendo can make more profit selling 60 million of there games on there own console then they could make selling 90 million on other consoles. Plus they make money from console peripherals and more.

 

[see colon]

Yeah, but how much of Nintendo's money is made from handheld console sales and how much from software licensing sales? Everyone knows that you don't make money on console hardware (and despite what Nintendo claim I am certain they don't on the GameCube at it's present price point). By making software for both Microsoft and Sony they would vastly increase their potential market.

none of this matters. nintendo isn't loosing money, they are making money. if you were making money consistantly why would you want to stop and run the risk of loosing your consitant income. it makes no sense, at this point in time, for nintendo to bail out of the console market.

even if nintendo went 3rd part it doesn't mean they will make more money. they would loose all royalties they collect from 3rd party sales, for one thing. and a nintendo game of equal quality and production cost, even if it sold the same number of units (and it might not, since they would have more competition) wouldn't bring an equal profit because they would have to pay royalties to the hardware manufacturer.

 

[g35er]

I'd like to go back to one of my original questions. Can Nintendo continue to afford to continue to lose as much per console sold as MS and Sony and just make it up in software? That's of course assuming their loss per console sold will be roughly equal.

Yes, Nintendo is doing okay now, but as MS and Sony continue to advance their tech in the subsequent generations, the cost for manufacturing consoles is getting higher. And maybe (maybe) the loss per unit sold will be higher. Can Nintendo continue to play that game?

 

[Carl B]

I'd like to go back to one of my original questions. Can Nintendo continue to afford to continue to lose as much per console sold as MS and Sony and just make it up in software? That's of course assuming their loss per console sold will be roughly equal.

Yes, Nintendo is doing okay now, but as MS and Sony continue to advance their tech in the subsequent generations, the cost for manufacturing consoles is getting higher. And maybe (maybe) the loss per unit sold will be higher. Can Nintendo continue to play that game?

In your second sentence, define the word continue.

 

[Diplo]

Pride?, Some people need to wake up and smell the profits. Sega had no money left and were losing money hand over fist. Nintendo have huge stores of cash and are making money, that's a significant difference.

Sega were making money not too long ago, either (and are again now once they swallowed their pride and cut their losses). Yes, Nintendo are making a profit at the moment, but that's mostly from the handheld market and through selling software. Once the PSP eats into that market (and every indication is it will do) and once their console sales fall even lower (which, in turn, means fewer software sales = less profit) they may well be in real trouble. The cost of R&D into a new console is massive, especially when competing against companies of the might of Sony and Microsoft, and especially when the latter can afford to sell their hardware at a loss.

 

[see colon]

I'd like to go back to one of my original questions. Can Nintendo continue to afford to continue to lose as much per console sold as MS and Sony and just make it up in software? That's of course assuming their loss per console sold will be roughly equal.

but the loss per console is not equal. it's the general consenus that MS losses the more per unit on hardware, followed by sony, and nintendo roughly breaking even ( give or take $10-20US).

so assuming the above is correct, does it make sense for nintendo to sell hardware at cost while it's competators purge money on each unit sold? yeah, i think so.

 

[g35er]

I was talking about the next generation (Rev). Although we don't know the details, we can assume that at first, there will be a loss per console if the Rev is in the same ballpark in terms of power as the other 2. Unless they figured out a "revolutionary" manufacturing technique--maybe that's the real revolution. Sony and MS can afford to absorb their losses with their billions in the bank.

So in a general sense, do you think Nintendo can continue to successfully play the razor and blade game?

 

[Legend]

also, Ninty using lower tech and thus going cheaper may be the reason they will stay going for a long time. since the others are going high-tech, thus more expensive.

 

[Carl B]

I was talking about the next generation (Rev). Although we don't know the details, we can assume that at first, there will be a loss per console if the Rev is in the same ballpark in terms of power as the other 2. Unless they figured out a "revolutionary" manufacturing technique--maybe that's the real revolution. Sony and MS can afford to absorb their losses with their billions in the bank.

So in a general sense, do you think Nintendo can continue to successfully play the razor and blade game?

Why, Nintendo's billions in the bank don't count? They've got as many of them as Sony does afterall.

 

[Diplo]

so assuming the above is correct, does it make sense for nintendo to sell hardware at cost while it's competitors purge money on each unit sold? yeah, i think so.

Sure, if you are managing to sell units. However, Nintendo have rapidly gone from #1 to #3 in the market and each successive console they release has had a smaller market share. In the UK they now have less than 9% of the console market. Their Q3 profits fell by 43% this year source. That's quite some fall. How much lower can that fall before they hit a point of no return? When major retailers no longer even stock your hardware or give shelf space to your games then there is a problem.

If Nintendo plough a lot of their (undoubted) profits into R&D for the Revolution and it sells even worse than the GameCube then they are in trouble, especially with Sony moving into the hand-held market. Imagine if Sony do to the GameBoy/DS what they did to the Nintendo 64? Where will the big N turn then? So, yes, Nintendo are making a good profit now but the video game market is a fickle one and big players can quickly be humbled... It happened to Atari, it happened to Sega, it happened to Commodore and it very nearly happened to Apple (until they diversified).

 

[Clashman]

I'd like to go back to one of my original questions. Can Nintendo continue to afford to continue to lose as much per console sold as MS and Sony and just make it up in software? That's of course assuming their loss per console sold will be roughly equal.

I think the fact that they have a multi-billion dollar war chest indicates that they can. The question is: will they? I think we'll have to wait for firmer Revolution specs before we make any judgements.

 

[RancidLunchmeat]

Is that really a viable option? Continue to be seen as clearly a niche player, while making enough money to survive long enough that Sony and MS's shareholders eventually scream they've had enough of this console biz and force them to leave the market?

Teasy,
What numbers are you using to come to the conclusion that N makes more money selling 60 million units at a profit and virtually no profit on hardware sales VS selling 90 million units to other consoles? Where is that extra revenue gained by selling 30 million units less but only on their own console?

see colon,

RE4 is relevant in this discussion as its one of N's very few system sellers. I'm aware of people who did purchase the GC just for RE4, especially now at the reduced pricing. That's like saying that GTA isn't a system seller for PS2 so it's not relevant to any PS2 discussion.

I bought yet another (my third) PS2 just to play GTA:SA. But I'm not going to buy a GC just for RE4, and by the time it's released on PS2, I'll probably more interested in the X360. I don't believe I'll be purchasing any more current generation games. So RE4, in my warped perspective, is a GC exclusive. Just like GTA:SA will be released on Xbox and I won't be buying it (and wouldn't) because of the time frame. So I see GTA:SA as a PS2 exclusive as well.

 

[Clashman]

Teasy,
What numbers are you using to come to the conclusion that N makes more money selling 60 million units at a profit and virtually no profit on hardware sales VS selling 90 million units to other consoles? Where is that extra revenue gained by selling 30 million units less but only on their own console?

Well, first off, your profit margins will be larger because you don't have to pay royalties to someone else, which is usually a significant chunk of profits. You are also collecting royalties from the 100 million other titles made by other companies on your system. And while the hardware itself isn't profitable, it's accessories generally are quite so.

 

[g35er]

Does everyone else see their market share trend? It went from 90% for NES to 60% for SNES to 40% to N64 to 20% for GC. Numbers aren't exact but you get the idea. Yes, it's just a trend and Rev could reverse it, but that's a disturbing trend.

BTW, could we leave the the fanboyism out of this? We all want Nintendo to do well. They make some great games.

 

[Teasy]

Diplo, what do you call not so long ago? Because the Saturn was a financial disastar, as was the Dreamcast. I don't know when the last time Sega made a profit as a console maker was. But what I'd like to know is when was the last time Sega were sitting on cash stores of $7 billion and making large yearly profits?

 

[Carl B]

Does everyone else see their market share trend? It went from 90% for NES to 60% for SNES to 40% to N64 to 20% for GC. Numbers aren't exact but you get the idea. Yes, it's just a trend and Rev could reverse it, but that's a disturbing trend.

BTW, could we leave the the fanboyism out of this? We all want Nintendo to do well. They make some great games.

I'm very business oriented, and I can understand the desire for marketshare, but in the context of the consoles, I don't see the relevance of Nintendo losing their #2 spot to Microsoft. (and by some numbers they haven't even) Microsoft has lost some ~$6 billion on the XBox venture; is that success? Hypothetically, if they became number one next-gen and tallied another $6 billion in losses, would they be toasting themselves? Now granted, I don't think another $6 billion in losses is going to happen, but you get my point.

If and when (because I do believe they will) Microsoft turns profitable this gen, they will have to continue that profitability for quite some time before they ever make up their initial losses venturing into this space, so I think on those grounds alone, Nintendo's level of profit out of this industry deserves some respect. In some senses, maybe they are the laggards - but in others they are most certainly leaders.

 

[Readykilowatt]

Yes, it's just a trend and Rev could reverse it

That's one of the reasons why the Revolution is being released.