Wii U hardware discussion and investigation *rename

[Shifty Geezer]

I'd say it's almost a given that 'sold at a loss' means everything from R&D to marketing to the actual product. Because why shouldn't it?

Because it's a statement about the financial viability of the device post design. If it's sold at a loss, the company loses money every time they sell one. That means you (as a business or investor) want to see lots of software sales to justify the expense of the machine. If it's sold at a profit, every sale is money in the bank. The response from investors to "10 million sold" is going to be very different if that hardware is sold at a loss over sold at a profit. Taking your film analogy, every DVD sold is sold at a profit. The cinema makes money on that DVD to recover the expense of creating the film and eventually in adding to the company coffers. The disk isn't sold at a loss regardless how much was spent on the film.

 

[ERP]

I'd say it's almost a given that 'sold at a loss' means everything from R&D to marketing to the actual product. Because why shouldn't it?

Whenever you see a 200 million dollar film then that figure includes the marketing budget and which is often up to a third of the total cost. There is no reason for any other product to be different in that regard.

There are accounting standards that they have to follow, I'm just not clear what they are.
Marketing would be accounted for separately.
R&D is almost always accounted for separately, and those write off's would have been in previous fiscal quarters anyway.
If Nintendo were a bigger company they would probably roll them into a divisions loss/profit calculation, but it's unlikely IMO they are included in a statement like the one given.

 

[Squilliam]

There are accounting standards that they have to follow, I'm just not clear what they are.
Marketing would be accounted for separately.
R&D is almost always accounted for separately, and those write off's would have been in previous fiscal quarters anyway.
If Nintendo were a bigger company they would probably roll them into a divisions loss/profit calculation, but it's unlikely IMO they are included in a statement like the one given.

Would a statement to the general public from a CEO have a different standard to say a statement given during the quarterly report? If they are intending to give the impression to consumers that the product is good value then saying that they lose money on every console is one way to impart that impression whereas to an audience of investers would want different information again.

 

[ERP]

Would a statement to the general public from a CEO have a different standard to say a statement given during the quarterly report? If they are intending to give the impression to consumers that the product is good value then saying that they lose money on every console is one way to impart that impression whereas to an audience of investers would want different information again.

They can't make intentionally misleading public statements, that could affect how people trade the stock. If they are really making $100 or so/unit as people here seem to think, then I think that would qualify, but I'm not a lawyer.

I would tend to go with if they say they're selling at a loss they probably are selling at a loss, and for whatever reason the BOM or the manufacturing cost or the shipping cost is higher than people here are projecting.

 

[Entropy]

Would a statement to the general public from a CEO have a different standard to say a statement given during the quarterly report? If they are intending to give the impression to consumers that the product is good value then saying that they lose money on every console is one way to impart that impression whereas to an audience of investers would want different information again.

Look, we've seen the console now. Reggie didn't refer to BOM. And there is no particular reason to think he should. Just because we don't know exactly how the numbers behind the statement were derived, doesn't mean that we can't use our bloody common sense and conclude that it has to include more than n to n+1 manufacturing costs.

You'll see an iSuppli estimate soon enough.

 

[bitsandbytes]

Any info about the retail margin? Maybe there's a big profit to distributors and retailers, it's a good gamble to steal all the shelf space.

I can't believe this ridiculously low-spec thing can cost a lot more to produce than PS360. They even saved a few dollars by removing bluray playback, and made the drive single layer only, the touch screen is complete crap, no HDD, little flash, everything looks like they cut as much as possible to make it as inexpensive to produce as they can.

Some trade price figures from MCV for the UK:

Basic Pack £205 Trade £250 Retail
Premium Pack £246 Trade £290-£300 Retail
ZombiU Pack £270 Trade £330 Retail

Even allowing for huge error/other costs $180 = ~£110 so I can't see Nintendo making a loss at £205 (at least in the UK)

 

[aaaaa00]

I would tend to go with if they say they're selling at a loss they probably are selling at a loss, and for whatever reason the BOM or the manufacturing cost or the shipping cost is higher than people here are projecting.

Maybe Nintendo is using the same accounting magic as in Hollywood, where profitable movies are subjected to financial manipulation so the net profit always comes out close to zero. This is so they can avoid paying out royalties, points, profit shares, etc.

http://en.wikipedia.org/wiki/Hollywood_accounting

(And yes, I'm mostly just joking. )

 

[Squilliam]

They can't make intentionally misleading public statements, that could affect how people trade the stock. If they are really making $100 or so/unit as people here seem to think, then I think that would qualify, but I'm not a lawyer.

I would tend to go with if they say they're selling at a loss they probably are selling at a loss, and for whatever reason the BOM or the manufacturing cost or the shipping cost is higher than people here are projecting.

Do Nintendo make their own consoles? It could be including tooling and refitting of production lines to make the Wii U?

Look, we've seen the console now. Reggie didn't refer to BOM. And there is no particular reason to think he should. Just because we don't know exactly how the numbers behind the statement were derived, doesn't mean that we can't use our bloody common sense and conclude that it has to include more than n to n+1 manufacturing costs.

You'll see an iSuppli estimate soon enough.

Yes it doesn't make sense that they are 'losing money' in the same way that say Sony or Microsoft talk about it. I guess the old slogan applies 'we're losing money on every unit we produce but we're making up for it with volume'

 

[tongue_of_colicab]

Even if refitting was included, it still doesn't make sense. Producing a wuu won't require some kind of special production line or anything.

 

[Arwin]

I think the profit comment only applies to the US prices. I don't think you can translate them easily to the EU market. Over here I haven't even seen the 8GB model, by the way.

US prices make sense to me. However cheaply the tablet is put together, it's still likely to be a significant part of the cost.

 

[liolio]

They can't make intentionally misleading public statements, that could affect how people trade the stock. If they are really making $100 or so/unit as people here seem to think, then I think that would qualify, but I'm not a lawyer.

I would tend to go with if they say they're selling at a loss they probably are selling at a loss, and for whatever reason the BOM or the manufacturing cost or the shipping cost is higher than people here are projecting.

Defitinitely accounting is a complicated thing.
I can see R&D and Marketing expanses being on a separate budget, especially as R&D efforts start quiet a while before launch, internally the project budget has to be known, provisioned and so on.

Though I wonder if running the first batch of hardware and the matching tests, then ramping up the production lines, etc. would qualify as production costs from an accountant pov as such the costs of the first millions of device would be higher than the expected BOM of the product after a few months. In the case of Nintendo could it be that they are going to spread those expanses on every devices sold till the end of the Japan fiscal year? It could make sense to me.

 

[MrFox]

The Yen is still strong, while US and Europe economy turned to crap. Maybe it contributes to the problem (if the WiiU is made in Japan). Whatever they export makes less money?

 

[tongue_of_colicab]

But it's not (in all likelyhood). Exchange rates will probably hurt on units sales. High yen means they will get less yen's from their EU/US sales. Than again, A strong yen will also mean they have to pay less yen's when they buy their parts and put everything together as a strong yen means they will have to pay less of whatever currency they have to pay to their partners thus bringing down costs.

 

[Exophase]

They could probably curb a lot of exchange rate risk (not to mention the cost of the exchange itself) by keeping large cash supplies in different currencies. No need to exchange all their sales dollars to yen if they can use some of those dollars to pay their American suppliers directly.

 

[haihoo]

The Wii U has enough power to show beautiful graphics. Look at Assassins Creed 3. The first Wii U games even if rushed ports, are on par with PS360 versions that use highly optimized engines that utilize every inch of power these consoles have.

If the engines for Wii U get more optimized they will show even better results. The launch games of the Wii U are based on Xbox360 code (even ZombiU started as a Xbox360 game) and are made and plannend for early Wii U dev kits that has been less powerful than the final dev-kits/wii u. As some devs said it is very easy to port Xbox360 code to Wii U, but of course this code only use a small part of the Wii Us power.

It would need lots of more power to differentiate graphics next gen substantially from this gens high end games like Assassins Creed 3. And following the recent rumors about PS4 and Xbox3 ... they honestly don't seem much more powerful than Wii U. If the new action game from Retro (Metroid Prime series) and the new RPG from Monolith (Xenoblade) or Bayonetta 2 from Platinum Games or even the next 3D Mario appears for Wii U they will show beautiful graphics and this (and third party games like CoD or FIFA) will be enough for most gamers.

The Wii U will be the PS2 of the new console generation. The PS2 dominated its gen nonetheless Gamecube and Xbox1 had better hardware. As in every generation the cheapest console dominated the other. Only the last generation was an exception, because the Wii had worse graphics than PS360, and that was clearly visible to every gamer. But even if PS4/Xbox3 had the power of todays high end PCs the graphical leap over Wii U would only small compared to Wii -> PS360, one reason of this was the SD graphic of the Wii compared to the much higher resolution of PS360 games.

But of course PS4/XBox3 don't have the power of expensive PCs, not even nearly that power. Consoles are not about high tech hardware anymore, because Microsoft and Sony lost billions of dollar with PS3 and Xbox360.

 

[AlphaWolf]

But of course PS4/XBox3 don't have the power of expensive PCs, not even nearly that power. Consoles are not about high tech hardware anymore, because Microsoft and Sony lost billions of dollar with PS3 and Xbox360.

Having the power of a high end PC isn't relevant because no developer is aiming at that, and MS is probably in the black on the 360. It has been clearly profitable for several years.

 

[Rurouni]

The Wii U has enough power to show beautiful graphics. Look at Assassins Creed 3. The first Wii U games even if rushed ports, are on par with PS360 versions that use highly optimized engines that utilize every inch of power these consoles have.

The problem with Wii U hardware is that exactly the one you described... Ports only on par (and most ports even a bit bellow) with PS360. I don't know why there are people giving a pass on Nintendo for doing this, but I don't remember where a next gen console can't easily outperform last gen console. Even PS3, which is very hard to code earlier in its life, easily outperform PS2.
Wii U first party games aren't really better graphically compared to PS360 and those games weren't ports.

If I have a tiny influence on Wii U hardware, I would suggest upping the power budget (around 70 to 100w). It doesn't need to change the hardware, just push the speed of the components more aggressively (especially in the CPU and RAM departments). Basically my target is to make sure that Wii U games are better graphically than PS360 from day 1.

 

[Gerry]

The Wii U has enough power to show beautiful graphics.

You should have stopped there. Everything after that perfectly reasonable comment was nonsense.

 

[Shifty Geezer]

The Wii U has enough power to show beautiful graphics. Look at Assassins Creed 3. The first Wii U games even if rushed ports, are on par with PS360 versions that use highly optimized engines that utilize every inch of power these consoles have.

The Wii U will be the PS2 of the new console generation. The PS2 dominated its gen nonetheless Gamecube and Xbox1 had better hardware.

You're living in denial here. Given what we're hearing about the likely hardware for Durango and Orbis, Wii U will not be comparable in the same way PS2 was to XBox. It'll be Dreamcast to Xbox, if you're lucky. We're talking <40 watts draw, versus maybe 200 for Durango/Orbis. We're talking probably 300+ mm^2 (maybe up 500 mm^2 total like this gen) of higher density chip area versus <200 mm^2 of Wuu, at higher clocks. Far more bandwidth in next-gen hardware.

Honestly, if you don't want to understand the tech, that's your prerogative, but blind, unsubstantiated faith that ignores all the reams of discussion thus far don't sit well in a B3D tech thread.

 

[Mobius1aic]

Basically my target is to make sure that Wii U games are better graphically than PS360 from day 1.

But when your closest competitions CPU can output 5x the GFLOPS (Xenon), you've got an issue that needs addressing, because surely there are going to be titles that you could never dream of seeing. 'Need those GFLOPS like IPC.