Loss-leading model quickly comes good for Nintendo
Reggie Fils-Aime has explained that the Wii U’s loss-leading business model turns a profit after just one game is sold for the system.
Speaking to the Mercury News, the NoA president was quick to point out that the company wasn’t making the bottom line sacrifices which some had thought it would by releasing its first console to be sold at a loss from launch.
“The business model doesn’t change dramatically, in that as soon as we get the consumer to buy one piece of software, then that entire transaction becomes profit positive,” Reggie said.
“In the end, the business model is still to drive the install base of hardware, and then to drive a strong tie ratio with all of the other software and experiences for the consumer. And if we’re able to do that, then we will create significant profit for the company.”
Details of Nintendo’s cut from third-party produced retail titles are not public knowledge, but it’s unlikely to be any higher than 30 per cent at most, suggesting that the loss margin on a new Wii U is minimal. With GameStop reporting that the attach rate for the Wii U is extremely healthy, at 2.4 per console sold, Nintendo is looking to recoup any console manufacturing losses extremely quickly.