Nintendo NX is now Switch (Official thread) (1 Viewer)

[LeoA]

Tempted to get a second Wii U for a spare...

I'm wondering if the NX will have some backward compatibility with Wii U, more in the Virtual Console sense. Wii games started to appear on the Wii U eShop and the NX supposedly has a touchscreen controller,

What great Wii U games really need a touch screen or a 2nd display in general?

You can port stuff like Super Mario 3D World over just fine and it's easy to envision touch screen course creation in Super Mario Maker, perhaps its greatest strength, being restricted to handheld mode with little issue. Heck, how often on the Wii U version did you even look up to your tv when crafting a course?

And I imagine a Virtual Console license transfer program will be in place, allowing you to link your 3DS/Wii U accounts in order to upgrade Wii U and 3DS Virtual Console downloads to their new NX versions for $1-$2, Wii > Wii U style.

so maybe there's a way to play on the controller and the TV at the same time, thus letting Wii U games be ported up?

Assuming that this is the combined handheld and console that we're all expecting and been led on to believe is happening, I really doubt that we'll be using the touch screen when playing in console mode.

Unless Nintendo actually envisions us having a HDMI cable coming out of this unit when playing it in console mode or has a wireless solution to stream that data to a dock that's physically connected to your HDTV, the screen with all the significant guts of the system has to be docked.

And since wireless controller signals are a lot less expensive and efficient than a wireless 1080p video/audio stream and their previous attempt to "revolutionize" the console world with a gamepad touch screen was such a massive commercial failure, why would they want to do that for?

If the Wii U did anything, it showed that console gaming didn't greatly benefit from the incorporation of a touch screen into the controller for a second display. No coincidence that virtually all of the Wii U's best games could be enjoyed with a Wii U Pro Controller, sans touch screen.

If so, then fine, kill the Wii U.

It's going, regardless.

Was a failure and isn't making money. Its mission at Nintendo for quite sometime now has been to appease existing Wii U owners and keep some semblance of life in it until it could be replaced at the earliest reasonable moment.

Will be dropped quicker than Microsoft did with the original Xbox, although I hope Nintendo will keep some accessories stocked for a time and hopefully continue the Selects program through 2017.

 

[Morgan Jolley]

Well, there's still the old rumors about an HDMI dongle to connect the handheld to a TV. I wouldn't be too surprised if NX is actually a powerful console and a sort-of-powerful handheld that both play the exact same cartridge games, but the handheld lets you play things on a TV using the dongle. If that's the case, then I could see them supporting a Wii U-style mode.

Sure, most of the great Wii U games worked on just the TV or just the tablet or with only a Pro controller, but some of the really unique and exclusive games made great use of the touch screen. Pikmin 4 and Wonderful 101 come to mind.

I think the Wii U, overall, actually did turn a slight profit for Nintendo, since every unit was sold at a loss that was recouped once one game was sold with it. And considering how well Super Mario Maker, Smash Bros., and Splatoon sold, they made money on it. They probably turned a profit, just not a Wii-sized one.

 

[LeoA]

I never played Wonderful 101, but even Pikmin 3 is an example of what I mean.

The Wiimote controls from the two Wii ports were excellent there, although losing the map kept me using the gamepad instead of my preference. But all i'd of needed was a way to bring that map up on screen whenever I needed to reference it and I'd of been there. But the option didn't seem to exist for some bizarre reason.

The Wii U project surely didn't turn a profit. I do believe that Nintendo was able in short order to quickly recoup direct manufacturing cost for each system sold, since I clearly recall it officially being stated very early in life that it only took 1 game sale to eliminate that deficit.

But a lot more is involved here than just direct manufacturing costs for each system sold that has to go to your component vendors, the factory assembling each unit, etc. After all, those huge losses throughout the Wii U generation were coming from somewhere.

So it's clear that this thing didn't pay for itself such as recouping the hundreds of millions in research and development expenditures, advertising budgets, staff salaries for the thousands of employees involved in the Wii U project at some level, etc.

Either way, it's been a fun ride and I'll be enjoying this system for years to come. Was happily my first console of this generation and remains the only one of the three in my home to this day, with quite a few games left that I want to experience.

 

[Morgan Jolley]

Using the Wii Remote + GamePad in Pikmin 3 was the best way to play it, honestly. I'm not justifying the price of the whole setup for that one game, but that one game made it work really well.

The Wii U was, overall, profitable. Even if it was $1 in profit, it was still profitable. It has a pretty decent software attach rate and they have been selling the console at a per-unit profit since like 2014. It wasn't a runaway success, but they didn't lose money on it. However, the cost of cutting the 3DS' price right after launch and a few quarters of slower-than-expected sales (games and hardware) along with shifting exchange rates between dollars and yen have impacted their financial reports over the last few years.

The stuff you mention (components, putting the hardware together, shipping the units around) are the per-unit cost that Nintendo is profiting on for each unit sold.

I'm also not sure Nintendo spent hundreds of millions on R&D for the Wii U. Do you have a source on their expenditures?

 

[LeoA]

Just open up an annual report, Morgan. 500 million USD a year for Nintendo is not at all unusual for R&D cost. Did you really think it wasn't in the hundreds of millions? Go look at what MS spent just to advertise the launch of Kinect 1.0, and we're talking just marketing. It's an expensive business.

While Nintendo hasn't made me privy to the full breakdown of where each cent went to for R&D, it seems quite safe to say that the Wii U's direct share of that pie from the official initiation of the project around the launch of the original Wii to the conclusion of it in the near future, is well into the hundreds of millions. And millions more in indirect benefits from work from other unrelated R&D projects that were able to be leveraged for this project. And we're only talking R&D costs...

Wii U was not profitable. Go look at Nintendo's finances. There's zero evidence to believe that Wii U wasn't a driving force behind Nintendo's record losses of this generation. What's your source anyways for such a peculiar thought when taken in context with Nintendo's financial woes of recent years and Wii U's miserable sales performance?

I can't believe we're even having this argument. Do you really think Nintendo is going to keep the Wii U an active concern after 2016 with hardware kept stocked at retail, new game development, etc? You're in for a disappointment since I'm not even sure more Selects rereleases of titles like Mario Kart 8 are guaranteed for 2017.

Wii U is going to be on life support after Zelda U launches and the NX hits store shelves.

 

[Morgan Jolley]

There's no firm number on the R&D spent on Wii U. Yes, they spend hundreds of millions on R&D, but what of that money was on Wii U, 3DS, New 3DS, NX, games, or other pieces of hardware that will never see the light of day? We don't know. For that reason, its a bit hard to pin down the exact cost of the Wii U to Nintendo and what amount they would need to recoup on it. And yet, they're turning profits.

If Nintendo was selling the Wii U at a loss but turned a profit once one game was sold with each Wii U, and their attach ratio is about 7 games per 1 Wii U, then you're looking at a profitable system. At 13 million Wii Us and over 70 million games, that's a substantial profit, especially considering the top sellers (Mario Kart 8, Smash Bros., Splatoon, Super Mario Maker) are first party titles. The top 16 selling games on Wii U were all made by Nintendo and sold more than 1 million copies, adding up to nearly 50 million units.

Like I said, a profit of $1 is still a profit. Nintendo's huge losses were incurred before Wii U hit the market, likely due to the delay between the release of the Wii (2006) and Wii U (2012). Look at their 2012 and 2013 reports when they weren't making much on the Wii or 3DS and the Yen-to-Dollar exchange rate was hurting them. The Wii U came out in fall of 2012, so the first report that would really include it is the March 2013 report, but only barely. That report had a loss of $457M, 2014 had a loss of $456M, 2015 had a profit of $208M, 2016 had $149M. But in the middle of all of those numbers are $500M or so PER YEAR in R&D costs that are not related to the Wii U. Remove the R&D (which would be considered costs for developing NX or something else entirely) and they're not doing too bad.

Nintendo, with all those losses, still has more cash on hand than Sony or Microsoft's gaming divisions. One main factor is that they sell their hardware at break-even or a profit.

I never said Nintendo was going to support the Wii U in the future, and I'm not arguing that. I'm just arguing that the system did technically turn a profit, even if it was a big disappointment. They kind of abandon their consoles once the new ones come out, and have done so for many generations. I expect nothing different here.

 

[LeoA]

There's no firm number on the R&D spent on Wii U.

Wii U has been a major component of Nintendo's business. How can you honestly debate that when they're spending half a billion dollars in research & development each year, that very little of it in actuality has gone into the Wii U project through the years?

Where do you think it all went to?

If Nintendo was selling the Wii U at a loss but turned a profit once one game was sold with each Wii U, and their attach ratio is about 7 games per 1 Wii U, then you're looking at a profitable system.

I already explained to you that what you've been going on about is direct cost. Nintendo at launch was subsidizing the direct cost of a Wii U, but only slightly where just the sale of one game to a customer earned enough in profit to make up for the subsidy.

But what's going over your head here is that we're talking about the price for a single Wii U. Nothing outside of the cost Nintendo paid for each specific component was being factored in. No accounting for marketing expenses, research & development, or even the president's salary was being factored in.

it was simply the price out of Nintendo's pocket to have that specific system produced. What 1 GPU cost Nintendo, what 1 plastic system shell cost Nintendo, what the USB ports cost Nintendo, etc. We're talking the difference Nintendo paid to produce 101 Wii U's compared to 100 Wii U's. But you can't ignore what it cost to be able to produce those 101 Wii U's in the first place.

Capital expenses and so on were not part of the equation. So just because Nintendo was likely not taking a loss on each system sold in short order doesn't mean other expenses suddenly just disappeared.

The Wii U came out in fall of 2012, so the first report that would really include it is the March 2013 report, but only barely. That report had a loss of $457M, 2014 had a loss of $456M, 2015 had a profit of $208M, 2016 had $149M. But in the middle of all of those numbers are $500M or so PER YEAR in R&D costs that are not related to the Wii U. Remove the R&D (which would be considered costs for developing NX or something else entirely) and they're not doing too bad.

So you think R&D cost is meaningless for the Wii U and it's impact on Nintendo's financials, yet suddenly it's an important consideration to keep in mind since they're now investing in the future past the Wii U and R&D expenses can't be attributed to a significant degree to the soon to be dead Wii U project?

Can't have it both ways.

Nintendo, with all those losses, still has more cash on hand than Sony or Microsoft's gaming divisions.

I've told you this before, but you're fabricating this one and never opened an annual report. That's because neither of those corporations organizes their financial reports in such a way that you could ever make this determination.

They're corporate-wide figures, not division specific. Just how did you figure out what proportion of each dollar from that category in their financial data for each of these diversified companies, was allotted for use by the division at each that holds the responsibility for videogaming?

You have no way to tell what resources Sony and Microsoft's gaming divisions have available to them, so please stop repeating this as if it were fact.

I never said Nintendo was going to support the Wii U in the future, and I'm not arguing that.

Actually, you said something like if the NX includes a gamepad with a touch screen for tv play, then it was fine to kill the Wii U. Then I replied that the Wii U was going either way since it wasn't a success and Nintendo had no incentive to stick with it past the launch of the NX, and you proceeded to start arguing with that.

So it seemed fair to assume that you were attempting to claim that the Wii U in actuality was a success and wasn't near death, presumably set to continue for a good time yet.

If you weren't arguing, what was the point?

I'm just arguing that the system did technically turn a profit, even if it was a big disappointment.

Nintendo lost billions.

2012 for instance was 5.32 billion when they were in the midst of preparing for the Wii U launch and struggling with the 3DS as you said, 2013 was 366 million, and 2014 was 456 million. Operating income of $207.83 million for the 2015 fiscal year and $149 million for 2016 hardly makes up for things or turns the Wii U project into the black.

And at least for 2015 since I haven't read their 2016 annual report, they basically said that they did better due to the depreciation of the yen that helped their cause when over 70% of their business is overseas, helping them turn a profit compared to the year before despite a decline in sales.

If either one of us was even in a position to calculate every dollar Nintendo spent on the Wii U and every dollar the Wii U has brought into the company, I really doubt it's earned a buck. 3DS was more successful yet the company has lost billions, and not just during the fiscal year where the 3DS fizzled out shortly after launch, requiring emergency surgery to save.

If Wii U was also profitable, however slightly, these huge losses shouldn't of been there.

 

[Morgan Jolley]

There's no way to know how much of the R&D cost was exclusively the Wii U, so there's no way to say how much was lost. They were working on the DS, Wii, 3DS, Wii U, New 3DS, NX, amiibo, hardware that never got released, the QoL stuff, and a whole bunch of games in the same 10ish year period. Even if you say 1/3 of the R&D costs between Wii and Wii U release (actually less time than that, since the Wii U R&D would be done before mass production, likely 6 months to a year ahead of release) was spent on the Wii U, then you're still looking at much less than billions. Hundreds of millions? Possibly, probably, maybe my dismissal of that number was off. But they still did earn a good chunk of money back on the Wii U, and I contend it was profitable. Saying, "They lost billions," while providing numbers without context doesn't mean it was from the Wii U.

Look at how much money Nintendo earned from 2006 onward. The Wii was a MASSIVE success. If Nintendo lost money after it, it's likely because they took 2 years too long to follow it up, not because the follow up was THAT BAD. The Wii U, up until about a week ago, had sold more units in Japan than the PS4. Amiibo sold incredibly well. Their games still sell exceedingly well, especially Pokemon and Mario. I can see mismanagement and a poor economy (remember the collapse of 2009?) affecting their bottom line for years more than the lack of sales of hardware, especially in the face of surprisingly good sales of software.

I think you misinterpret my "fine, kill the Wii U" comment. I meant more that its fine to stop making the hardware if Virtual Console ports will still let people play the games, not that it is finally reaching a point where it sold so poorly that Nintendo should kill it or something. And I never disagreed that they wouldn't end it, or that they shouldn't end it because not enough people played it. If you interpreted my comment to mean more than it did, that's on you.

 

[LeoA]

Of course there's no way to know how much of the R&D cost was exclusively attributable to the Wii U project. But I also never pretended to know.

That said when they're investing half a billion dollars a year into that line item on their balance sheet, it hardly seems to be a leap to suggest that hundreds of millions went into the Wii U project during its lifetime, which most would suggest started the Monday after the Wii launched since they always have people working towards the future. That's what you objected to me saying and what I found so utterly bizarre.

The key though is that R&D is just one expense of many that you weren't taking into account with your gross oversimplification about how the economics play out here where profit and loss are concerned. If not selling a system at a loss was the magic formula to profits here, we'd never see anyone do so. Yet it has been done quite a few times, often successfully.

And Wii was a great success for 3 years or so, but look at the millions that they were losing even before it was replaced at just 1 year later than the 5 year norm. And even if the economy was a major issue here, they still failed at creating long-term success with the Wii and the struggles with the 3DS and Wii U. I didn't see massive losses posted by Microsoft's gaming division during this period , after all.

And Wii U outselling the PS4 in Japan, while nice sounding, is sadly all but meaningless today. The console market has been decimated in Japan in recent years. For instance of a fact that while unscientific, says a lot about the decline here, Nintendo managed to sell 12.75 million Wii's in Japan. That's a market that it died out in first and which never even saw any of the system revisions released there. And that was with a fairly healthy performance from the PS3 and a long life with the PS2 well into that generation.

Yet today, the Wii U which you said was leading the current gen race until very recently there, has managed less than 3.25 million at home as it reaches its 4th anniversary and the end of its reign as Nintendo's premier home console hardware.

For a company that does well over 70% of its business outside of Japan and given the decline in the console market there, Japan is a poor barometer of their success or lack of it in some regards, today.

 

[laser]

I'm not sure you understand how Nintendo's R&D works. When they greenlight development of something, a console, a game, an accessory, they don't open up a new, temporary division to do it. All components of Nintendo all always working on something. The first thing the Mario team does after finishing a Mario game is work on the next Mario game. Same for the Zelda team, the Smash team, the Splatoon team, and yes, the hardware team. Sometimes they bring in outside studios and license technology, but the vast majority of their R&D is done in-house by the same employees that they always use.

Sometimes they have large one-off costs like their new R&D building (and sometimes large one-off PROFITS like the recent sale of the Seattle Mariners), but they don't have sudden spikes in R&D costs (though the increasing complexity of games and hardware is making costs rise industry wide) or massive marketing campaigns (Nintendo is the least flashy/bombastic of the major video game corporations, which comes from a conservative Japanese mindset), so the only parts of their financial reports you need to be concerned about are the sales figures and the exchange rate. And you can see from those that after the Wii/DS craze ended and the Wii U/3DS debacle began, there was a downturn, but the situation has since improved. All of this has been reflected in the stock price:

In any case, they have billions of dollars cash-on-hand and negligible debt, so they can weather a few more of these downturns...though the board of directors may get a thrashing.

 

[LeoA]

I'm not sure what it has to do with the debate at hand, but Nintendo does not open up a new division every single time they start a new project. They only have around 20 subsidiaries and most of those have been around for many years.

Regardless, the entire point was attempting to communicate to Morgan that in order to make a system profitable, it doesn't just need to be sold at a price greater than the direct cost to Nintendo to produce that single unit.

You revenue has to be greater than all your expenses. Everything that Nintendo spends money on needs to be covered, from paying people to maintain the grounds at their headquarters and other facilities right up to paying the executives, and everything in-between. The Wii U project even needs to be responsible for covering its share of the price to pay people to sweep the floors. So regardless of how much of the R&D budget went into Wii U projects, it's still an investment that has to be recouped.

If you're able to sell the system at a price higher than it cost to pay vendors like AMD for the specific components that went inside that specific system, cool. But it hardly means anything when we're talking profitability since the financial picture is far more complicated than that simplistic approach.

And while Nintendo has been crawling back, being in the black recently doesn't suddenly mean that Nintendo has actually made money on the Wii U project as a whole.

 

[Morgan Jolley]

MS didn't turn a profit on the entire Xbox enterprise until several years into the 360 being out, and then suffered a huge loss when they admitted the 360 RRoD issue was their fault and started fixing consoles for free. I'd wager their Xbox profits are probably still not that huge but the potential is why the unit still exists.

The Wii U made money through software sales. Roughly 70 million discs have been sold on it, an overwhelming majority of which were made by Nintendo themselves. On a $60 game, since they develop/publish on their own platform, they're probably walking away with $40+ in income. That means revenue on just their games alone of about $2 billion. Yes, that's minus the development/marketing costs and everything, but that's still a huge chunk of money. Add in the success of amiibo, add in the income from games they didn't develop, and remove that roughly $500M per year in R&D on things that weren't Wii U and you're looking at a profit.

If they sunk $1B into the Wii U and only got revenue of $1,000,000,001, that's still a profit.

The 3DS is doing well. Not better-than-DS well, but well. The initial struggles (price, 3D gimmick, getting people to put down their DS and buy a 3DS) have kind of been dealt with.

 

[laser]

You revenue has to be greater than all your expenses. Everything that Nintendo spends money on needs to be covered, from paying people to maintain the grounds at their headquarters and other facilities right up to paying the executives, and everything in-between. The Wii U project even needs to be responsible for covering its share of the price to pay people to sweep the floors. So regardless of how much of the R&D budget went into Wii U projects, it's still an investment that has to be recouped.

If you read their financial reports, you'll see that R&D is their greatest expense by leaps and bounds. Stuff like property maintainance and executive salaries are a relative drop in the bucket. Memorabilia licensing alone probably covers that stuff.

Further to your point about profit margins on hardware, Nintendo depends on it more because they have fewer revenue streams than the other major video game corporations, therefore fewer safety nets. No online subscriptions, no PC division, no home theater division, no film division, no oodles of annual cash cow franchises, no lucrative partnerships.

 

[LeoA]

Laser, when did they slash the marketing budget? Used to be spending half a billion a year there, too. Surprised to hear it's virtually nothing these days. But if it works, great.

MS didn't turn a profit on the entire Xbox enterprise until several years into the 360 being out, and then suffered a huge loss when they admitted the 360 RRoD issue was their fault and started fixing consoles for free. I'd wager their Xbox profits are probably still not that huge but the potential is why the unit still exists..

The RROD fiasco and fix happened very early in life for the 360. They did not start to earn profits and then encountered issues, like you said. The profits came afterwards.

The Xbox division started to be profitable on an annual basis back in 2007/2008 and has been consistently in the black ever since. The losses of the early Xbox days (Which often weren't all that great despite the media hype, with at least one quarter pre-360 turning a profit just due to the launch of a single hit game) and the first couple of years of the 360 are long behind them.

As for the rest, just open a Microsoft annual report. Profit for the Xbox portion of Microsoft's business in their 2015 annual report is 1.78 billion for an example. To help put that in perspective, Nintendo's total revenue for 2015 was only 4.81 billion. And we're talking about what seems to have been considered a disappointing year for the Xbox there, with revenue and profits presumably well below what Microsoft had planned for.

So certainly not small where this industry is concerned, although I imagine that when we're talking 40% of their business being represented by the de facto Xbox division, profit is still not where Redmond wants it to be by Microsoft standards.

The Wii U made money through software sales. Roughly 70 million discs have been sold on it, an overwhelming majority of which were made by Nintendo themselves. On a $60 game, since they develop/publish on their own platform, they're probably walking away with $40+ in income. That means revenue on just their games alone of about $2 billion. Yes, that's minus the development/marketing costs and everything, but that's still a huge chunk of money. Add in the success of amiibo, add in the income from games they didn't develop, and remove that roughly $500M per year in R&D on things that weren't Wii U and you're looking at a profit.

If they sunk $1B into the Wii U and only got revenue of $1,000,000,001, that's still a profit.

The 3DS is doing well. Not better-than-DS well, but well. The initial struggles (price, 3D gimmick, getting people to put down their DS and buy a 3DS) have kind of been dealt with.

I've had enough probablys and guesses in this thread for a lifetime. I can see the numbers in their annual report that state in b&w their overall performance in a variety of categories, but don't see much sense in trying to twist those around.

Nintendo lost money this generation and regardless why, it makes their sales performance this generation for this pillar of this industry a disappointment and why as I said earlier, they won't be prolonging it like you were appearing to imply when you chose to argue when I said that Nintendo would be dropping this system at the earliest opportunity.

They were losing the war this generation by almost any measure. So even if they had some small scale victory with the Wii U by heavily massaging the numbers, it still failed. A successful handheld and console should've created consistent profits for Nintendo, covered the expenses associated with the preparation work for their eventual successors, gotten them through rough stretches due to factors outside their control like inflation, built up their bank account after the heavy drain that's associated with launches, etc.

Yet if you add up the profits and losses since the 3DS and Wii U launched, they've lost money and have drained nearly half of their ready assets represented by the cash & deposits line item on their balance sheets, down from the 9-10 billion it consistently hovered at after the Wii and DS established themselves.

All Nintendo did this generation is experience disaster and then managing to stop the bleeding, and leaving a legacy of too many good games that didn't sell in the numbers that were deserved.

 

[laser]

When did they slash the marketing budget? Used to be spending half a billion a year there, too. Surprised to hear it's virtually nothing these days. But if it works, great.

I apologize for not double-checking the numbers. Nintendo does not have anywhere near the level of advertising presence as pretty much any other major electronics company, and leverages social media and word of mouth greatly, so I wrongly assumed that the advertising budget was small. Do you have any idea where it's going? Because here in Canada, I don't see much more than the obligatory retailer launch promotions and a scant few late night TV ads...

They were losing the war this generation by almost any measure. So even if they had some small scale victory with the Wii U by heavily massaging the numbers, it still failed. A successful handheld and console should've created consistent profits for Nintendo, covered the expenses associated with the preparation work for their eventual successors, gotten them through rough stretches due to factors outside their control like inflation, built up their ban account after the heavy drain that happens associated with launches, etc.

Nobody's saying it was a success. But they did the absolute best they could with a terrible situation. The 3DS price cut followed by a strong software lineup stabilized it. And the Wii U's attach rate plus not cutting the price kept the figures just tolerable. Amiibo also helped a little bit.

Yet if you add up the profits and losses since the 3DS and Wii U launched, they've lost money and have drained nearly half of their ready assets represented by the cash & deposits line item on their balance sheets from the 9-10 billion it consistently hovered at after the Wii and DS established themselves.

Cash and deposits have increased by 1 billion USD since the end of FY 2011. But it dropped by 3.4 billion USD in just that one year. The Wii craze dropped off FAST, and it looks like they weren't prepared at all.

 

[LeoA]

I don't know, either. I assume that they're largely targeting children. So since my idea of entertaining television for example is watching a 1940's B&W movie on Turner Classic Movies, I'm just not exposed to what they're spending money on.

So something like the 412 million that they invested here in 2016, down from previous years such as 2012's 910 billion (Which btw was over a quarter of a billion more than that year's R&D expenditure) and which was one way that they stayed profitable last year despite sales declines, largely goes unnoticed by me.

Shouldn't come as much of a surprise though in an era where AAA games are well known to have marketing budgets at times of well past 100 million dollars for a single game, far exceeding the development cost in some instances (Like Modern Warfare 2's well publicized 200 million dollar marketing campaign).

And cash and deposits have not increased by 1 billion since the 2011 fiscal year. Quite the opposite in fact. Cash and deposits reflect their struggles well, I feel.

Nintendo's cash and deposits:
2002: 7.2 billion USD
2003: 6.2 billion USD
2004: 6.9 billion USD
2005: 7.4 billion USD
2006: 5.3 billion USD
2007: 5.8 billion USD
2008: 9.0 billion USD
2009: 7.7 billion USD
2010: 9.5 billion USD
2011: 9.8 billion USD
2012: 5.6 billion USD
2013: 5.1 billion USD
2014: 4.7 billion USD
2015: 4.5 billion USD
2016: 5.0 billion USD

Note the drops when they've entered the next generation of hardware and how over the subsequent years, they traditionally recover that and build back up their reserves. Then note the results from the past few years and how it hasn't recovered significantly this generation. In fact, this line item only continued to decline until 2016.

They're certainly not starved for resources, but this thought that some have that Nintendo's bank account has no limit isn't really accurate. It's amazing the movement that can happen here in such a short time, such as the over 4 billion drop back around the 3DS launch and latter stages of Wii U development. A 5 billion dollar reserve could seem awfully small in an awful short time if the NX struggles early on like the 3DS did or just doesn't ever take off and become a hit, like the Wii U did.

It's a good thing that they at least were able to stabilize themselves, since it could be looking pretty barren today and they need this resource if they're going to succeed with the NX.

They won't succeed by pinching pennies, after all.

 

[Morgan Jolley]

Regarding the RRoD for 360, the decision to spend $1B repairing consoles was made in May 2007. They expected to turn a profit in 2007 (I thought they did before announcing the RRoD fix) but that was pushed back. The Xbox One has also been a pretty big loss for them, since each unit is sold at a loss and they aren't doing so well (less than 1/2 of what PS4 sold).

And just to repeat, I never said I wanted Nintendo to extend the life of the Wii U. I never said I hoped they would. You misinterpreted what I said.

Let's not forget that there was a worldwide economic collapse in 2009 and an earthquake/tsunami that rocked Japan just a few years later. Their assets took a hit due to both situations, as did many Japanese companies. That's why I'm trying to look squarely at the costs of the Wii U and not the entire company's situation. Was the Wii U a disappointment? Absolutely, and nobody has disagreed. I just am arguing that the sum total of R&D, manufacturing, and hardware/software revenue for the Wii U are probably a net profit, even if it's a very tiny one that is dwarfed out by other operating costs or losses.

 

[LeoA]

Regarding the RRoD for 360, the decision to spend $1B repairing consoles was made in May 2007. They expected to turn a profit in 2007 (I thought they did before announcing the RRoD fix) but that was pushed back.

Then even those seemingly huge expenses didn't hold the 360 from being profitable shortly afterwards, since at a quick glance just now, 2007 was the first quarterly profits of the 360 era and 2008 was when the tide turned for the Xbox division with its first full fiscal year of profitability.

The Xbox One has also been a pretty big loss for them, since each unit is sold at a loss and they aren't doing so well (less than 1/2 of what PS4 sold)..

It is undeniably profitable as shown in their annual reports. I don't know if they're subsidizing the hardware or not, but it's a moot point since as I've tried to pound into your brain, the secret to a profitable platform doesn't begin and end with the system covering its direct manufacturing cost. If it did, nobody would ever price their hardware below cost.

Selling a console is just a means to an end, with the primary goal being to get it into as many homes as is economically reasonable (i.e., you can't just give them away). The real profits lay in game sales, online subscriptions, licensing fees, etc.

And just to repeat, I never said I wanted Nintendo to extend the life of the Wii U. I never said I hoped they would. You misinterpreted what I said.

If I misinterpreted what you said, what exactly was your original point? You quite clearly wanted to disagree when I said that the Wii U failed and was going at the earliest possible chance, regardless of exactly what form the NX takes.

Let's not forget that there was a worldwide economic collapse in 2009 and an earthquake/tsunami that rocked Japan just a few years later. Their assets took a hit due to both situations, as did many Japanese companies. That's why I'm trying to look squarely at the costs of the Wii U and not the entire company's situation. Was the Wii U a disappointment? Absolutely, and nobody has disagreed. I just am arguing that the sum total of R&D, manufacturing, and hardware/software revenue for the Wii U are probably a net profit, even if it's a very tiny one that is dwarfed out by other operating costs or losses.

You don't have the data to isolate numbers to just the Wii U alone. It's a fools errand to even try. Even Nintendo would struggle to manage the job to identify every cent spent on the Wii U and compare it to every cent earned. Like an engineer that's bounces back and forth from 3DS and Wii U projects. Do you have him log his time so you can precisely attribute what projects his salary went to? Nintendo is too big of a company to track data such precisely, so you can hardly make a halfway decent guess at it.

And losses are losses. If some extraordinary events occurred during the same period that the 3DS/Wii U appeared, they're still losses. It's like me trying to argue that the Atari 5200 wasn't a failure since an extraordinary market event went on that saw the console industry almost go extinct. At the end of the day, that's the environment that the system faced, its lifespan was still a few mere months, it barely sold 1 million units, etc. Spinning its failure into anything else is just misrepresenting what happened back in the early 1980's.

It's nice that they're showing modest profitability in the past two fiscal years, but that's all it is. Like I said earlier, you can't just ignore the losses yet count the profits. It's all connected and you have to take them both. Nintendo's losses for the first few years of this generation are posted a few posts back and can be checked via their online annual reports at their own website.

They're facts that the 3DS/Wii U generation over all hasn't made Nintendo money. Even if you could successfully argue that the Wii U in isolation did ultimately make a buck, what does it even prove? Nintendo during its life was still racking up losses this generation with only modest profits shown later on, it sold significantly worse than Nintendo's previous worst performer, etc.

You still end up with a system that Nintendo has no incentive to prolong.

 

[Morgan Jolley]

The Xbox One has sold about 20 million consoles in nearly 3 years. Considering the immense amount of money sunk into advertising, game development, etc. on top of R&D and manufacturing, they haven't really done well. I don't know if we can see only the costs of the Xbox/gaming division from MS' financial reports, but everything I've seen doesn't look rosy. Nintendo is in a better position overall, in some ways, because they have the 3DS doing well (not super amazing, but well), amiibo is a hit, and the majority of Wii U software sales were for Nintendo's own games. Microsoft has a few 1st and 2nd party games on Xbox One, but they're not as numerous or selling the same volume as Nintendo has on Wii U, even with fewer consoles (at a lower loss) sold. MS does make a good chunk of money on Xbox Live subscriptions, which is why they no longer report hardware sales and instead focus on XBL.

I already commented on my original Wii U comment. I was saying something along the lines of, "Porting the Wii U's hits to the NX so that gamers can still try them without tracking down a Wii U means its fine for them to kill the Wii U now or soon." This is the quote of what I originally said, in context:

"I'm wondering if the NX will have some backward compatibility with Wii U, more in the Virtual Console sense. Wii games started to appear on the Wii U eShop and the NX supposedly has a touchscreen controller, so maybe there's a way to play on the controller and the TV at the same time, thus letting Wii U games be ported up? If so, then fine, kill the Wii U."

So you've gone from "the Wii U incurred huge losses for Nintendo" to "there's absolutely no way to tell where all the money went and its a fools errand to try" and "losses are losses, regardless of where they came from." What I'm saying is that you can't say the Wii U created massive losses if you're unwilling/unable to actually identify the specific costs and revenues associated with the Wii U. If the Wii U had been a huge success but exchange rates killed their profits, you wouldn't just say the Wii U failed, you'd take their financial situation in context.

We both agree that the Wii U was a big disappointment, didn't sell as well as they hoped, is their worst-selling console ever, and has not made them a lot of money. I'm just arguing that it did turn a profit, even if it didn't turn enough of a profit by itself to offset all of the other losses at the company, and I point to the low manufacturing loss combined with exceptionally high software revenue to offset the R&D and overhead expenses that were probably devoted to the Wii U. You're saying it didn't turn a profit because the company lost money overall, even if you can't prove that the money lost was due to the Wii U or other sources. If I sell gadgets and gizmos, my gizmos division profits $1B but my gadget division loses $1.5B, my operating losses are $500M. That doesn't mean my gizmo division lost money, it just means my company, overall, lost money. So you can't say my gizmos were an abject failure just because they didn't save my company.

Nintendo sold about 13M Wii Us and 50M units of 1st party software. The other 20M or so units of software are a mix of 1st and 3rd party games. Let's imagine that the revenue from the 20Mish games already offset the Wii U per-unit manufacturing losses, so the 50M 1st party game sales revenue is just money to pay for development costs of those games and then money right in their pockets. Each $60 game produces about $45 of revenue for Nintendo, meaning 50M games produces $2.3B roughly. That's a lot of money. And if you look back at Nintendo's comments on R&D spending, its actually less than the $500M number I mentioned earlier. In 2006, it was $103M. In 2007, it was $370M. After that it ramped up to about $500M per year. Keep in mind that this cost was split between Wii things (like MotionPlus), 3DS development, and Wii U development, on top of software for all of those.

 

[LeoA]

I don't know if the Xbox One has done well or not. But profits are there since that part is verifiable in their annual reports. As for Nintendo doing better, just look at Microsoft's "disappointing" profit showing for their gaming division in 2015 compared to Nintendo's entire 2015 revenue stream.

As for what you said, I actually agree about the contents of it.

There's probably plenty of Wii U's out there for the people who really want one.

I'm wondering if the NX will have some backward compatibility with Wii U, more in the Virtual Console sense. Wii games started to appear on the Wii U eShop and the NX supposedly has a touchscreen controller, so maybe there's a way to play on the controller and the TV at the same time, thus letting Wii U games be ported up? If so, then fine, kill the Wii U.

But what you're ignoring is that the entire issue happened after this post and my response to it. In reply to what I quoted, I stated that the Wii U was going regardless of the presence of a touch screen for tv use on the NX, since the Wii U failed and Nintendo had no incentive to continue it a moment longer than necessary.

You choose to then argue for reasons that you've yet to ever mention. If you weren't putting forth the argument that the Wii U was commercially successful to a degree, I'm not sure what the point was?

So you've gone from "the Wii U incurred huge losses for Nintendo

No. I just said that it didn't make money for Nintendo in the initial post that you so disagreed with.

The closest I said otherwise was that "after all, those huge losses throughout the Wii U generation were coming from somewhere." This is stating that the Wii U bears some responsibility for the billions in losses this generation for Nintendo as a corporation. Just what do you believe led to something like the ~5 billion loss back around 2012, for example?

You don't think that a solid portion of it could've been work to get software ready for the Wii U, get manufacturing lines setup, etc? What's your source for absolving the Wii U of partial responsibility for such a massive loss? Even just 20% responsibility still outweighs 2014/2015's small profits.

You're saying it didn't turn a profit because the company lost money overall, even if you can't prove that the money lost was due to the Wii U or other sources. .

As for the Wii U's success or lack of it, I feel like I've said my piece already.

If you want to think it might've actually been a success and even make adjustments from financial principles like dismissing currency exchange rates in order to paint a rosier picture, that's fine even though I don't agree.

As for me proving that it lost money, I'd argue that you have the greater burden to prove that it did make money given its well publicized lack of success and Nintendo's corporate-wide financial performance during its generation.

Yet you've done nothing of the sort since it's an impossible task for you to quantify since you have very limited information to work off. So it comes down to opinions and it's clear that we're going to have to agree to disagree here.