Morgan Jolley
Senior HTF Member
- Joined
- Oct 16, 2000
- Messages
- 9,718
For 2012, Nintendo literally stated that the losses came primarily from a weak Yen, the 3DS launch price cut, and slow software sales at the end of the Wii's life. Keep in mind that the international economy was still reeling from the recession, too. Their expenses definitely included a lot of Wii U planning and early production, but they flat out said the top 3 reasons for the huge losses and the Wii U was not part of that. You can disagree about the value of exchange rates, but you're not a financial professional with an informed opinion on that matter. Whether you agree with it or not, it's what happened, continues to happen, and will always happen when it comes to large international corporations. It's not the ONLY thing that happens, but in the post-recession economy it was a big deal.
If Nintendo sells a game in the US for the standard $60 price but the exchange rate between the USD and the Yen is not in their favor, then their revenues will change, potentially dramatically. Instead of $60 per game X 5M units sold X 120 Y per USD = 36B Yen in revenue, they might be seeing $300M X 100 Y per USD = 30B Yen. In 2012, it was nearly 75 Y to the USD, whereas right now its roughly 100 Y to the USD, peaking in 2015 at about 125 Y to the USD. That means all Japanese companies who report earnings in Yen would have made less money from US sales in 2012 and more in 2015. If Nintendo made $100M in revenue in both 2012 vs. 2015, that's the equivalent of making 7.5B Yen (2012) or 12.5B Yen (2015) (a difference of 5B Yen, which is currently about $50M). Considering their losses in previous years were on the order of hundreds of millions and included other things, the added exchange rate losses make sense.
If you look at Sony, they also had some pretty significant losses in the 2009-2014 time frame. Some of that is attributed to PS4 development and launch, but some of it is also overseas exchange rate losses. I'm not sure we can really compare with Xbox, since most of the sales for Xbox consoles, generally, is in the US so exchange rate losses aren't as important.
I never said the Wii U was a "success." I said it probably turned a profit for Nintendo. Given their history, a successful console would sell in excess of 40-50 million units over its life, at the very least, if I had to ballpark a number. So the Wii U was absolutely a failure in that regard. However, they clearly turned a profit on manufacturing costs and then continued to turn a profit from first party software sales. What number of consoles sold or software units sold would make the Wii U a profit, from your view?
Again, they've essentially broken even on manufacturing costs of the Wii U by now, probably to the point where the per-unit profit on new sales (because of decreased manufacturing and component costs today) have offset per-unit losses incurred at the beginning of the Wii U's life. Software sales, to the tune of 50M+ for 1st party releases, are actually pretty phenomenal and all of the revenue from those games goes right into Nintendo's pockets. Amiibo was driven primarily by Smash Bros. and Wii U ownership, even though it is supported on 3DS. It's hard to pin down exact numbers for game development, especially considering smaller vs. larger games and everyone being full-time Nintendo employees who may work on multiple games, but average costs are around $10-20M plus marketing for the kinds of game Nintendo makes. Let's just assume that's on the lower end and go with $20M average. Nintendo probably made about $2B in revenue from those 50M software sales. The 50M number represents about 20 games. If the revenue was distributed evenly, you're looking at over $100M in revenue per game. Do you think Nintendo spent $100M on development and marketing for all 20 games? Or do you think there's profit in there? I'd wager profit, and probably a pretty decent one at that. If we say $30M per game for development and marketing, that's $600M spent on $2.2B revenue, meaning $1.6B profit. The Wii U did not cost $1.6B to develop, so they probably turned a profit on the entire effort.
If Nintendo sells a game in the US for the standard $60 price but the exchange rate between the USD and the Yen is not in their favor, then their revenues will change, potentially dramatically. Instead of $60 per game X 5M units sold X 120 Y per USD = 36B Yen in revenue, they might be seeing $300M X 100 Y per USD = 30B Yen. In 2012, it was nearly 75 Y to the USD, whereas right now its roughly 100 Y to the USD, peaking in 2015 at about 125 Y to the USD. That means all Japanese companies who report earnings in Yen would have made less money from US sales in 2012 and more in 2015. If Nintendo made $100M in revenue in both 2012 vs. 2015, that's the equivalent of making 7.5B Yen (2012) or 12.5B Yen (2015) (a difference of 5B Yen, which is currently about $50M). Considering their losses in previous years were on the order of hundreds of millions and included other things, the added exchange rate losses make sense.
If you look at Sony, they also had some pretty significant losses in the 2009-2014 time frame. Some of that is attributed to PS4 development and launch, but some of it is also overseas exchange rate losses. I'm not sure we can really compare with Xbox, since most of the sales for Xbox consoles, generally, is in the US so exchange rate losses aren't as important.
I never said the Wii U was a "success." I said it probably turned a profit for Nintendo. Given their history, a successful console would sell in excess of 40-50 million units over its life, at the very least, if I had to ballpark a number. So the Wii U was absolutely a failure in that regard. However, they clearly turned a profit on manufacturing costs and then continued to turn a profit from first party software sales. What number of consoles sold or software units sold would make the Wii U a profit, from your view?
Again, they've essentially broken even on manufacturing costs of the Wii U by now, probably to the point where the per-unit profit on new sales (because of decreased manufacturing and component costs today) have offset per-unit losses incurred at the beginning of the Wii U's life. Software sales, to the tune of 50M+ for 1st party releases, are actually pretty phenomenal and all of the revenue from those games goes right into Nintendo's pockets. Amiibo was driven primarily by Smash Bros. and Wii U ownership, even though it is supported on 3DS. It's hard to pin down exact numbers for game development, especially considering smaller vs. larger games and everyone being full-time Nintendo employees who may work on multiple games, but average costs are around $10-20M plus marketing for the kinds of game Nintendo makes. Let's just assume that's on the lower end and go with $20M average. Nintendo probably made about $2B in revenue from those 50M software sales. The 50M number represents about 20 games. If the revenue was distributed evenly, you're looking at over $100M in revenue per game. Do you think Nintendo spent $100M on development and marketing for all 20 games? Or do you think there's profit in there? I'd wager profit, and probably a pretty decent one at that. If we say $30M per game for development and marketing, that's $600M spent on $2.2B revenue, meaning $1.6B profit. The Wii U did not cost $1.6B to develop, so they probably turned a profit on the entire effort.
