I don't think a lot of you understand costs...

#1dart246Posted 12/6/2012 4:36:06 PM
It is well known that Nintendo is losing money on each Wii U sold, thus selling them at a loss.

And I have repeatedly seen the reasoning that Microsoft can make a strong system system and sell it below $400 but in truth that is far from...very far from it. Looking at the BOM (Bill of Materials), one can make a decently strong computer for $400-500, not amazing, but enough to play the most recent games and make them look gorgeous and have the computer set to be able to play games for years to come. However, when looking at a new video game system, one can not simply say "They're buying them in bulk thus the cost will be dramatically less, and they can obviouly make a stronger system for $400."

Let's just say that the BOM on the console is $350, actually we need to go back in time and start approx 2-3 years ago. We would first have to look at the cost of R&D (Research and Development). Microsoft Research has some of the brightest individuals working for them, and the minimum education level required to even work at Microsoft Research is PhD Candidate (meaning you are in the process of obtaining your Doctoral).

[For those that think this is a lie, you are more than welcome to visit MS Research and see the job requirements for most of their projects]

These individuals are well paid, looking at a minimum of $200,000 a year (before taxes). Of course Microsoft does not just have one person working on a project, they actually have entire buildings with upwards to 100 people working on a project at any time. So, to be generous, let's say Microsoft has a team of 50 people working on the Xbox at about $200K each for three years. That cost alone is $10,000,000 a year in R&D, not including benefits, vacation, or PTO (Paid Time Off). Now they have been working on it for probably about three years. So let's just round the total R&D cost to $30,000,000 [which is actually very very low for an R&D expense for a new project].

So now we have R&D at $30,000,000, bu in addition with in that R&D is overheard (lighting, rent (though I doubt MS actually pays for rent and instead owns the property outright, and for some companies rent is chargedd seperately, others it's part of overhead), water, other utilities).

Now that the product is ready to go from an R&D standpoint there are still SEVERAL other costs associated with it such as:

- Labor (Foxconn putting the Xboxes together)
- Feight (shipping of the Xboxes from Foxconn to respective regions, and the shipping of components to Foxconn in the first place, intercompany shipping of WIP (Work-in-Process) items)
- Maintenance and Upkeep
- Shipping (the shipping of the finished product to the retailer or consumer)
- Materials (as stated before)
- Inventory (yes, inventory actually does have a cost)

And the big one: Advertising and Marketing.

These costs are all associated with the item. For an investor these costs allow them to see the actual cost PER UNIT and determine the ROI (Return on Investment) and if the endevour is worthwhile and if so, how long or what is needed for the item to return a profit for the company.

But what does this all have to do with Nintendo?

This has to do with Nintendo becuase they go through the same procedures and expenses, as does Sony. Thus when I hear the claim that Nintendo cheapened out on their technology within the item I cannot help but if the person understands that had Nintendo not have made sacrifies in some areas the system would cost considerably more. With the extreme rise in development costs that have occured, if one is truly expecting the Xbox to be "six times as strong" as with the next Playstation, they may be sadly disappointed, or severly angry when the price is announced.

TL;DR: Buying $300 of materials mean nothing for how strong the new system is.
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PSN: VisperCon; NNI: Rywins
#2StealthlysPosted 12/6/2012 4:36:49 PM
Can you please cite your sources?
#3dart246(Topic Creator)Posted 12/6/2012 4:37:40 PM
Stealthlys posted...
Can you please cite your sources?


Standard Managerial Based Accounting and GAAP Standards?
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PSN: VisperCon; NNI: Rywins
#4stekim40Posted 12/6/2012 4:44:24 PM
I'm sorry but theres NO WAY Nintendo can lose money, the hardware simply doesn't cost that much. 300 Wii U premium of mine probably has a base cost of 100 MAX.

I simply cannot believe they are not making money, either their are lying or they are incompetent. I prefer to think its the former.
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Playing: Xcom:EU, PC Minecraft, Skyrim , F1 2012
Waiting for: ELITE 4 (still), GTA V, Pikmin 3, Dragon Age 3
#51shadetail1Posted 12/6/2012 4:46:27 PM
stekim40 posted...
I'm sorry but theres NO WAY Nintendo can lose money, the hardware simply doesn't cost that much. 300 Wii U premium of mine probably has a base cost of 100 MAX.

I simply cannot believe they are not making money, either their are lying or they are incompetent. I prefer to think its the former.

Or, here's a crazy thought as a third option, maybe you're wrong.
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Religion is like spaghetti: either stiff and fragile, or wet and limp.
#6Parkers_PeterPosted 12/6/2012 4:46:55 PM
Maybe because Costs is not from my native country.
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Shut up
#7DeathSoul2000Posted 12/6/2012 4:47:58 PM
1shadetail1 posted...
stekim40 posted...
I'm sorry but theres NO WAY Nintendo can lose money, the hardware simply doesn't cost that much. 300 Wii U premium of mine probably has a base cost of 100 MAX.

I simply cannot believe they are not making money, either their are lying or they are incompetent. I prefer to think its the former.


Or, here's a crazy thought as a third option, maybe you're wrong.


except he's not. hardware from 2006 is inexpensive. get over it.
#8StealthlysPosted 12/6/2012 4:49:00 PM
Except all of you are wrong.
#9BuretsuPosted 12/6/2012 4:50:19 PM
dart246 posted...
It is well known that Nintendo is losing money on each Wii U sold, thus selling them at a loss.


It's just as well known that the loss Nintendo takes on each Wii U sold is recovered with the additional purchase of a single game.
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no i tried resetting game i even start violent slamming cartridge on wall but all it does make static noise when i put into DS, the problem not fix! -ReconUnit
#101shadetail1Posted 12/6/2012 4:51:44 PM(edited)
DeathSoul2000 posted...
1shadetail1 posted...
stekim40 posted...
I'm sorry but theres NO WAY Nintendo can lose money, the hardware simply doesn't cost that much. 300 Wii U premium of mine probably has a base cost of 100 MAX.

I simply cannot believe they are not making money, either their are lying or they are incompetent. I prefer to think its the former.


Or, here's a crazy thought as a third option, maybe you're wrong.


except he's not. hardware from 2006 is inexpensive. get over it.

Or, here's a crazy thought as a second option, maybe you're wrong too, for believing that urban legend about 2006 hardware.
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Religion is like spaghetti: either stiff and fragile, or wet and limp.