Nintendo will sell Wii U at a loss; Analyst questions launch sale predictions

Some may have been surprised at the Wii U’s relatively high launch price, but Nintendo will still be selling the hardware at a loss.

In addition to the yen’s continuous appreciation, the Wii U hardware will have a negative impact on Nintendo’s profits early after the launch because rather than determining a price based on its manufacturing cost, we selected one that consumers would consider to be reasonable.” Iwata told investors.

In this first half of the term before the launch of the Wii U, we were not able to make a profit on software for the system while we had to book a loss on the hardware, which is currently in production and will be sold below cost. Our loss has therefore widened during the second quarter in spite of bringing the Nintendo 3DS hardware back to profitability.”

But none of this has anything to do with the Wii U’s potential success on the market, of which Nintendo remains bullish.

It reckons it will sell 5.5m Wii u consoles by the end of its financial year along with 24m Wii U games.

That’s a high attach rate, and one that US analyst Michael Pachter thinks is a little optimistic.

Said Pachter: Guidance for 24m Wii U software units in FY:13 implies an attach rate of over four games which we view as highly unrealistic given pricing and release slate.

The launch schedule is better than we had initially expected, with notable launch day titles including Activision Blizzard’s Call of Duty: Black Ops II, EA Sports’ FIFA Soccer 13, Nintendo’s New Super Mario Bros. U and Nintendo Land, and Ubisoft’s Assassin’s Creed III and ZombiU.

However, demand will probably wane once Nintendo’s core fan base has purchased the first 5-6m units, negatively impacting long-term hardware and software sales as well.”

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