By M.H. Williams
Unlike its competitors, Nintendo is well-known for selling its hardware at a profit from the beginning. Nintendo president Satoru Iwata even admitted that the 3DS portable would not be sold at a loss. So it’s not odd to wonder how much profit Nintendo is making with every 3DS sold.Eurogamer enlisted some help from UBM TechInsights to tear apart a 3DS and estimate how much the individual parts cost Nintendo.
According to preliminary numbers by David Carey, VP of technical intelligence at UBM TechInsights, the system’s raw materials cost an estimated $101 per unit. This stands to be a $15 increase over the cost of the DSi, which launched in North America for $169.99. If that estimate is correct, then the $249 dollar asking price for the system is more than double the system’s cost, and giving Nintendo even more profit than their previous portables. This does not take into account any other hidden costs Nintendo has to work with for the system’s launch, including R&D, marketing, and distribution.
“Little known fact, the margin on hardware for retailers is incredibly small,” said EEDAR analyst Jesse Divnich. “Retailers make the profit on the games and accessories. Typically retailers see a 20 to 25 per cent margin on the games and 40 to 60 per cent on the accessories.”
Wedbush analyst Michael Pachter previously told IndustryGamers that the $249 price tag is too low and Nintendo would be “leaving money on the table.” Even now, he feels that the price isn’t ripping off consumers.
“I’m sure people will complain in a really tough economy, and I don’t blame them – it’s clearly expensive. However, the fact is the device will be in tight supply, with probably fewer than 500,000 available for the UK market, and so Nintendo is charging what it thinks the market will bear,” said Pachter.
Is there such thing as too much profit?