Nintendo CEO: 'We Believe In Making Money On Our Hardware'

Nintendo Wii

Flickr/Enrique Dans

By John BenyamineAt a press event in New York City to unveil the Wii U’s launch plans Nintendo of America president and CEO Reggie Fils-Aime took the time to answer some of GamesIndustry International’s many questions. While the announcements of price, launch date and more did much to alleviate some of the uncertainty surrounding the console and the company since E3, the bottom line is no one – not even Nintendo – can really predict just how well (or poorly) the Wii U will fare this holiday and the years ahead.

That said, it’s Fils-Aime’s job to steer the ship in North America, or as he says, “to galvanize the Nintendo of America resources to make this launch our best ever.” That’s no small feat, seeing as how the original Wii became a mainstream phenomenon. Reggie remains as confident as ever, however, that his team and the talented developers across Nintendo in Japan will deliver a Nintendo experience worth ponying up 300 bucks (at minimum) for.

In this exclusive interview, we speak at length with Reggie about the value proposition of the two Wii U bundles, dealing with consumer perception in a market affected by tablets, free-to-play and cheap apps, the future of gaming with two GamePads, relying too heavily on the same Nintendo IP and characters, and much more.

Q: Let’s get right into it. Big news today with the Wii U price points and release date. How did Nintendo arrive at $299 and $349 as the price points for Wii U? And will Wii U be profitable from day one?

Reggie Fils-Aime: The way that we approach consumer value is we want to make sure we give the consumer a lot for what they pay, and when you look at that basic model you get the innovation in the GamePad (and all of the gaming options that presents), you get Miiverse in terms of a gaming community, you get Nintendo TVii, you get video chat… all of that is included in the base proposition. We think $299 is a really strong value, and it’s a value that’s going to be strong for a long time.

That gets into another one of our pricing philosophies; we don’t believe in pricing a product and then having to reduce the price some short time later. When we had to do that for 3DS, it was a very painful proposition for us. And what we did with the Wii at $249 and leaving it there for, I think, about three and a half years is very much consistent with our pricing philosophy.

In terms of profitability, we don’t comment on our internal byproduct P&L, but as a philosophy, we believe in making money on our hardware, even if it’s small amounts of money at the start. We don’t believe in losing a lot of money on hardware. I brought up 3DS – after the price cut, we were losing money on 3DS hardware and that’s what led to our posting our first operating loss ever as a public company.

Q: We did get some reaction from industry analysts, I’m not sure if you’ve had a chance to hear what’s being said…

Reggie Fils-Aime: I haven’t had a chance to read.

Q: This should be fun. We have EEDAR’s Jesse Divnich saying Wii U is unlikely to persuade core gamers with that $299 price point…

Reggie Fils-Aime: He needs to see Call of Duty that we have here, or Assassin’s Creed.

Q: He did mention Call of Duty specifically and he said that he doesn’t think straight ports from Xbox 360 would be enough to entice core gamers. That was his point of view, and Michael Pachter said that while Nintendo is looking at a holiday sellout, $299 will seem high in March when we expect Microsoft and Sony to cut prices.

Reggie Fils-Aime: But those are a different generation than our product.

Q: Sure, but how do you respond to the general sense from some people that Nintendo could have been more aggressive with pricing?

Reggie Fils-Aime: In the end, the consumers are going to decide. So I’ll share this data with you. We’ve announced the price and we have a number of retailers taking pre-orders and the feedback that I’m getting from retailers is extremely strong in terms of pre-sales and consumer excitement at the store. In the end, I care about those people. I care about the consumer who’s putting money down on a pre-order and whether or not we’re presenting a great value to them. Based on some of the reports I’m getting, the answer is yes.

Q: Sticking with the pricing issue…

Reggie Fils-Aime: It’s not really an issue…

Q: The pricing topic… [Reggie laughs]… I think Kindle, for example, coming out with their low cost tablets, and Apple with their announcements yesterday… we’re speaking of that value proposition, and it seems that while some consumers are OK going with higher hardware prices, they may expect a lower software cost – you see those dollar apps or $10 apps and things like that. How do you think Nintendo is shifting to perhaps get to that differing consumer philosophy on value?

Reggie Fils-Aime: We believe that when it comes to hardware, we want to pack a lot into the smallest price possible, so that’s why we don’t charge for additional services like some of our competitors do. That’s why we include the capability of video chat with the GamePad’s built-in cameras, for example. From that standpoint, we want to make sure the hardware is as strong a value as possible for as long as possible.

On the software front, what I would tell you is it’s important that we offer a range of software experiences that have a range of prices. Here today, we’re showing off three different digital experiences and we haven’t announced what those price points will be, but certainly they will be less than full price games. So we have to make sure that the value equation for what you get and what you pay is as strong as possible, whether it’s a smaller piece of digital content or whether it’s when a consumer buys Wii Fit U.

Check out the complete interview at GamesIndustry International.

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