It was confirmed in late October that Wii U will be sold at a loss, which gave the retail price some context and perhaps made some supporters nervous about the financial impact on the company. According to comments from Nintendo of America boss Reggie Fils-Aime, however, the loss on each console is evidently small enough to not be a concern.
In an interview with Mercury News, Reggie explained that any potential loss immediately turns to profit with the sale of one game.
The business model doesn't change dramatically, in that as soon as we get the consumer to buy one piece of software, then that entire transaction becomes profit positive.
In the end, the business model is still to drive the install base of hardware, and then to drive a strong tie ratio with all of the other software and experiences for the consumer. And if we're able to do that, then we will create significant profit for the company.
Of course, Nintendo takes a royalty from each game sale — typically between 20 and 30% — which suggests that the loss on each console is a small amount equating to around £10/$15 or less. As with 3DS, it's also possible that streamlining and improvements in manufacturing will likely turn each system sale into a profit, though after the recent Foxconn controversy it's perhaps understandable if Nintendo doesn't directly address that in the near future. Elsewhere in the same interview, Reggie tackled a question on whether much of the Wii audience had been lost to smartphone or Facebook-style games.
Our target is consumers 5 to 95. We pride ourselves on being a mass market games company. We absolutely want more active players. We want more casual players. And we think we've got the offering to attract a very wide audience.
Consumers are looking for new and compelling experiences. And we believe we're delivering a vast array of new and compelling experiences with Wii U.
So there you have it, once you buy a game — the pre-bundled Nintendo Land with the Deluxe Set doesn't count — then you're making that Wii U profitable for Nintendo. All in all, it's not a bad position for the famous gaming company.