And what about the 3DS?
A platform that, when launched, needed a dramatic price cut in order to save it. One that will trend lower than the DS in the coming years, and generate far less income than its predecessor.
Investors want to see growth; not decline. And 3DS's decline may be far less than the Wii U relative to the Wii, but it's still decline. And what happens with their next-handheld? Is it OK for them to continue seeing declines in this sector while mobile and tablet devices continue robust growth?
This "shareholders want to see growth" thing is fine, but it's absolutely not managable in reality, because it's an unpredictable market. If Nintendos shareholders would follow this trend there wouldn't be a Wii or Wii U, because their console hardware sales decreased for 4 consecutive generations. (NES > SNES > N64 > GCN) (GB/C > GBA).
Furthermore, this is a cyclical industry, if the 3DS doesn't achieve a certain amount of sales it doesn't mean that the following handheld won't do it. It also doesn't mean that they can't generate bigger incomes with less hardware sales due to profitability maximation.
Additionally, most of Nintendos shareholders don't even have voting rights.
And I mention the 3DS because it's part of the business, they don't need to achieve NDS - numbers to be successfull in reality, noone is going to ditch Sony because they can't achieve PS2 sales.
Almost profitable? Again, Microsoft and Sony are going to cut the price on their consoles as soon as they can. They are not in the business to make margins on hardware, they make their money with online services, licensing fees, and software sales.
That's your assumption.
Why would Sony cut the price of a profitable hardware if it sells anyway? Or why would they cut so much that it's under production price again? Just because they worked like this in the past doesn't mean they have to follow the route. As you can see, a profitable hardware market can bring you a lot of income.
Wouldn't the shareholders tell you that this isn't as profitable? /sarcasm
The graphical jumps aren't going to really get smaller. With the advent of VR, they only become even more important in order to create immersive worlds.
Of course they are, this is just the natural way of things. People are even moaning about this generation from time to time.
And it's easier to create graphical jumps from this:
Than this:
And Nintendo is far behind when it comes to the entire 'console concept' ecosystem....so far behind that they won't be able to compete against Sony and Microsoft's offerings.
Well, Sony & Microsoft have more to offer but Nintendo offers already the most important stuff:
• Online Focus (eShop / Indy / Digital / BC)
• Their own social network
• Possibility of every monetazation method
• Online streaming services
There are other things like the hardware-tied downloads which they have to improve of course.
It's only going to be profitable if it's a desired product. Wii U was designed to be profitable as well, we all saw how that turned out. Nintendo's next product could be just as big of a failure as the Wii U without a place in the market, but sure, it could initially be selling above its production cost. But if no one is buying it then they have to cut price and take losses.
That depends highly on the product itself, we can't say this as we don't know
what they are creating,
what they earn per unit and
how it's going to perform.
It's not just graphical jumps. It's online infrastructure. It's things like Live streaming. It's friends lists. It's how quickly you can move throughout the UI. It's forward thinking objectives like Gaikai streaming.
Nintendo is never going to be able to compete there. The playstation audience this gen will be massive and no one will be jumping ship just because Nintendo now produced a console with "good enough" graphics.
They have an online infrastructure, they have friend lists, the UI is fast enough currently and Gaikai isn't even up by Sony (and Nintendo researches this technology too).
While they don't have live streaming they have their own social network, something that Sony & Microsoft don't offer.
As other have pointed out, this is an interesting but ultimately short-sighted analysis of information that many of us who followed the industry already knew. The fact that Nintendo has been abundantly successful in the hardware business in the past by managing to attain significant market share while simultaneously selling the hardware at a profit for the entire generation is beyond irrelevant in a market where Nintendo is taking a loss on hardware while selling Dreamcast-like numbers of its home console.
Again, this refers to the current generation, it doesn't mean that they have to follow the same route in the future.
(...)
For instance, NSMB U has sold nearly 2 million units, correct? NSMB on Wii sold nearly 30 million units. How many sales would NSMB U have had if it were a 360/PS3 game? Definitely at least 10 million, but probably at least 20 million. There's a good $600 million of foregone profit. That's part of the opportunity cost of the Wii U.
First of all, you compare the first year sales of NSMBU with the lifetime sales of NSMB Wii. I don't see the logic, even if NSMBU won't reach those numbers.
And furthermore, while you talk about opportuniy cost, you also ignore the synergy effects.
What if one copy of New Super Mario Bros. can sell one hardware unit which leads to more software purchases, more digital purchases, more accessory purchases and so on?
And Nintendo sells their software for usually 50$. Retailer cut is around 15$ + 5$ production cost. That's what they pay currently. On the eShop they earn 100% of this.
If you distribute it on other systems you have to consider additional 5$ to 7$ of licencing fees + fees for the online distribution, they have to sell more units per game anyway.
