The business with game consoles is seemingly a rather special one where manufacturers are subsidizing their hardware in hope to make a profit with royalties from games.
Not so with the most successful one of them, Nintendo that follows a different approach. While for Microsoft and Sony the business with game consoles is only a small part of their overall turnover for Nintendo it’s their core business. And why spend money when you can make some with the same product.
Quite a few stories recently pointing out that Sony is loosing money / heavily subsidizing each sold unit of Playstation 3, but how big the differences are was not clear until today when Japanese weekly magazine Toyo Keiyai (Weekly Tokyo Economics) has published a more detailed comparison between Sony’s PS3 and Nintendo’s Wii hardware and production costs. It looks like Nintendo has highly optimized its manufacturing and part costs while the other players seemly haven’t (yet).
The Japanese Magazine has broken down the costs for the Wii (USD 158.30) and PS3 (USD 805) as shown in the table on the right.
“Hollywood” graphic chip from ATI plus 3 MByte cache from NEC (USD 29.60), Broadway-CPU from IBM for USD 13 and 88 MByte DRAM for USD 7.80. Plus USD 31 for the drive, USD 11.30 for the power supply and USD 19.50 production cost together with other parts for USD 46.10 adds up to total costs of USD 158.30.
Please note that the Wii console is sold in Japan without a game disk – so no additional costs for that.
While the estimates for Sony’s PS3 might be a bit on the high end, as a result, whenever Nintendo sells a unit is is already making a profit while Sony is loosing money until it might receive enough royalty payments that all game console manufactures charge to game software producers.
So even when the prices would deteriorate Nintendo will be ahead. And with with its Wii console leading the sales charts, Nintendo’s different business model might pay double.
If you want to get a closer look at the internals of Wii and PS3, click on the images above for the complete disassembling stories.
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