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by Mike Zazaian September 15, 2006 - 11:37am, No Comments

Nintendo's Wii

While the PS3 and Xbox 360 will likely make a bundle on games with their next-gen consoles, Sony and Microsoft take a financial hit with each unit sold. Not so with Nintendo’s Wii.

Nintendo took a more reserved approach to hardware with this gaming generation. They scaled back pure hardware performance and teraflops and focused on games and useful features for the the upcoming Wii. By putting a less-powerful Broadway CPU into their next-gen Wii, along with some other less aggressive parts, Nintendo has guaranteed themselves a profit on each each Wii they sell. According to Nintendo chief marketing officer Reggie Fils-Aime, Wii will be a money-maker from the get go, We will make a profit on the entire Wii proposition out of the box—hardware and software.

Of course, it seems as though any company that produces a product would be aiming to make a profit right out of the gate. But Microsoft and Sony tried so hard to one-up each other on pure hardware performance with their console offerings that they ended up screwing the pooch. The pooch, in this instance, is Microsoft and Sony.

Microsoft’s Xbox hit shelves at $299 and $399 US dollars respectively for their base and upgraded Xbox 360 units. At that price, Microsoft still takes a $126 loss with each unit sold, a hit they were willing to take in hopes of re-cooping on games.

Most of this loss comes as a result of the 3-cored monster Xenon PowerPC cpu under the Xbox 360 hood, a monster has yet to unleash more than a single core for a game. While the console will likely mature into its release cycle as game developers find ways to utilize multiple cores, with less than ten million units in circulation right now Microsoft isn’t making enough on game sales to justify being in the 200 million (US) dollars in the red on the whole 360 scenario.

Sony’s in an even worse position than Microsoft. After including a Blu-ray drive, a next-generation media drive that will play discs up to 50GB, Sony guaranteed a $200-$300 PS3 price hike with this feature alone. Nintendo’s attitude, in the meanwhile, is that consoles aren’t for watching movies, they’re for gaming.

The PS3’s unique Cell processor has also caused a number of problems for Sony President of Entertainment Ken Kutaragi. While certainly powerful, the Cell’s complex 9-core design has brought low yield rates of 10-20 percent for chip manufacturer IBM, also contributing to the high price of the unit. The PS3 will be such a costly endeavor for Sony that at one point there was mention of its sale for as much as $800. And while $800 seems preposterous, even as a $600 offering the PS3 won’t sell enough units for Sony for them to make their losses back on game sales.

Regardless of the outcome of this generation, it’s certainly one that will teach console makers a great deal about what’s important to consumers. Each console will carve out its respective niche, but it’s difficult to say who will come out on top. From my standpoint, it seems as though Nintendo’s Wii will jump out ahead because of its lower price, bundle of games, and innovative gaming features. That said, I think that the Xbox360 will continue to appeal to the more “hardcore” first-person-shooter-loving segment of gamers, while PS3 will be able to rest upon the comfy PS2 fanbase that it built in both North America and Japan. But for now there’s more positive going for Nintendo than negative, putting them in a good position to make some waves as competitors Sony and Microsoft tiptoe around multi-million dollar losses.

[via ars technica]