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Gaming Forums => Nintendo Gaming => Topic started by: StRaNgE on February 12, 2003, 11:11:31 PM

Title: Gamecube console, profit from day one?
Post by: StRaNgE on February 12, 2003, 11:11:31 PM: i have read over and over that the cube has made money from the sale of the console from day one while ps2 and x-box both took or are still taking some serious losses on their consoles.

although i have seen this on the old forums numorous times i have yet to see any facts showng the cubes construction cost and it's intake.

does anyone here know what those figures are and can it be backed up?
thanx
Title: Gamecube console, profit from day one?
Post by: RickPowers on February 13, 2003, 05:32:47 AM: While I can't give you exact information (Nintendo doesn't release those figures), GameCube is the first console that Nintendo lost money on at launch. However, that loss per console was in the SINGLE DIGITS, and they had reached break-even by March of that year. All of Nintendo's other consoles made money at launch, usually also in the single digits.

Both Sony and Microsoft lost significant money on their consoles at their respective launches, and while Sony should be making money on PS2 at this point, Microsoft is still losing significant money on each and every Xbox sold.
Title: Gamecube console, profit from day one?
Post by: Sith on February 13, 2003, 06:22:16 AM: On the original PGC forums, many people stated that the Gamecube cost $100 to make, hence they made $50 every console sale.

I'm guessing those figures are incorrect after hearing what you said.
Title: Gamecube console, profit from day one?
Post by: StRaNgE on February 13, 2003, 07:43:06 AM: yes, gotta be honest . i was not expecting you to say that rick after so many said the 100 dollar thing. Although even 1 dollar is netter then a negitive amount the rumors of it being a 50 take home on each consol ran rapid in the last forum.

does anyone else know about this as well?
Title: Gamecube console, profit from day one?
Post by: MikeHrusecky on February 13, 2003, 07:54:40 AM: What Rick said is true. The Cube didn't cost $100 to make off the bat, that's a more recent development due to moving manufacturing to a Chinese (?) subcontractor, or something like that; I don't remember all the details. I'm not entirely sure if the "under $100" production is online yet, but it might be.
Title: Gamecube console, profit from day one?
Post by: ink on February 13, 2003, 08:01:12 AM: Well the price-per-cube is a function of how many they sell and make. If Nintendo just made one Cube, it would have been a multi-million dollar expense; but as they make more and more, the design and manufacturing costs come down as well. I doubt even the game companies even know the total cost of their hardware at any given moment; although they probably have a per-machine figure for any given assembly run. The overall business must make money, and that is the goal. Both Nintendo and Sony are doing this. Microsoft isn't (yet).
Title: Gamecube console, profit from day one?
Post by: RickPowers on February 13, 2003, 08:12:53 AM: Exactly, Mike. What I said has no bearing on Nintendo's cost per unit at this time. While I sincerely doubt that the "$100 per unit" that people on the other forum were quoting is entirely accurate, considering how quickly Nintendo makes manufacturing changes, it's probably in the ballpark.

Sony is also making money at this point, thought not very much. There are some costs associated with the PS2 that are fixed, such as licensing the USB and Firewire ports, the Optical output, the DVD drive, etc. This is where Nintendo was smart ... staying away from "industry standards" allows Nintendo to avoid the licensing costs associated with using those technologies.

Microsoft is still losing money, and it's largely because of the fight with Nvidia over the cost of the chips, plus the fact that the Xbox is basically built with "off the shelf" parts. Theoretically, the cost of the Xbox should be able to come down pretty quick once they move to the rumored smaller size unit.
Title: Gamecube console, profit from day one?
Post by: Christberg on February 13, 2003, 08:43:59 AM: Don't forget the fixed cost of that 10gb harddrive either, Rick. There's really not much that can be done to produce that part of the unit cheaper. In theory, with a die shrink or better manufacturing you can make any chip eventually cost pretty much nothing, but with an HD, the price to build it never really drops because the costs associated are the drive motor, cleanroom, and disc. Unfortunately, not much can be done to make those cheaper.

The Xbox will probably still be losing money when 2005 rolls around if they keep dropping the price like that.

The smaller form factor WILL certainly help though.
Title: Gamecube console, profit from day one?
Post by: Resemvla_Syria on February 13, 2003, 09:47:08 AM: I guess this really shows Microsoft inexperiance in this industry , and its a good way to see if they have learn for the next generation.
Title: Gamecube console, profit from day one?
Post by: Mingesium on February 13, 2003, 09:56:26 AM: Here is stuff that I read that keeps GameCube cost down:

Nintendo is planning on manufacturing GameCubes in China.

Nintendo is letting FIC make the boards

Nintendo gave IBM a billion dollars for the Gekko. I think thats a fixed cost. So if Nintendo hits their 50 million mark, the Gekko would have cost them $20 each.

Also, I think that Nintendo has struck a deal with ATI. I know that ATI has received some of Nintendo's software money.
Title: Gamecube console, profit from day one?
Post by: RickPowers on February 13, 2003, 09:57:08 AM: Quote
Don't forget the fixed cost of that 10gb harddrive either, Rick. There's really not much that can be done to produce that part of the unit cheaper. In theory, with a die shrink or better manufacturing you can make any chip eventually cost pretty much nothing, but with an HD, the price to build it never really drops because the costs associated are the drive motor, cleanroom, and disc. Unfortunately, not much can be done to make those cheaper.

Uh, Microsoft doesn't MAKE the 10GB hard drives. They BUY them, so they pay whatever the cost is when they buy the lot. So it's not a fixed cost.
Title: Gamecube console, profit from day one?
Post by: ink on February 13, 2003, 10:57:37 AM: Quote
Uh, Microsoft doesn't MAKE the 10GB hard drives. They BUY them, so they pay whatever the cost is when they buy the lot. So it's not a fixed cost.

Ummm, yeah, but who do you think pays the price for all that?

Microsoft.
Title: Gamecube console, profit from day one?
Post by: manunited4eva22 on February 13, 2003, 11:11:22 AM: The cost for an ATA33 6-8GB HDD (I personally have never heard of one that did store 10GB) is so low right now it is pretty much a null cost. Buying them at face value they are worth no more than 14 dollars a unit in bulk, and that cost does drop as they become further outdated. Example: I have a 1/2GB monster HDD that cost more than 1 grand when it was bought. I'm sure it dropped to a very low cost to build at some point, but it almost never drops to the actual cost to build. Microsoft still has a while before they have to worry that they are driving the 2 HDD manufacturers into the ground by demanding lower costs.
Title: Gamecube console, profit from day one?
Post by: Mingesium on February 13, 2003, 11:22:16 AM: they don't make hard drives that small anymore. Microsoft actually buys like 20GB hard drives and partitions them.
Title: Gamecube console, profit from day one?
Post by: Christberg on February 13, 2003, 11:23:30 AM: Quote
Originally posted by: RickPowers
Quote
Don't forget the fixed cost of that 10gb harddrive either, Rick. There's really not much that can be done to produce that part of the unit cheaper. In theory, with a die shrink or better manufacturing you can make any chip eventually cost pretty much nothing, but with an HD, the price to build it never really drops because the costs associated are the drive motor, cleanroom, and disc. Unfortunately, not much can be done to make those cheaper.

Uh, Microsoft doesn't MAKE the 10GB hard drives. They BUY them, so they pay whatever the cost is when they buy the lot. So it's not a fixed cost.

The production cost for the unit never really changes though. The only thing that can effectively be made cheaper is the labor, and that only goes so far. People can underbid each other for the HD cost (it's just a friggin IDE drive) but that's not going to go very far either. Don't see how it can drop in price all THAT much.
Title: Gamecube console, profit from day one?
Post by: Ian Sane on February 13, 2003, 11:37:26 AM: "I guess this really shows Microsoft inexperiance in this industry , and its a good way to see if they have learn for the next generation."

Well Microsoft has never really planned on making a profit with the Xbox so it doesn't really have anything to do with inexperience. The Xbox is more or less being used to get a foothold in the console market so that future Microsoft consoles can make a profit.
Title: Gamecube console, profit from day one?
Post by: Christberg on February 13, 2003, 11:44:57 AM: Quote
Originally posted by: manunited4eva22
The cost for an ATA33 6-8GB HDD (I personally have never heard of one that did store 10GB) is so low right now it is pretty much a null cost. Buying them at face value they are worth no more than 14 dollars a unit in bulk, and that cost does drop as they become further outdated. Example: I have a 1/2GB monster HDD that cost more than 1 grand when it was bought. I'm sure it dropped to a very low cost to build at some point, but it almost never drops to the actual cost to build. Microsoft still has a while before they have to worry that they are driving the 2 HDD manufacturers into the ground by demanding lower costs.

That's different, because it's just surplus that's hanging out in their warehouse. They sell those at a loss. The actual raw materials to produce a hard drive outside of the chipset and the drive motor haven't changed at all really since the very first IDE drive. They use the same exact platters, same cases (you'd be surprised what molded steel costs) and the drive motor hasn't really dropped in cost either.
Title: Gamecube console, profit from day one?
Post by: RickPowers on February 13, 2003, 12:51:52 PM: Christberg, you have no idea what you're talking about. Hard Drive prices drop almost DAILY. Manufacturing gets cheaper and cheaper, and like I said, Microsoft isn't the one that MAKES the drives, so the actual manufacturing cost is irrelevant. All that matters is what Microsoft PAYS for them.
Title: Gamecube console, profit from day one?
Post by: Christberg on February 13, 2003, 01:54:39 PM: OK, you tell me how the raw materials cost of a hard drive can drop. The most expensive components are the platters, the HD casing, the head, and the drive motor that spins the platters.
Title: Gamecube console, profit from day one?
Post by: RickPowers on February 13, 2003, 02:17:17 PM: Again, Microsoft isn't paying for the cost of the materials or the labor, they're simply paying what the vendor is charging, and there is no rule anywhere that says that the vendor has to charge over their costs. To Microsoft, the hard drive is just a PART. You're WAY overanalyzing the situation.

But, to answer your question ...

The cost of the raw materials drops just like anything else in a free-market economy; Hard Drive makers don't make every last thing in the drive, they buy parts from suppliers just like anyone else. Labor goes down as the Hard Drive makers replace humans with machines, the cost of the clean rooms and equipment is amortized over the cost of each manufacturing run, and technological advancements reduce costs across the board.

None of that is even close to relevant in the Microsoft situation, though, since 8GB hard drives aren't made anymore, and 10GB drives (what Microsoft switched to) are quickly being phased out too. When that happens, the price will drop even further as the hard drive suppliers clears out obsolete inventory.

Seriously, you might want to rethink acting like you have an MBA around here. You'll get eaten alive.
Title: Gamecube console, profit from day one?
Post by: Christberg on February 13, 2003, 02:31:03 PM: Yeah, you pretty much nailed it there.

Still, the cost of molded steel is the same it's been for ages. HDs aren't like a microprocessor where you can just shrink the size of it by half and then manufacture them in the same size wafers, effectively dropping the cost directly relative to the size of the chip.

Not that I have one of those (going to scholl for cosci at the moment) but it's certainly a vested interest of mine.
Title: Gamecube console, profit from day one?
Post by: RickPowers on February 13, 2003, 02:45:28 PM: Quote
Still, the cost of molded steel is the same it's been for ages.

Prove it. Technological advancements in steel production occur just like in any other industry, perhaps not as fast as in high tech, but steel is no where near as expensive now as it was, say 50 years ago. Unless you can back up your statements, I suggest you let this go ... because if I have to dig up the figures to prove my point, I'm going to be very angry.

And you wouldn't like me when I'm angry.
Title: Gamecube console, profit from day one?
Post by: Sith on February 13, 2003, 05:08:05 PM: RockPowers, my dad sells computer parts for a living, and I work along side him once in a while. In my entire time there, I hardly see Hard Drive prices drop or increase. I do not know how you can say the 10GB Hard Drive price drops DAILY, when my dad sells it at the same amount weekly.
Title: Gamecube console, profit from day one?
Post by: BlkPaladin on February 13, 2003, 06:22:44 PM: Even if you Dad sells them that isn't the end all of the story. You seem the have a narrow view of the market. The prices of everything fluxuate daily. In markets such as Computer Technology the manufactures buy their raw product by the lowest bidder. So the cost to them fluxuats but there is always a down trend in techonolgy cost because of new technology, new manufacturing costs, cheeper labor (The reason so much technology is assembled in Asia because the work force works for peanuts.), then they have a fixed medium price that they sell it to the manufactures the mark up on it is enough to cover the manufacturing with a target area profit. The Middle man gets the techonology at bulk prices were they sell it to retailers, etc for another marked up price, that has a downward progression as time goes on. The reason why price stay at a certin is that retailer orginal only make a marginal profit off the newer techonologies so it sells. But as the supply cost goes done they try to keep it at a certin market up to wring all the profit out of it.

But in a free market there will always be someone who undercuts you and if they start taking a good part of your business you have to cut the price or be put out of business. They same principles effect all the levels of supply, so prices go down. And technology has another driving factor that brings it down faster as newer technology comes out the older techonolgy has to get cheeper or it won't sell. But there is so much you mark something down before it not worth making. So as new technology get stacked in generations on top of old techonology it forces the price down, and as soon as something gets to the point it not profitable to make any more its phased out.

There are a ton of other factors that effect price like supply and demand. But I won't go into them. I was majoring in Business in college but only had two year before I was injured and had to drop out. But Rick is correct when he say things drop "daily" if that helps. Retailers don't drop prices with the market because they want to get the most money out of it. But we are NOT talking about retailers here. We are talking slowly about the manufacturing process and that is quite different than what you are talking about.

Sorry about the confusing language, I'm working on 4 hours of sleep. And I have been up for over 15 hours. I start sounding rather funny.
Title: Gamecube console, profit from day one?
Post by: Resemvla_Syria on February 13, 2003, 06:51:46 PM: Quote
Well Microsoft has never really planned on making a profit with the Xbox so it doesn't really have anything to do with inexperience. The Xbox is more or less being used to get a foothold in the console market so that future Microsoft consoles can make a profit.

That may be true that Microsoft didn't planned to make a profit but almost anybody can assure you that in designing the xbox they were trying to be as cost effective as possible, and thats the point that if MS was more experience they would have though of this phase of the xbox's lifespan. Like somebody mention that Nintendo started modifying the cube almost from the get go, and thats the difference from the experience.

by the way I'm new here but long time reader of the PGC forums and this is my second post in a games forum since like 1998.
Title: Gamecube console, profit from day one?
Post by: Christberg on February 13, 2003, 07:00:43 PM: Quote
Originally posted by: RickPowers
Quote
Still, the cost of molded steel is the same it's been for ages.

Prove it. Technological advancements in steel production occur just like in any other industry, perhaps not as fast as in high tech, but steel is no where near as expensive now as it was, say 50 years ago. Unless you can back up your statements, I suggest you let this go ... because if I have to dig up the figures to prove my point, I'm going to be very angry.

And you wouldn't like me when I'm angry.

I'm going to let it go and all because the effort to find that information would be difficult at best. Finding the bill of materials for a HD would be the same as finding the bill of materials for a GC, and if you can't do that in your position... Frankly most likely not possible. I'm going to let it go with a little story: you see, I play in a band that makes experimental music, and a while back I asked friend of mine who has an EE degree what it would cost for him to make some custom pedals for me. (this was about a year and a half ago) Since his father happens to be a professor of Engineering at UW, he has access to all the materials to make them at cost. The cost of the electronics I wanted would have cost less than what it would cost to buy (about 3 bucks), but the casings and power supply? 8 bucks for just the casing for it.

Ever wonder why the cost for the power supply in your PC has never budged from 50 dollars since the 8086, but the quality is way worse now? Let's face it, the resistors and circuit board costs are nothing now and they're pretty much the same they've always been. It's the metal.

But seriously, this is my last post about this and I'm letting you win. You win.
Title: Gamecube console, profit from day one?
Post by: StRaNgE on February 13, 2003, 07:20:45 PM: nice to see some interesting feedback form from this.

i have no idea what steel or other metals cost 20 years ago but i purchase small amounts of steel brass and aluminum all the time. a brass rod of 5/16 diamiter runs about 10 bucks for 3 feet of it depending on where ya get it.

as far as external harddrives go, the one i got for myself about 2-3 years ago is 60 gigs and ran about 250-300 same one is i think 150-200 now.
Title: Gamecube console, profit from day one?
Post by: theaveng on February 14, 2003, 05:10:59 AM: Quote
Originally posted by: Christberg
Still, the cost of molded steel is the same it's been for ages. HDs aren't like a microprocessor where you can just shrink the size of it by half and then manufacture them in the same size wafers, effectively dropping the cost directly relative to the size of the chip.

Anyone who's ever purchased a Hard Drive knows this is blatantly false. I recall spending $300 to get a 20 megabyte drive. (No that's not a typo...it was really that small.) Now I can spend the same amount of money for a drive that is (1) half as large (2) holds 10,000 times as much information:200 gigabytes (3) operates much, much, much faster. Hard Drives are following the same process of shrinkage and diminishing costs as microprocessors.

As for steel, I don't have a direct knowledge of prices, but I'm aware that manufacturers are *constantly* experimenting to find cheaper methods of manufacture. The raw material remains the same, but new methods of retrieving, processing, and forming that raw material decrease labor, waste, and costs.
Title: Gamecube console, profit from day one?
Post by: Christberg on February 14, 2003, 06:08:52 AM: Quote
Originally posted by: theaveng
Quote
Originally posted by: Christberg
Still, the cost of molded steel is the same it's been for ages. HDs aren't like a microprocessor where you can just shrink the size of it by half and then manufacture them in the same size wafers, effectively dropping the cost directly relative to the size of the chip.

Anyone who's ever purchased a Hard Drive knows this is blatantly false. I recall spending $300 to get a 20 megabyte drive. (No that's not a typo...it was really that small.) Now I can spend the same amount of money for a drive that is (1) half as large (2) holds 10,000 times as much information:200 gigabytes (3) operates much, much, much faster. Hard Drives are following the same process of shrinkage and diminishing costs as microprocessors.

As for steel, I don't have a direct knowledge of prices, but I'm aware that manufacturers are *constantly* experimenting to find cheaper methods of manufacture. The raw material remains the same, but new methods of retrieving, processing, and forming that raw material decrease labor, waste, and costs.

The size and raw materials hasn't changed in a very, very long time. I can prove that no problem. But seriously, I'm dropping this.
Title: Gamecube console, profit from day one?
Post by: theaveng on February 14, 2003, 08:06:43 AM: You can't prove it, because it's not true. I've been using/purchasing hard drives for nearly 20 years, and I KNOW the cost has come down. I know, because I was *there*. 20 megabytes was $300 in the late 80's. Today you can purchase an ultra- tiny drive about $50. The price came down.

In the late 80's builiding a hard drive-equipped console like X-box would have been extremely expensive (~$1000). Now, we can do it for ~$300. Why? Because PRICES DROPPED on hard drive manufacturing costs.

Anyway to me, your assertion is as silly as saying, "There's no difference between 1980's and 2000's cars." It's just a stupid remark.
(Note I said your remark was stupid, not you. I criticize ideas, not people.)
Title: Gamecube console, profit from day one?
Post by: Christberg on February 14, 2003, 08:41:49 AM: Quote
Originally posted by: theaveng
You can't prove it, because it's not true. I've been using/purchasing hard drives for nearly 20 years, and I KNOW the cost has come down. I know, because I was *there*. 20 megabytes was $300 in the late 80's. Today you can purchase an ultra- tiny drive about $50. The price came down.

In the late 80's builiding a hard drive-equipped console like X-box would have been extremely expensive (~$1000). Now, we can do it for ~$300. Why? Because PRICES DROPPED on hard drive manufacturing costs.

Anyway to me, your assertion is as silly as saying, "There's no difference between 1980's and 2000's cars." It's just a stupid remark.
(Note I said your remark was stupid, not you. I criticize ideas, not people.)

Wrong, the size really hasn't changed for ages man...

http://www.westerndigital.com/products/legacy/Legacy.asp?r=1#dimensions
Western Digital 40 mb drive dimensions:
1 inch X 5.7 inches X 4.00 inches weight:1.12 pounds

http://www.westerndigital.com/products/products.asp?DriveID=38 (you have to click on the dimensions link to get it)
Western Digital 200 GB drive dimensions:
1.028 inchesX 5.787 inches X 4.00 inches weight: 1.32 pounds

The size of the Xbox hard drive is the same as well. Seriously man, the size hasn't changed because the AT standard dictates the drive dimensions.

My 14mb drive that I put in my 386/SX20 back in the day??? Same size.

There ARE microdrives out there that have a smaller form factor but those are designed for laptops and the Xbox chassis would need a redesign to use them. They also cost more. If I dig around HardOCP I can find pics to illustrate that, too... but once again, I'd really like to drop this.