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[Zannegan]

I'm surprised there's no increase in the profit margin at all. Just goes to show how little "common sense" (i.e. wild-ass guesses) have to do with business realities.

Now imagine it had been a pro model. Would an additional $50 have been enough to deliver a 2-3x jump in power plus extra features like DLSS on top of the OLED screen? Not at the sake profot margin, surely, but still profitably?

This sort of news really makes me worried about the Switch successor.

 

[Fake]

Where is all those bloomberg defenders from previous threads? Are they hiding like Jason?

I guess is time to go back and talk about crunch from an an anonymous email again.

 

[GuinGuin]

I'm surprised there's no increase in the profit margin at all. Just goes to show how little "common sense" (i.e. wild-ass guesses) have to do with business realities.

Now imagine it had been a pro model. Would an additional $50 have been enough to deliver a 2-3x jump in power plus extra features like DLSS on top of the OLED screen? Not at the sake profot margin, surely, but still profitably?

This sort of news really makes me worried about the Switch successor.

That's all based on the idea that they are telling the truth.

 

[Abriael_GN]

Bloomberg says so and I agree with them.

Imagine basing your idea on the rumormongering of a media outlet known for a long history of bullshit fueled by "anonymous sources" lol.

Where is all those bloomberg defenders from previous threads? Are the hiding like Jason?

Unfortunately, there are some, and they're as ridiculous as you'd expect.

 

[CAB_Life]

So it doesn’t increase, but it likely stays the same or very similar since Nintendo are Nintendo and they didn’t say anything about incurring a loss on the new model.

 

[Interfectum]

Bloomberg says so and I agree with them.

 

[Bernd Lauert]

All that R&D for an update that doesn't even increase profit

The R&D is for the Switch Pro.

 

[tommib]

Bloomberg says so and I agree with them.

Not sure if serious.

 

[StreetsofBeige]

Two possibilities in my books.

1. Bloom is right and Nintendo trying to dampen the news so they can nicely surprise the market with giant profits. If analysts bake into earnings expectations OLED profit boosts they will increase their estimates which no company likes

2. Bloom is wrong and Nintendo genuinely counters their claim and its not as profitable as stated. A big statement as its rare for a company to publicly say margins on a product isnt as good as thought

 

[GuinGuin]

Not sure if serious.

It also lines up with common sense. A 7 inch 720p screen probably costs them a $10 premium over the old one. It's not like OLED is uncommon anymore.

 

[Abriael_GN]

Not sure if serious.

Takashi Mochizuki's astroturfing account?

 

[KAL2006]

They don't need higher profit margin as it's already high as fuck now. The tech inside the Switch I bought years ago for my Shield TV way before the Switch launched. Nintendo have not dropped the price of the Switch years later which is not the ordinary are most console makers drop prices 3 years in.

Nintendo always work with Hugh margins whether that is not dropping price for not only their console but there games, or lower budget development of there games just look at the new Pokémon as a example. But in the end it isn't about profit margin it's about would someone pay at this price and in this case they would.

 

[Bernd Lauert]

It also lines up with common sense. A 7 inch 720p screen probably costs them a $10 premium over the old one. It's not like OLED is uncommon anymore.

What also lines up with common sense is that a company won't break the law and lie to its shareholders for no good reason.

 

[Saber]

Its about time people stop listing to these insider clowns and alikes.

Hope it put this so called "pRo" rumors people here loves to spam to rest.

 

[Aranea]

Might be a good time for this company to stop making up fakes news. I'm actually behind this idea of companies debunking fake articles, just like Square Enix did a couple of months ago.

 

[spons]

Color me surprised. Thought that it would be cheap for them to buy 30 million 720p panels in bulk, but I guess not.

 

[DonkeyPunchJr]

It’s because the profit margin on the old Switch is already so high.

 

[Coloress_Kafka]

Will be interesting to see if Bloomberg responds because the value in a publication like them is accuracy in reporting. Also Bloomberg having evidence that Nintendo is very publicly lying to their investors is a much bigger story.

 

[tommib]

It also lines up with common sense. A 7 inch 720p screen probably costs them a $10 premium over the old one. It's not like OLED is uncommon anymore.

You’re hilarious.

 

[Kokoloko85]

They must have better profit margin no? There using the same tech as a 2017 switch but oled? Vita had an oled too.

 

[DonkeyPunchJr]

They must have better profit margin no? There using the same tech as a 2017 switch but oled? Vita had an oled too.

No not necessarily. Say original Switch only costs $100 to make, that would mean it has a 66% profit margin. Which in turn would mean that if the OLED cost more than $17 above the previous model, it would have a lower profit margin.

Obviously I pulled those #s out of my ass. But you can see that if the Switch already has a big profit margin, then the new screen can still be very cheap while also having a lower profit margin than the old one.

 

[Zannegan]

That's all based on the idea that they are telling the truth.

I mean, as a business, you don't straight up lie to investors unless you want to go to jail. It's a huge deal.

Beyond that, I may not know much, but I do know that the cost of new hardware is never just the cost of your components. There's always more to it. Did I think there was $40 more to it? No. But then, I have zero experience in manufacturing, so I don't really know what I'm talking about.

On the other hand, I do have experience with my common sense conclusions being completely wrong. What humility I have has been hard earned, and that none to quickly. Lol.

If Nintendo has come out and directly denied the story, then you can bet it's literally, provably true. Watch and see how Bloomberg responds.

 

[Magos Librorum]

You mean that Bloomberg report was another lie of Takashi Mochizuki? How shocking.

 

[FStubbs]

Yep...if Switch OLED has the same profit margins as the 4 + year old original Switch (or even the younger Mariko revision) AND there is a tech shortage pushing prices up...then they really are killing it.

I don't know why this is considered bad Nx people feel the need to either attack or defend Nintendo's profitable practices. A profitable Nintendo ensures a competitive and diverse videogame market...

That's precisely what many on this forum do not want.

 

[Reallink]

Nintendo are the Hollywood accountants of the videogame industry. They have attempted to publicly quash every BoM report for every console they've produced, claiming particularly around launch to lose money or break even on hardware that is built from half decade old parts with multiple estimates suggesting up to 100%+ profit margins. Either they have the worst supply chain managers in the history of the world several times over, or they're masters at legally cooking the books to obfuscate their profit margins from consumers, who they tellingly and bizarrely mention by name here. Why would you mention customers in a statement like this unless you viewed BoM estimates as a threat to your business?

 

[GuinGuin]

Nintendo are the Hollywood accountants of the videogame industry. They have attempted to publicly quash every BoM report for every console they've produced, claiming particularly around launch to lose money or break even on hardware that is built from half decade old parts with multiple estimates suggesting up to 100%+ profit margins. Either they have the worst supply chain managers in the history of the world several times over, or they're masters at legally cooking the books to obfuscate their profit margins from consumers, who they tellingly and bizarrely mention by name here. Why would you mention customers in a statement like this unless you viewed BoM estimates as a threat to your business?

Believe me when I say they are barely breaking even on their Amiibos. Think of all the retooling involved!

 

[tr1p1ex]

They must have better profit margin no? There using the same tech as a 2017 switch but oled? Vita had an oled too.

They have a better profit margin than they did in 2017 but not a better profit margin with the OLED model at $350 than the current $300 Switch.

 

[cireza]

The fact that Nintendo felt the necessity to comment about this actually makes the Bloomberg claim more believable to me. They probably hit a sensible point there.

 

[Zannegan]

The fact that Nintendo felt the necessity to comment about this actually makes the Bloomberg claim more believable to me. They probably hit a sensible point there.

This isn't "little white lie" territory, this is major fines and/or do time territory. You just DO NOT lie to investors as a company that plans to be around in ten years. It's not because I trust Nintendo or think they love and respect their customers any more than any other big company, it's just bad business.

Bloomberg may not even be wrong in their estimates of the cost of the individual parts; but if Nintendo says their margins are the same in a message targeted at investors, again, you can bet it's literally, verifiably true.

 

[tr1p1ex]

The fact that Nintendo felt the necessity to comment about this actually makes the Bloomberg claim more believable to me. They probably hit a sensible point there.

So they publicly issue denials only to accurate reports in order to mislead investors and customers? Got it. lol.

It's not because it was an inaccurate report that was misleading investors and customers.

And since Bloomberg was already wrong about Switch 4k, they can't be wrong again. It wouldn't make sense for them to be wrong again then right.

And further pointing to Bloomberg being accurate is there is no penalty for them reporting what analysts said about the SWitch Profit margins no matter if those analysts were wrong. While there is a huge possibly of a fine from the SEC and lawsuits from investors if Nintendo is caught misleading investors. So obviously this further points to the Bloomberg reports being accurate.



A+ logic! You've sniffed them out. YOu're a regular Columbo.

 

[Panajev2001a]

Do you work at Bloomberg?

Nope .

 

[Panajev2001a]

With the cost of tooling new production lines to manufacture the new dock and modified case parts for the larger screen, if that was necessary, their margin per unit probably hasn't improved. Probably won't until they reach some sort of economy of scale. We also don't know if they had to make any small changes to the internals to adapt to power requirements for the new screen. In the short term that could also increase cost.

No doubt in the short term manufacturing costs have increased over what they're paying per unit for existing lines. The new dock and ethernet capability confirm that more than the screen has changed.

$50 per unit of cost increase? ...

 

[cireza]

So they publicly issue denials only to accurate reports in order to mislead investors and customers?

Yeah. If I had a business about making billions of dollars I would definitely do this.

Do you think that they would have come with a Tweet like this ? "Yes we are actually making a huge margin out of the OLED model, thanks to all the buyers in advance !"

This is the typical situation where you can only say what people want to hear.

 

[tr1p1ex]

Yeah. If I had a business about making billions of dollars I would definitely do this.

Do you think that they would have come with a Tweet like this ? "Yes we are actually making a huge margin out of the OLED model, thanks to all the buyers in advance !"

This is the typical situation where you can only say what people want to hear.

lol. that's why you don't have a multi billion $$$ business. There are rules out there against misleading investors.

And of course no company is going to brag to customers how much money they are making. There would be zero point to it. They are under no obligation to tweet out their profit margins daily to customers. And customers really don't care about the exact profit margin. If customers thought the product was a ripoff then they wouldn't buy it.

Everyone knows companies make a profit or attempt to make a profit on what you buy. And some do better than others. The ones that do better either make something more desirable than the average company or they have some monopoly-like pricing power in the marketplace or both.

Also might be news to some people that although Nintendo makes a nice profit margin in good times, it's nowhere near what some of the imaginations out there seem to think it is. Especially on hardware and even more so on just released hardware.

 

[Reallink]

This isn't "little white lie" territory, this is major fines and/or do time territory. You just DO NOT lie to investors as a company that plans to be around in ten years. It's not because I trust Nintendo or think they love and respect their customers any more than any other big company, it's just bad business.

Bloomberg may not even be wrong in their estimates of the cost of the individual parts; but if Nintendo says their margins are the same in a message targeted at investors, again, you can bet it's literally, verifiably true.

"Margins" can be manipulated with any kind of expense. For a simplistic example, 20% of every Switch OLED sold can be ear marked to pay an associated marketing expense, and legally reported as a -20% lower margin. Similary, the cost of the new assembly line or the R&D designing the console can be paid for with a per unit margin deduction. The problem is these are massively front loaded expenses, and pinning this burden on the first 5 million units doesn't really represent the cost of a product likely to be produced in the 100 millions, and sold for 5-10 years. These are the most rudimentary examples for how you could claim a loss on a $350 device with a $150 BoM, certainly experts in the field would know loopholes that go several layers deeper.

 

[Gamer79]

IMO Nintendo missed a big opportunity here. They should of used the newer Tegra X1+ chip with the 4k upscaling along with the oled screen, and updated Ram and called it the Switch+ for $399. IMO the new oled model isn't worth it.

 

[tr1p1ex]

IMO Nintendo missed a big opportunity here. They should of used the newer Tegra X1+ chip with the 4k upscaling along with the oled screen, and updated Ram and called it the Switch+ for $399. IMO the new oled model isn't worth it.

Nah. 4k upscaling not going to do much for Switch games. They don't even run at 1080p. The 1st party games are all cartoony graphics. They look good. And most people really can't tell 4k from 1080p from 10' away on a ~60" tv.

Switch 2 will come out in ~2 years and have a next-gen chip in it. And we'll get 1080p on the tv. Maybe.


They still believe in generations.

 

[tr1p1ex]

always ignore reports and posts that say parts cost x and device cost y so profit margin is y-x and all of its sister and cousin reports as well.

if you wan to see what Nintendo makes for profit just go read their financial reports.

 

[cireza]

And customers really don't care about the exact profit margin.

So why did they take the time to explain this ? Investors certainly want for the margin to be even bigger, and customer are not interested. So why did they tell everyone that the margin is lower ? Looks like a bad move.

 

[bender]

Anyone thinking core components aren't getting cheaper as time passes doesn't understand Nintendo's business model.

Traditionally you'd be correct. We are not in traditional times as far as manufacturing is concerned and price increases for components has happened several times in the past year and a half.

 

[tr1p1ex]

So why did they take the time to explain this ? Investors certainly want for the margin to be even bigger, and customer are not interested. So why did they tell everyone that the margin is lower ? Looks like a bad move.

because the info wasn't accurate. And they deemed it important enough to issue a correction. And because people like you believe this stuff.

 

[SLB1904]

best part about this is Bloomberg stans will shut up

 

[GuinGuin]

"Margins" can be manipulated with any kind of expense. For a simplistic example, 20% of every Switch OLED sold can be ear marked to pay an associated marketing expense, and legally reported as a -20% lower margin. Similary, the cost of the new assembly line or the R&D designing the console can be paid for with a per unit margin deduction. The problem is these are massively front loaded expenses, and pinning this burden on the first 5 million units doesn't really represent the cost of a product likely to be produced in the 100 millions, and sold for 5-10 years. These are the most rudimentary examples for how you could claim a loss on a $350 device with a $150 BoM, certainly experts in the field would know loopholes that go several layers deeper.

Very good post. Nice insights.

 

[StateofMajora]

Not sure what to think. I did find it a bit surprising that supposedly the new oled screen only cost them 3-5 bucks more per unit... seems like it'd be more.

Either way, Bloomberg has 0 cred at this point.

 

[MarkMe2525]

Nintendo is full of shit.

 

[Majukun]

The fact that Nintendo felt the necessity to comment about this actually makes the Bloomberg claim more believable to me. They probably hit a sensible point there.

damn if you do, damn if you don't apparently.

 

[tr1p1ex]

"Margins" can be manipulated with any kind of expense. For a simplistic example, 20% of every Switch OLED sold can be ear marked to pay an associated marketing expense, and legally reported as a -20% lower margin. Similary, the cost of the new assembly line or the R&D designing the console can be paid for with a per unit margin deduction. The problem is these are massively front loaded expenses, and pinning this burden on the first 5 million units doesn't really represent the cost of a product likely to be produced in the 100 millions, and sold for 5-10 years. These are the most rudimentary examples for how you could claim a loss on a $350 device with a $150 BoM, certainly experts in the field would know loopholes that go several layers deeper.

They aren't manipulating Switch margins just so they can issue a correction of an inaccurate report.

It's definitely true though that the Switch OLED isn't just Nintendo swapping in an OLED screen into a Switch which is one reason why NIntendo issued the correction.

 

[Panajev2001a]

They aren't manipulating Switch margins just so they can issue a correction of an inaccurate report.

It's definitely true though that the Switch OLED isn't just Nintendo swapping in an OLED screen into a Switch which is one reason why NIntendo issued the correction.

Sure, it is an added cost, but Switch also depreciated and again… $50 increase in MSRP is a lot. We are talking about almost 17% BoM increase… really?

 

[Fake]

The fact that Nintendo felt the necessity to comment about this actually makes the Bloomberg claim more believable to me. They probably hit a sensible point there.

So, if Nintendo confirmed Bloomberg reports = Bloomberg was right, but if Nintendo denny Bloomberg reports = Bloomberg was right.

Make dualsense.

 

[tr1p1ex]

Sure, it is an added cost, but Switch also depreciated and again… $50 increase in MSRP is a lot. We are talking about almost 17% BoM increase… really?

A $50 price increase doesn't mean $50 more in the cost of parts.

Because they not only have the parts cost, but they have a lot of other costs associated with developing and making a new model and getting the factory up and running and making the customer aware of it. And getting retailers to stock shelves with another model. And they might have a situation where they are making the old model still and production is split between 2 different yet similar models which would likely drive up manufacturing costs a bit per unit.


Then if Nintendo makes 10% profit on $300, they are going to want to make 10% on $350. And if the retailer makes 10% on $300 then they will want to make 10% on $350 as well. I'm just pulling 10% out of a hat.

So a $50 price increase represents all of that.

also note they didn't say their profit margins aren't greater on the OLED model than the Switch on launch day. They said they aren't greater than those of the Switch today. So depreciation from 2017 doesn't factor in to the profit margin comparison between the 2 different models rolling off the assembly line today.


higher pandemic influenced costs that have hit supply chains as of late might be a wash too across both models. Although they could be greater for the OLED model if new parts for it would have had to been secured more recently compared to the old model.