"More casual players aren't as likely to be attracted by hardware features, so it's all about delivering a fun, easy-to-use and addicting game experience," says Anita Frazier, toy and video game analyst at NPD Group.
Another factor in enticing those casual users is keeping its console cheap. "The key thing about Nintendo is they want their things to be at price points that anyone can respond to," says Hiroshi Kamide, director of research at KBC Securities Japan. Nintendo's strategy is to buy inexpensive components instead of making them in-house, allowing the Wii to sell for $260 while the PS3 costs $300.
But here's the winning point: Unlike its competitors, Nintendo has figured out how to make money from its console sales. Sony loses money on each Playstation sold. Microsoft might just break even. But every Wii brings in $6 of operating profit for Nintendo, says David Gibson, an analyst at Macquarie Securities.
Nintendo also sells 60% of Wii games itself, compared with 30% for Microsoft and 15% for Sony. Wii users are expected to buy the most games this year, 220 million, compared with 120 million PS3 games and 125 million for the Xbox 360.
The top three Wii games--"Wii Play," "Super Smash Brothers Brawl" and "Super Mario Galaxy"--are all Nintendo's own titles, but the top three for PS3--"Grand Theft Auto IV," "Call of Duty 4: Modern Warfare" and "Assassin's Creed"--are all from outside developers, not from Sony.
By making most of its games itself, Nintendo risks sacrificing the chance to earn licensing fees from as many third-party developers as its competitors. It also prices games cheaper--at $50 versus $60 for the other two consoles. But so far the gambit has paid off: Wii locks in fans because many of its most popular games appear exclusively on the Wii. And Nintendo has a higher gross margin on game software than the others at 65%, compared with between 50% and 60%.
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