Analysis: Manufacturing cost and estimated sales of the Gateway 3DS (and other 3DS Flashcarts)

wololo

Been followin' the console hacking scene since 2006, I'm an old guy so get off my lawn!

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51 Responses

  1. Much Math
    Very numbers
    Wow Profit
    So Pricey
    Amazed

  2. hgoel0974 says:

    Nice analysis, I’d guess this sort of number crunching is what you’ve studied? Cause really I don’t know anyone who doesn’t specialize in these things would ever think things through so well!
    I’m surprised with how much you cut out from their profits and still the result was a multi-million dollar business!

    • wololo says:

      Thanks for the compliment, but this is absolutely not my field. However I dug a lot for that type of information recently, for this device and earlier for the True blue dongle

    • Acid_Snake says:

      I don’t know about wololo, but in my university any computer engineer must have knowledge of advanced math, statistics and economy, this is the latter. And it’s very simple, calculate the total cost by adding up the fixed cost plus variable cost per unit and use that to calculate how many units you need to ship in to have a benefit, it’s a simple equation:

      units * selling price = fixed cost + variable cost * units

      from there on you calculate “units” to know how many units you have to sell to have benefits, and in the case of the Gateway, it’s a very low number.

  3. digitduck says:

    nice post, and it confirming what almost everybody thought. But why is everybody so impressed by this? apple is kind of doing the same thing i thought…

    • wololo says:

      Apple is a legit business, that’s the main difference. Most of the Gateway customers are not realizing the amount of money that goes into Gateway’s pocket. This article is putting numbers on the cost of piracy.

  4. keane says:

    Hey! good analysis research. The timing is interesting, basically the z i think talked about vita hardware hacking and dumping cartridges then we come onto 3DS cartridge profits, haha though I know this is just a coincidence since you have explained to people where you got these numbers from your previous article before the ps vita hardware dumping anyway

  5. enigma says:

    Not to be that guy, but who gives a rats ass. People are willing to pay to pirate, who cares. Its not gonna stop it by throwing stats out there. Everyone knows manufacturers make bank on things legit business or not.

  6. Frezzno says:

    Could you also make a calculation on how much a 3DS game cost to develop? So that we can compare to how much a developer loose to this.

    • wololo says:

      Unfortunately I don’t have that many contacts in the gaming industry, and game development costs can go from almost nothing to hundreds of millions, it is very difficult to gauge. I think the important number here is that for the Nintendo DS, it was estimated that 1% of owners were pirates. Based on these numbers, I don’t even understand why Nintendo or game developers consider this as an issue. My personal take on this is that devs see their sales numbers, see the amount of pirated games, and assume that they would get back these sales if piracy wasn’t involved. Why on the contrary, they should reconsider their marketing strategy to understand why 1% of owners being pirates actually impacts their sales that much. It also means that the remaining 99% are not really buying their game in the first place.

      Some studies showed at some point that on the DS, 10% of the players of a given game had pirated it. Based on the numbers of flashcarts, it means 10% of the NDS base owned the game, including the 1% of pirates. so, 9% of the total NDS owners had bought the game, 1% had pirated it, the 90% remaining didn’t care. That’s where their leverage is, not on the 1% of pirates.

      Not that I am trying to minimize the impact of piracy (it’s still definitely hundreds of millions of dollars going to the wrong people each year if you think of all the hardware mods for all consoles), but that the comparison would be extremely difficult to make.

  7. Yifan Lu says:

    Once I saw what the kernel exploit was, I was almost angry at Nintendo. I mean… what? The hackers basically had a free pass there. As soon as they managed to get the ARM9 kernel memory dumped (which they could with a hardware dumper if they didn’t already have an exploit), all it took was a very simple search to notice the bug. I doubt it took a year. Maybe a month at most. Of course maybe another month was spent writing the payload, but still. I wish sony was this careless.

  8. Zik says:

    hey wololo. nice analyst of that data. it almost accurate as possible.

    too bad the people who defended the Gateway 3DS won’t be reading this.

    As for the business making for manufactoring the games, it can easily go into millions of dollars.

    This is the possible breakdown of developing the game:
    1. writers
    2. artists
    3. CADD/Animations
    4. debugger
    5. Market departments
    6. producer for physical format
    7. medium for digital content
    8. mass stations for GPU
    9. storyboard
    10. music producer
    11. coders

    I might have missed out on some. or may have neglect it, but when you considered the the fact that gaming industry has come a long way since the 8bits worlds. it isn’t like the 8bits world anymore, where all you needed was the writers, coders, storyboards and producers.

    when you considered the fact that games are nearly made with 3d particles, there are more involved in it, along with paying the license fees for using the engines not owned by the studios as well as other engines like BINK.

    When you also considered it, paying $59.99 + taxes in the USA, their break-even rely on the mass sales breakthrough like BF4, COD: Ghost, COD: BO2.

    If you remember a few years back to MW3 and it initial success, the developer teams are often given bonus if the games are met with rousing success that exceed the expenses, it would be worth it to them.

    but if we were to pirate these right off the bat, it like saying that you don’t appreciate their efforts and telling them to go bak to 8bits.

    this is probably why i’m already losing interest in gamings since it doesn’t gives much replay values and there are many differents issues with the younger generation’s short attention spans.

  9. Ryan says:

    I don’t give a damn, seriously.

    It’s easy for people like Wololo to be against piracy. Living in Japan or whatever 1º World Country you other people might be from.

    I live in a shitty 3º World Country(Brazil). Minimum wage here is about $300. The cost of a 3DS XL is about $300 dollars and each game is about $80.

    Try living here for once and let’s see if you’ll keep with this same hypocrisy.

    I’ll make them as profitable as they want. They’re pretty much my heroes.

    • motu90 says:

      I can absolutely understand that there are different conditions around the world, but it’s still no excuse to support piracy. It’s very easy and applies to every single person in the world: What you can’t afford you don’t own. I can’t affort the money to visit Brazil at the moment, even if I’d love to. The consequence: I can’t fly, period. I’m not going to steal somebody’s ticket or plane to get there, it is as it is.

      It’s really not my intention to argue with you about what is legit and what is not, but it’s just my point of view.

    • Caio says:

      I’m not sure whether shitty third world countries even count in those companies’ statistics.

    • Ztupid says:

      O_o What are you talking about? Even the people in first world countries are poor trying to make a living. If you think everyone is rich and can afford games, think again.

      If you live in the third world countries doesn’t really apply, considering that companies don’t want to lower prices JUST for the 3rd world for two reasons: people just buy it and have it imported, which would promote regions locks and publishers (like EA, Activision) would lose money if they sell games at a low prices in 3rd world countries.

      and yes, i’ve been to one. seen so many copies games as well as many fake phones, consoles, and whatnot.

      and remember this, even your handheld may get bricked, even if you bought from Gateways themselves. there no guarantee that the codes won’t affect even legit buyers.

  10. veelk says:

    Not trying to sound like piracy is good, but it isn’t completely bad either!
    At least in my personal case, a large amount of the games I’ve ended up buying, I’ve played them first either via emulation or a flash cart.
    If the only way to play games EVER was only by the available official ways, which are either buying the full game or downloading a demo, I wouldn’t even own, know or love more than half of my games.

    To put a quick example, Final Fantasy VI.
    Back in the SNES era, I never met anyone who owned this game, and I was barely aware it existed. (FF3 as it was called in USA of course)
    But because of emulation, I was able to find and play this game, and ever since then, I’ve been a full supporter of the game with every re-release.
    Similar things happened when I had a DS flash cart. It was more like a try-before-buy thing for me.

    So it’s not that bad! As long as good games are produced, the people with money will be motivated to buy and support them.

    And then what about inflation? Those old games that start to increase in price until they cost near a hundred or more online. Without piracy, this kinda thing would still happen, and the games would be accessible only to the rich.

  11. OR says:

    I own a GW cart and don’t make any excuses about it. I like pirating and for me the $75 I spent was worth it considering the number of games I’ve been able to play with it. I admit though that I’ve been pirating/hacking stuff since the days of VHS and Betamax tapes and have a little bit of an addiction to it. I’m probably quite a bit older than most of the folks on this forum as well.

    • wololo says:

      Well, as I said, I am trying to not be judging. I believe piracy is a personal choice. If you made it knowingly, good for you.

      I just wanted to shed some new light on the business for people who didn’t know about this, not to judge people for their decision to own the device or not, but rather to those who imagine that $75~$80 is a “fair” price given the amount of work/energy spent on the device: it’s not.

  12. lum says:

    Problem is, with Gateway’s current technology, they don’t have years ahead of them to make profit. The only customers they will get are people who purposely leave their 3DS at a low firmware version, and this number will only decrease as time goes on. Unless it’s now runnable on the latest firmware, Gateway’s not going to sell them by the masses.

    • wololo says:

      True. I went with the assumption that
      – The firmwares that “don’t work” haven’t been around for a while: there were 80 million 3DS sold before those firmwares were published.
      – people who are tech savvy enough to “know” about things like the GW also know they should not upgrade their firmware.

      Based on that, I assumed 1% of the current user base of the 3DS is a good approximation. Of course, if/when the 3DS gets 100 million users, the estimate I made of 350’000 units will not increase, technically reducing the 1% to 0.33% or something similar; but with a fixed amount for a potential market of 350’000 units.
      So I still think the math works, does that make sense?

      • RandQalan says:

        I know this is a lost cause for you

        The people that pirate games do not see the irony of paying this company for games they could buy with the same money

        Nice info BTW

        Thanks

        They do the math realize it is cheaper for all the games that are compatible and realize they would save money buy using this card

        What they do not realize if that code kicks in they are out of all the games and the 3DS :o

      • Daggdroppen says:

        Thanx for the article! I agree with most of the stuff you write. Gateway and other manufactures will probably find a way to run their card on 4.5 + firmwares. So i think we can count on at least 1 % flash carts just like the ds had! The main problem for them to earn money during 2015 will be the fact that there much progress being made at this very moment on the 3ds homebrew scene..
        Smealum is one of the pioneers:

        https://mobile.twitter.com/smealum

        He is against piracy, will make his code as “piracysafe” as possible. But ppl will figure out how to pirate sometime.. This will however enable ppl to use their sd-cards instead of buying flash-carts. When that happens gateway will loose their income :)

  13. Stranno says:

    At least the 3DS/NDS will get dirty cheap with time.

    I want a NEO N64 Myth but 200$, holy shit, its 900% overpriced. And it wont get lower, there is no competition.

  14. ghadz says:

    it will be cool if we can see vhbl cartridge on vita! who wants to invest?

  15. LennyVita says:

    What about all the 3ds systems they ruined with their death code? that is shameful. they don’t deserve the attention of being a legit company. If a person chooses to use a flash card, thats their choice. If they made all this money from sales and killed all those 3ds with their update, i hope they are soon out of business.

  16. Sonic says:

    I don’t understand, why are acting like if gateway punched you in the face and you want a full revenge against them. You think everyone is an idiot who doesn’t understand that gateway is over priced? I know from the beginning that it is over priced but they are over priced because they are the first one to come out with a hack in the market with a 3DS hack. Your being weird here wololo, either your just getting mad because you have personal issues with gateway or maybe just because you hate piracy that’s why your “flaming” so much. On the other hand I say that I believe everything you say and it’s all true then tell me what should I do then? Where can I get a 3DS hack then???

    • wololo says:

      Can you clarify where you are seeing “revenge” , or “flaming”, in this article? Please quote exact sentences from my article. I believe I have been extremely cautious to not judge anything here, just to give numbers. I was being interested in knowing the numbers, I do not own a 3DS or any Nintendo product, so I do not seek “revenge” on anyone here, just tired at people who think these people are the “good guys”.

      • Sonic says:

        lol this is “flaming” wololo. Getting angry because people think they are the good guys. They are hackers too and I know that they are earning money through hacking but what you gonna do when they are the first one to come out with a 3DS hack. I mean they can place any price for now. I would also not buy their product if there were some cheaper and better hacks available for 3DS but there aren’t any. Besides just to be clear I support you guys as well. It’s not like I’m their fan boy or something. If they put a blame on your I would take your side as well support you fully. I’m using your TN-V7 on my Vita and It’s great. I’m also a gateway user and I think their hack is pretty good and in the future it’s just gonna get better. The main thing is we can’t blame them unless someone else comes out with a better hack for 3DS.

  17. Sinn says:

    They’ll get only get 1/4 of that after taxes.

  18. I said it before and ill say it again f*** True Blue, Gateway, all the reDRM junk and the criminals who make them…

  19. badbob001 says:

    The article is mostly fine but for the very last sentence where it leaps to proclaiming that “you are not really paying these people for their work, you are paying for piracy.” I don’t understand what does the price markup have anything to do with supporting piracy. If they sold it for a little or no profit, then it’s less about piracy? One can argue that even if you paid no money for it, you are still potentially supporting piracy.

    There is a high markup because the market supports it. They offer a product with unique features that are in high demand and so they can charge more. As you said, the potential market size is limited and so it makes sense for them to try to capitalize on sales early instead of trying to stretch it out long term. When competitors come out with products that are more compelling, then prices will come down.

    I sometimes shake my head when I see an expensive painting that appears to be the result of the artist tripping over a paint can. Or I look up the price-controlling and monopolistic practices of the diamond industry whenever I see one of those damn commercials. Or wonder why a simple bag of animal hide is so expensive and yet so attractive to the ladies. Or why an additional measly 8GB of internal storage on a tablet costs $100 more. Then I calm down and realize that all I can really do is not buy those products and hope others will do the same.

    And don’t forget about other expenses to owning a business such as office space, employee benefits, TAXES, number of employees, master templates/molds, etc.

    • wololo says:

      These people do not have office space or employee benefits. They most likely do not pay taxes, and it is highly probable the total number of people working for Gateway 3DS is 5 at most. The molds, etc… costs are fully included in my analysis, as part of the $200’000 fixed costs.

      I am baffled that some people think there is some sort of legit business/company running this thing o.O

      (also, since you also posted on GBATemp: I don’t understand how being personally against piracy reveals any sort of “agenda” on my end, I prefer to call that “ethics” if you don’t mind. That being said, I believe I have managed to keep my personal opinion on the matter quite separate from the article, except, indeed, for a few notes like the one at the end. What I am trying to say is that the “added value” of the Gateway 3DS does not come from the actual added value from the people who worked on the device, but from the games on the 3DS. When you pay a high margin to Apple, you pay for the security, the high customer service, etc… all of these things come directly from the work that Apple put into their products. This is very different from the case here. Am I making sense?)

      • Ztupid says:

        You have to consider this:

        Gateways don’t want any competition, they don’t have any types of contacts, and if your 3DS get bricked because of their codes, it mean they don’t want competition. That how the markets strives.

        Look at CodeBreaker, GameGenie and severals other back in the haydays. They didn’t try to sabotage other companies, but seek to improve their own product. Chances are, Gateways probably only intended to profit with little effort in improving the software but changing a few codes once every other update.

        And remember, if they take all the efforts to hid their footprints, it meants they intend to make their escapes once someone catches a hint of their location.

  20. icyheart says:

    It is High risky investment ,But high return in other hand.
    3DSgatway team sell retailer for $55 per units without shipping.

    • Ztupid says:

      think about it. it only cost less than that to manufacture it. even less since they’re making profits. chances are, they probably even stole someone codes and intended to make a profits off it.

      you WANT market competitions, even if it piracy, but to input a codes that you know your competitors are cloning with the intend to brick your handheld? You might as well as go buy the dang game.

  21. asdf says:

    This research is researched, but poorly and just scrambles to add a few numbers together and at the end when you couldn’t find the numbers, you used a let’s assume it’s large approach. It is poor form because you made far too many assumptions and don’t understand the business. There are numerous administrative and variable costs out and lumped up so much into the manufacturing that it is meaningless. Regardless of what you think about the business, whether it is legitimate or not, it still functions like one.

    At the end of the day, is it surprising to make a profit or even overcharge? No. They are looking to make a profit, and it is a common tactic to overcharge on the first set of units. It’s called price skimming. What I don’t understand is that you don’t see the value added and label it as piracy. Sure, it is being used as such, but much of the research is eventually going to be used elsewhere, we saw this with the region free patch already (though it didn’t work out).

    • wololo says:

      I am open to people proving me wrong with a more in-depth research. Until then, my numbers are the closest to reality you will publicly find. Whenever I use a “let’s assume”, my numbers are still pretty accurate and based on facts I cannot necessarily share (kickstarter projects for electronic gadgets sharing their cost breakdown, historical/statistical data about companies such as Datel, statistical data about similar piracy rings, etc…), but whenever in doubt I underestimated the values (in general by a factor of up to 10) to mitigate the “bias” I might have in over-evaluating the numbers. As far as I can tell, nobody else has ever tried to publicly analyze this market so precisely.

      In other words, let’s be scientific about this: prove me wrong with a better study, or shut up

  22. Ken Arromdee says:

    I am trying to not pass any moral judgement here, but the people buying these chips need to realize a huge profit goes in the pockets of those who sell it to them, and that profit margin is completely unrealistic compared to the work and actual investment in the product. This is because you are not really paying these people for their work, you are paying for piracy.

    Would you then encourage people who find and create exploits to release the exploits for free, thus preventing companies like Gateway from making huge profits?

  23. EmoryM says:

    If they wanted to secure those profits they probably shouldn’t have associated themselves with bricking 3DSes – I didn’t buy a Gateway yet (updated firmware) and they’ve guaranteed I never will.

  24. Nooback says:

    You’re just jelly you dont have any skillz wololo like the Gateway team,go back to your vhbl stuff lol

  25. tonojoshua says:

    Very funny about your comment why nintendo must worry 1% of ds with flashcart. Triple a title selling 1million copy. If only flashcart is not there, it will selling 2 million copy. So no wonder nintendo and dev despise piracy for stole their money.

    • wololo says:

      You are being tricked in the assumption known-to-be-totally-wrong that 100% of the pirates would actually buy the game if they had no choice. This assumption is a trick from the game industry, and has proven to be wrong, over and over. It is much more accurate to assume the game would sell 1% more, making it 1.01 million copies. Not 2 millions.

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