4 Reasons Why Wii Ought to Anticipate a Price Cut

| About: Nintendo Co., (NTDOY)

It is looking more and more like Nintendo (OTCPK:NTDOY) may have no option to make the Wii cheaper at retail, despite what Satoru Iwata says. Here’s why:

  • It has been at the same price for a long time now, during which it has become a lot cheaper to manufacture, especially with the volumes being churned out. Nintendo has been making a profit in every unit from the beginning, so there is plenty of room to drop the price.
  • The company is ramping up production to 25 million units a year. Initially these will just meet the backlog of demand, but once that is done it will need to use the price mechanism to shift them.
  • Nintendo's release schedule is looking very weak. Right now we have Super Smash Bros, Brawl, Mario Kart and Wii Fit. Then nothing mega and lots of shovel ware. Compare that with the PS3 and 360.
  • GTA IV. This is going to transform the balance in the market strongly in favour of the HD consoles. The Wii is going to look increasingly last gen.
  • To make the most money out of the Wii back catalogue of games, Nintendo needs as many platforms out there as possible. At a lower price it will sell more Wiis and milk it on the software.
  • The Microsoft Xbox 360 price cuts now make the Wii look very expensive. You get a whole lot more for your money with the 360.

So when is this going to happen? Q3 of 2008 is my best bet. But it could be a little later, depending on what the market tells Nintendo.