4 Reasons Why Wii Ought to Anticipate a Price Cut

It is looking more and more like Nintendo (NTDOY.PK) 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.

Comments

[Mickah]

Point 1 - isn't this irrelevant? Just because Nintendo can cut prices doesn't mean that they will have to.
Point 2 - the backlog of demand is unlikely to be met this year (so no price cuts this year, which is what Iwata was saying).
Point 3 - PS3 and X360 don't have a whole lot of "mega" games coming this year - PS3 has MGS4, X360 has what?
Point 4 - GTA4 will boost sales of the HD consoles, sure, but not at the expense of the Wii. In any case, the Wii has always looked "last-gen" - why should GTA4 make any difference?
Point 5 - They're already selling as many Wiis as they can make - cutting the prices just means lost revenue and no extra sales.
Point 6 - The 360 price cuts haven't made any difference to Wii sales. Customers seem to prefer the Wii even though the 360 is cheaper.

Put it this way - we're already at the end of April and the Wii is still selling incredibly well. Why would it suddenly start selling badly before the end of the year?

[xtrader]

does Bruce play the Wii? Does he own any games consoles? This article says "no" He has no idea why the Wii is outselling PS3 and Xbox.

[Ting]

Wiifit should keep demand for Wii high as Nintendo further penetrate expand into non-core markets. Also, unlike the other two console manufacturers, Nintendo does not have any other goals other than to make money off the consoles they are making. Finally, unless we are only comparing the graphics, the Wii's motion sensing control is probably the only truly next-gen innovation feature.

Unless we are seeing inventory stacking up when production increase, I doubt there will be any price decrease.

[Fëanor]

I usually find your comments very informative, this one to, but I think it misses on one critical point.

"You get a whole lot more for your money with the 360." Do you?
We have to stop looking at the cost of producing when valuing a product this is the GM way. Do as Toyota, what is the consumer willing to pay for this product? Right now the consumer is definitely willing to pay 250, and my guess is they will still be, even at a production of 25 mill a year and and x360 costing 199.

[CoverRAGE!]

Very little of what goes on in the Xbox and PS3 side of things has any noticeable affect on the Wii's sales. They are not aiming for the same market , first off, and, secondly, the Wii is selling tons more units.

GTA IV, as wonderful as it may be, will change nil.

[user 365]

A bit misguided to say the least... I don't assume for a second that Nintendo doesn't have other big games on the immediate horizon. The new Mario Baseball game will come out some time during the summer lull, but after that, they'll be saving the big games for the holiday season. They've been doing this longer than anyone else - they are dumb enough to front end all their good games and leave nothing for the rest of the year. We just have to wait till E3 to find out what the next big game or peripheral is. By many predictions it'll be a new Kid Icarus game, but I bet there'll be a lot more than that.

[ClaudeLv250]

Well bruce, it's nice to know you haven't change much since your (short) days on vgchartz. You still have a completely wonky take on reality. Most of your "points" are exactly why a price cut isn't going to happen.

1. Making a profit isn't a reason to drop the price.

2. They're ramping up production because after 1.5 years they STILL HAVEN'T BEEN ABLE TO MEET DEMAND. We have seen to ceiling for Wii sales in America, it's naive to think that demand is suddenly going to be met in 3 or 4 months when it couldn't be met in over a year of already high production numbers.

3. You're making the same fatal mistake others have - because Nintendo has not revealed their line up for the rest of 2008, people simply assume that there's nothing to be released. The fact is that they already said they'd reveal their line up at E3, and there's already several games floating around for an 08 release we know about: Mario Super Sluggers, Disaster: Day of Crisis, Animal Crossing and Kirby.

4. GTA IV is going to sell truckloads the first couple of weeks and then the industry will move on to hyping the next big game. No single game on another console is goign to impact the Wii. People have been saying that it "looks last gen" since before the console launched. If that didn't stop it out of the gate, I hardly think yet another Grand Theft Auto game is suddenly going to do it.

5. Nintendo doesn't need to lower the price to sell more Wii consoles. The problem is that they simply CAN'T PRODUCE ENOUGH to satisfy demand. A price drop would have no visible effect because it *already* sells out the second it hits shelves. There has to be some signs of demand being met before you can even suggest that a price cut is needed to move more consoles.

6. Subjective. And the 360 price cut in Europe had ZERO effect on the Wii. It's still outselling 360 by more than 2:1 there.

[superchunk]

Hey Bruce, I think your article has more to do with your personal view stated at the end of your blog, "You get a whole lot more for your money with the 360.", than it does with the actual facts on the ground.

1. Prices cuts are not determined by the profit the item is making. This point it completely irrelevant.
2. This simple fact that demand is still larger than supply 1.5 years into its life, far longer than any previous console, is proof enough that we will not see a discount anytime soon.
3. Nintendo's release schedule is not weak. NA still has Wii Fit next month and EU still has Super Smash Bros Brawl in June. On top of that Nintendo is always secretive with its releases. Mark my words, come E3 you will realize how wrong you are on this point. Plus, beyond MGS4 and GTA4(which just released) what major games do PS360 have coming?
4. GTA4 will affect the Wii as much as Halo3 or Call of Duty 4 did. Both of these games, and many others, have shown visually why the Wii is so 'last gen', as you put it. Yet, on a world wide scale, the Wii still beats the competition by at least 2:1. People have to realize that games like this sell to the minority 18-25 males who have proclaimed themselves as 'real gamers' while the rest of the world who bought PS2's in mass and are now buying Wii's continue to buy Mario Kart and Mario and Sonic at the Olympic Games.
5. Nintendo are already selling as many Wii's as possible. By the time we can actually recognize the shift from 1.8m/month to 2.4m/month we will be hitting the holiday season, which means a significant increase in demand through December. The best bet of seeing normalized stock in retail isn't until January/February of 2009.
6. The 360's price cuts, as well as last year's price cuts from both MS and Sony, have not impacted the Wii's demand in the least bit.

All you have to do is look at the DS to see what Nintendo's plans are for the Wii. The DS is undoubtly the market leader in handhelds. It enjoys a massive lead over the PSP. Very early on, i.e. before the DSLite hit the shelves, it received a $20 price cut. That was 3 years ago. Since then the PSP has drop by over $70 and has not affected the DS' sales rate at all on a global scale, thus Nintendo has not touched the DS' price.

The Wii will be the same. It will remain at $250-ish until either A) Wii's are sitting on shelves at higher than normal retail levels OR B) PS360 starts to sell at a similar level or greater than Wii. I don't think 'B' is ever going to happen and 'A' will happen at the earliest of mid 2009.

[mesoteto]

i completely agree with you super....Bruce come on buddy this is just false logic in all of ts glory

[timmah]

#1, Having the ability to drop the price in no way makes a company want to. What company in it's right mind would say "Hey, we can't meet demand and we're making a killing on every unit we sell, we should drop the price so we don't make such a profit". This argument makes no sense.

#2, Being forced to raise production (increased demand) never gives a company reason to drop a price. Being forced to LOWER production (decreased demand) causes that. Basic business logic is exactly to the contrary of this point.

#3, Nintendo's lineup is weak? I don't see any reality to back this up. Is this just your opinion based on your personal definition of 'weak'?

#4, I've heard this before, every time there is a major release for the HD consoles, the argument is made that it will hurt the wii. In reality, this has never happened. I choose reality.

#5, If Nintendo cannot even meet demand when the price is $250, why is it necessary for them to lower the price to sell more consoles? This doesn't jive with reality.

#6, MS Price Cuts may help increase 360 sales, but as demonstrated by price cuts in the past (PS3 for example), the Wii will keep right on selling. On your point that 'You get more for your money with the X360', the list of 'features' and 'graphical specs' is not the only thing the consumer is looking for. There are also factors such as 'Fun', and 'Controls'. So this is merely your opinoin and it in no way reflects the reality of the current market.

Mark my words, Nintendo will not cut the price of the Wii until after the holiday season, and they will still out, even with the increased production.

[misterd]

Should Nintendo be PREPARED to make price cuts at a moments notice? Hell yes. But that's so blindingly obvious to anyone with more than 2 ganglia that I don't think Nintendo needs us to clue them in. Will that need come as early as Fall '08? Highly unlikely. 2009? Probably.

As to specific arguments:

1. If you are saying that this allows Nintendo to cut prices without hurting themselves (ala MS and Sony), you're dead on. If, as some seem to think, you are saying this is a reason to drop prices... no, not in the least. This is a reason to keep the prices up and milk the market for every last cent.

2. Increased supply will decrease demand. The problem is we have no way of knowing yet just what the demand is. No one could have forseen Nintendo being in this position a year ago. It will take time for Nintendo to increase the supply, time for that supply to hit the market, and then time for the demand to die down, and even then we don't know that it will die down below the supply levels. I don't see Nintendo getting enough feedback to signal the need for a cut until close to the holiday season, and then they will likely sell so many Wii's that a price cut could wait until the new year.

3. Here's the statement that blows my mind. Do you really think that Nintendo woud release SSBB, MKWii and WiiFit all in a 60 day period in their biggest market if they had absolutely nothing to play the rest of the year? Nintendo is playing things close to the vest right now, and very likely will have some big announcements come E3 (or sooner). Until then, I think predictions about it's 2nd half library are premature.

4. Will GTA4 help the HD consoles? Sure. But how much? Earlier GTA games sold roughly 12-15million copies each, and I imagine most of those were to the same 12-15 million customers. How many of those do you think have already purchased a 360 or PS3? I imagine a pretty good number. How many of the other 100 million PS2 owners, the ones who never purchased GTA3/VC/SA, will be swayed to get a PS3 or 360 based on GTA4? In short, there will be a shift, but not a dramatic one.

5. Nintendo already has as many consoles in homes as is humanly possible. They are not on shelves gathering dust. Cutting prices on consoles that are going to sell anyway won't do diddly- and you haven't made a convincing argument yet that there will be Wii's on shelves any time soon, so this point is very premature.

6. Unfortunately the 360 price cuts have come in regions where people don't care all that much. The cuts in the US last year were just anemic. Until the 360 gets another round of cuts here, Nintendo has nothing to fear.

[Exful Galaxaic phenom]

I'm sorry sir, and I don't want to hurt your feelings or anything but, who the hell are you fooling? yourself?

Do you really believe half of the bull that comes from yourself? and how old are you 80?

You completely think the Wii will just all of a sudden set on fire and fall out of the sky. If your that much in denial over the Wii, get one yourself and you will eat your words. (I thought people said old people love the Wii.)

Anyways, I play the Wii more than I do my Ps3 anyways. It won't change my opinion if since gta4 come out.

Let me ask you, how the hell is gta4 making the Wii look dated? What are you smoking? Gta4 isn't even graphically powerful in all honestly. Call of Duty 4 or Gran Turismo 5 Prologue would have had a better chance at making the Wii look dated than Gta4.


If you are going to write articles, base them off of Truth! Face the Sunny side of Truth.

[Steve 3.x]

As most have already said, this is complete baloney. And even if Nintendo does plan on dropping the price at some point in the next year, they aren't going to talk about it now.

[Grampy]

If you were not convinced by the comments you received, I hope you were by the NPD numbers for April. You are living in a fantasy land, which is fine, but please don't write fantasy articles which mislead investors.
In other words, to paraphrase an ad slogan that goes with your much beloved but badly faltering PS3, Live in your world, write in our world.

[Rev. S Campbell]

Folks, it's not wise to argue with Bruce on the basis of solid, indisputable facts. He doesn't really recognise the concept.

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