Waiting for the Wii Price Cut

Back in April I talked about the upcoming and inevitable Wii price cut. This is now looking a lot more likely, here’s why:

• There has been nothing AAA launched on the Wii for a very long time. And their announced upcoming game launch schedule is looking very weak. They have done all the big first party IPs for this generation. This makes the Wii a less compelling purchase compared with other consoles which have had far more powerful game launch schedules over the last six months with more of the same to come over the holiday season.
• Market price. You can now buy a far better console for a lot less money. Microsoft  (MSFT) has gone to war here and their offering at the $199 price point is compelling. The Wii now looks like a very expensive Ford next to Microsoft’s cheaper Ferrari.
• They are losing the monopoly on the casual family gaming customer. Microsoft and Sony (SNE) have woken up to the huge change in the market.   Their response is, and will be, a range of game titles aimed directly at the Wii jugular.
• Supply. Nintendo (NTDOY) has learned the lessons of undersupply and has geared up to have enough volume to supply the market. And we all know about price elasticity of supply.
• The economic downturn. This is going to get a whole lot worse before it gets better. People will still pay for their entertainment. They just have less money to do so.
• The razor blade business model. Basically the more Wiis that are out there, the more Wii games that will be sold. And there is more money to be made selling games than there is selling consoles. So Nintendo has a strong incentive to get as many machines out there as possible regardless of price point.
• Weak online offering. As Sony rolls out Home and as the Microsoft Live service undergoes a major upgrade for the better, Nintendo is being left behind in this very important part of the gaming experience. This could force them to use the price mechanism in order to compete.

Nintendo has run the last six months with the Wii on sheer impetus. You have to wonder how long this will continue with the market changing so much. A price drop is inevitable. The only question now is whether or not Nintendo can get away with delaying it until next year.

And there are still a lot of Wiis to be sold. For a keen gamer Wii ownership is essential for those amazing, classic first party games. For others, as a second console to have alongside the 360.

Comments

[FreddyCruder:]

hm.. another point to add to the list is the fact that "Wii 1,5" will be standard next year, where u will be able to buy the console with the new gyroscope enhanced controllers. so Nintendo might want to cut prices for holiday season to be able to sell all their old wii consoles, although that might not be an important point considering they don't have any problem with selling out all of their consoles as it is already, but still, I'd say it's one of the major reasons why we will see a price drop within this year.

2008 Sep 30 11:57 AM

[FreddyCruder:]

one thing that might be seen as slightly contradictory with your article is this: you state that the companies don't make their money on the consoles, but on the games, and at the same time you state that Nintendo have run out of AAA titles. In other words, if they wont make much money on games as it is right now because there aren't any titles, then their only source of revenue is the actual consoles, and considering that Nintendo is selling the Wii with a relatively good profit. (It's last generation hardware compared to sony and microsofts consoles). It's doubtful if they can afford to slash prices on the Wii to stay competitive. But hey, I'm no economist, so I might get this wrong. As for the other two companies entering the casual gamer territory I don't think they will be able to with the same punch. This is the thing: Wii together with Wii sports is the most ingenious gaming platform offer ever. Why? Because you essentially get a package that "non-gamers" understands. It's great versions of tennis and all the other sports that's in the title, it resonates well with "non-gamers" since it's physical, and it's what games should have been from the very beginning. Now, when it comes to story driven games or shooters that's a completely different ballpark, and one that Nintendo haven't been able to capitalize on this generation. But anyways, what I'm trying to say is simply, that I don't think Sony or Microsoft will be able to pose any considerable threat to Nintendo and their pursuit of the casual gaming audience using only means of price point. They would need similar controllers as well, or something that's even more "I get it"-esque.
In a sense it's like comparing apples with oranges. Nintendo is the console with Wii Sports, and they have some great titles for kids like Mario etc. And when EA finally starts to deliver great sport titles next year together with Nintendos new controller I would say that it will be even harder for the competition to keep up.
But of course, you are absolutetly right that it's bizarre that Nintendo can sell their console for such a high price now that Microsoft is going to lower their price yet again; and of course, it's a bit dangerous for Nintendo here, because they don't have as large revenues on game sales as Microsoft. I'm not sure though that Microsoft knows what they're doing right now, I mean, how much money aren't they loosing on their consoles already, and to then lower the price yet again.. these are risky times in the video-games industry for the companies, but it's definitely not grave times for the consumer (unless you are a hardcore gamer owning only a Wii, or one of the people who stood in line to buy an xbox 360 when it was released at triple the price it's at now).

2008 Sep 30 12:32 PM