Waiting for the Wii Price Cut

Includes: MSFT, NTDOY, SNE
by: Bruce Everiss

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  (NASDAQ: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 (NYSE: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 (OTCPK: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.