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Forums - Nintendo Discussion - The Wii, Price Drops, and Long Term Sales...

Ok by now pretty much everyone understands that the Wii is not going to have a price drop until supply meets demand and stays that way for at least a month or more.  The reasons for this are quite obviously because Nintendo has no financial incentive to lower the cost of a product they can't seem to produce fast enough.

With that in mind I have to say it seems like everyone has forgotten the Wii will eventually cut its price.  Its almost as if everyone is so caught up in the idea that the Wii is selling out that we have forgotten to look forward and realize it obviously can't last forever.  This is especially true for people who believe the Wii could see sales slumps early in '08, but don't address the price cut options Nintendo has available.

So my questions are: Exactly how big of an impact on long term sales will a Wii price drop be?  And do you expect the value of the SKU to change as a result of that price drop?

 

My Thoughts:

On the second question, I don't think Nintendo has any reason to remove Wii Sports when they do drop the price and I can't think of any features they would want to remove, so I will clear that second question up right away and say I think Nintendo can afford to and almost certainly will do a straight price cut without changing the overall value being purchased in any way, except possibly by increasing the Value.

Now onto the much more complex long term sales impact of a price drop.  First of all I will say that I am expecting a $50-$70 price drop for their first drop depending on when they eventually do cut price.

Historically looking at other consoles the bulk of their sales are not done at their initial price point but rather at their mid-life price points.  And while the Wii may be late to the price cut fun, I do think it will benefit from this trend as we have seen other consoles in its position do in past generations. 

Interestingly I think its very likely we could see an uncommon trend in the order of the price cuts. Or to put it simply, we could see a situation where the price is dropped in the EU and/or Japan before it is dropped in the US.  This would of course be due to the demand being met at a much better pace in these regions, particularly EU/others.  With that in mind, I am not entirely sure that a price cut is as far off as we may have thought.  In giving it a second look I think we actually could see an X-mas cut in EU/Others (doubtful) or possibly an early '08 cut in EU/Others (unlikely).  I only point out these possibilities because before I had discounted them completely, however now I do feel they are possibilities.

Ideally Nintendo would have production ramped up to "ludicrous speed" (to borrow a phrase from space balls) and would be able to accomadate a new influx of Wii buyers should they choose that path. However,  I don't have nearly as good of a grasp on the EU/Others regions as some of our members so I will leave the speculation on what kind of impact a price cut will have there to them.  

As for US and Japan, I think a good strategy for Nintendo is to wait and observe the situation.  A strategic price cut as an offensive weapons against competitors or as a defensive weapon to keep sales high can be very effective if used properly.  In essence the Wii has been performing this well without having to make a lot of moves which leaves them a full arsenal of tricks to use as they move deeper into the generation.  This could become important later down the road as they wheel and deal for 3rd party exclusives.

Imagine if you will scheduling a substantial price cut to hit the day of the launch.  When attracting a big third party title being able to make these kinds of offers is huge.  Imagine Nintendo offering as a promotion a package of the Wii+ Their Game for $270 as an incentive to the developer. There are a lot of promotions you can offer as you are getting ready to cut price that are in effect lowering the cost while increasing the value, basically this creates a price cut that focuses consumers to a chosen product allowing Nintendo ti offer incentives to third parties while building a very strong library.

In conclusion I think price cuts are one of the best tools/weapons each company has and utilizing them at a time of your choosing as opposed to a time dictated by neccessity allows you to generate a lot more impact out of that price drop.  This of course means that should Nintendo utilize thier position properly they could greatly increase their final market share for the generation. 

PS - Sorry for the length, just had a lot to say =P 

 



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I think you are right.

For europe, a price cut before Christmas is very unlikely, Nintendo will probably sell out even without lowering the price.
Afterwards it is possible. I think the first moment for a price cut in europe will be when Mario Kart releases. Maybe Nintendo will then bundle MK with the Wii and Wii Sports for the same price it had before. After MK hype dies down, Nintendo would also lower the "real" price.



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I think Nintendo could drop the price of the Wii+Wii Sports to 200$ and then offer Wii+Wii Sports+Wii Fit+Balance Board for 250$.



Rhonin the wizard said:
I think Nintendo could drop the price of the Wii+Wii Sports to 200$ and then offer Wii+Wii Sports+Wii Fit+Balance Board for 250$.

 If they only want Wii Fit to be a big hit this would work fine.  If they want the Balance Board to be used in multiple titles, including third party titles, they'll have to offer a single option that includes it.



What? Price drop?

Ridiculous. Currently it's the fastest selling console of all time just the way it is. You can't even begin to talk price cut until it slows down to the speed of its competition. It outsells the other combined still.

Talking price cut, assuming it does happen, would CERTAINLY be less than $50. That's 20%. A 20% price cut on a console that JUST came out would be unheard of and madness. Nintendo would lose a lot of unnecessary money.

 If there is one, think $20. Nintendo DS anyone?



 

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I think the idea of doing a drop in the nomral console's price and phasing in one with the wii Balance Board and wii Fit is intriguing, because unlike 20 gigs of hard drive space, that's worth the extra fifty (hundred) dollars. I'd be quite happy if the Balance Board becomes prevalent enough to be frequently used in games...



cdude1034 said:

Ridiculous. Currently it's the fastest selling console of all time just the way it is. You can't even begin to talk price cut until it slows down to the speed of its competition. It outsells the other combined still.

With that mindset, the PS2 would never have had a price drop in its entire life. You price drop as soon as you can meet demand at a lower price and make a better profit.



Reality has a Nintendo bias.

You drop price when you can exceed demand, not when you can barely meet it...

I think the wii may have already had some price drops in some smaller markets, but was due as much to exchange rate changes as meeting demand...


My guess is fall of 08, assuming Nintendo doesn't suddenly find itself increasing supply at the same time when demand falls. Right now, at least in America, the wii hasn't fully met it's launch demand, which is higher then the sustained demand, and so demand could fall quickly once that is met. I don't see that happening prior to Christmas, but stranger things have happened...



Honestly, they can barely keep it in stock around the world. It's breaking all these records, selling twice as much as the others. Don't expect any substantial price drops until it's out for about 2 years OR sales slow down out of nowhere, which I don't see them dropping down to nothing. If things stay reasonably well, I'd say expect a 50$ price drop in early - mid 2009. The only thing that might force them is if the core drops down lower then the Wii which I also don't see happening for a while.

I'm sorry but the price won't be going down overly soon, you're more likely to see colored versions of the console which always seem to spike sales a few weeks, and THEN a price cut a few months later. A sure sign, if you ask me, that a price cut is coming is the release of multi colors or a redesign.



One of three things need to happen before Ninty will consider a price drop:

i) Wii stops selling out (demand drops): Honestly, not likely anytime soon - especially with all this new software hitting. Demand is going to go, up, up... up. And if demand hasn't dropped by the time WiiSports II hits... it may not happen for 5+ years.

ii) Wii manufacturing increases significantly (supply increases): This is gradually happening, and we have a feel for the amount of units out by March '08 - thanks to Ninty financial statements. If supply managed to ... say... double - there is a good chance Ninty would drop the price straight away (or close).

iii) Both: What really matters is supply vrs demand. If supply doubles - and the demand appears to absorb this extra manufacturing - then it doesn't matter at all. I estimate there *could* be a potential market for as many as 500m Wiis (worldwide).

...

Before Ninty drop the price, they will tinker with bundling - the same as Sony are doing in Europe. Wii + WiiSports + Game for $249 (or even $279). A Metroid bundle. A Mario Galaxy bundle. A Smash Brothers bundle. A Mario Kart bundle. A MP8 bundle. A WiiFit bundle (etc...).

Each of these would further drive demand - without affecting the real price.

...

Wii Sports has easily paid for itself. Ninty could easily drop the price to $199US - the only thing that would really be affected is their bottom line (i.e. profits). 10m units at $50US less --> $500m US --> a lot of money.

...

Its impossible to know the impact on long-term sales at this point. Although its crazy to suggest, the Wii *could* keep selling out - at its current price - using bundling alone - for 2-3 more years (if not longer).

The only thing I will say - the longer Ninty can keep it at its current price - the better the long-term prospects for the console are. Its amazing to think that it *could* outlast the PS3...

 



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