The Wii, Price Drops, and Long Term Sales...

[shams]

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).

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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.

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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.

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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...