When Will Wii be $150

[Squilliam]

Pineapple said:

Squilliam said:

If they cut the price by $50 they'll cut their hardware margins by at least 50% and they'd have to sell at least twice as many units to make the same profit as before. I don't really see them cutting the price as theres no real objective reason to maximise market share at this juncture unless they have an oversupply of Wii's which they need to clear.

It's not that simple. They'd be halving their initial profit, yes, but not their long-run profit.

If the people had bought just the Wii, and no games and no controllers, they would have halved their profits. But seeing as people buy games and remotes - which most likely account for more of the profits than the hardware - it's nowhere near as simple as you portray it.

Perhaps even more than halving... their profit margins dropped considerably when they cut the price the first time which also coincided with currency woes. Effectively they would be substantially reducing their margins per console in order to attract the worst customers they have yet, those who were too stingy to pay $200 for a Wii so why would these same people turn around and buy full price software? The most price concious people are the people who are most likely to buy used or rent their titles. Theres a reason why most companies aren't in a hurry to cut the price below $200 and why they instead tend to elect to keep the increased margins from component cost reductions.