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MTZehvor on 25 March 2014
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Einsam_Delphin said:
MTZehvor said:
Einsam_Delphin said:
MTZehvor said:
Einsam_Delphin said:
MTZehvor said:
Einsam_Delphin said:
MTZehvor said:


Yep, it wont happen, just like with the first price cut... oh wait! Why you guys still seem to think losing money is the only factor that plays into whether or not they should price cut despite Nintendo proving twice already that it's not, I'll never know!
First off, price cuts have already been shown to be massively ineffective for the Wii U. The Wii U costs about $50 less this year than it did last year, has a full year's worth of games behind it, and is selling 10K or so better weekly than it was last year. That's a pathetic increase for any sort of incentive, let alone a good $50 price cut. If a price cut was going to drastically improve Nintendo's fortunes, it already would have.

 

Secondly, they may very well not make much money when their console is barely selling. But your plan not only takes away their chance at profit, it puts them at a huge disadvantage as well. You're advocating that Nintendo sell the Wii U at essentially $190 (taking away the $60 for Mario Kart), or, in other words, less than two thirds of what it was being sold for at its launch. Technology improves exponentially, but not that exponentially. There's simply no way for Nintendo to make profit with a handicap like this unless it somehow increases software sales by a factor of three or so, and as the previous price cut has already shown, that isn't going to happen.

In terms of microeconomic theory, Nintendo is currently hovering inbetween the average fixed and average variable costs of their marginal cost graph, meaning that it makes sense for them to stay in business (or, at least, this line of production) for the time being. Your proposition is simply advocating driving them further towards the average variable cost curve in the vain hope that this will somehow magically spike software sales despite precedent arguing against this, which is a policy on par with a struggling football team making all of its tickets a dollar apiece in the hopes that concession stands will cover the lost revenue.


Price cut you mean, no plural. As said already in the OP, their first price cut was a price cut in name only, as it didn't actually give the Wii U a new price point. It went from $300-$350 to $300, so of course nothing was gonna change. Besides they can't just never price cut again. It's going to happen eventually. As for your next two points, we'd need to know exactly how much Nintendo is losing per system sold to know if it'd be worth it atleast for the short term, which we don't of course.

What do you mean it didn't give the Wii U a new price point? The console went from $350-$300 with a game bundled, and $300-$250 for just the console. It gave the Wii U a new price point that would be just as visible as this new price point.

We don't know exactly how much Nintendo is losing, but it's fairly easy to look at past data and easily tell that this is not a good idea regardless. Let's look at the effects of a price cut. According to this study on video game markups, each individual game sold can at best hope for a $20 profit for the parties involved. And that's a best case scenario. So now, let's assume Nintendo slashes the price of a Wii U down to $250 (which is what it would be with your proposal). The profit being made from the consumer buying Mario Kart as well is $20, since it's a first party title with no one but Nintendo involved. So Nintendo has $210 in the bank for this Wii U.

Now here's the kicker; in order for Nintendo to get back to the ORIGINAL level it was selling the Wii U at ($300), which was still being sold at a loss, they would need to sell 5 other first party titles at the full price of $60. In order for them to actually be profitable, they would need to sell at the very least two more (we know now that the original claim of it only taking one game purchased to make the Wii U profitable was incorrect, so at the very least, it's two), meaning that Nintendo would have to sell SEVEN first party titles (not including Mario Kart 8 thrown in for free) at the very least to be profitable. An attach rating of 8 titles per console is higher than the Wii had, for comparison.

And keep in mind, Nintendo only gets the full $20 if it's a first party title. If second or third parties are involved, such as Retro, Platinum, Ubisoft, etc, Nintendo will get less than that and have to sell even more. Assuming people buy software developed by third parties semi-routinely, Nintendo will need to have a software attach rate of nearly 11 per console, something completely impossible for a console in its second full year on the market.

Currently, the Wii U needs at the very least a software attach rate of 3 first party titles per console in order to simply make it back to the original level it was selling at, and at least 5 to be profitable (and probably more). Is this currently a bad situation? Absolutely; it's a bad scenario Nintendo is in, but at the very least, it's within the realm of possibility to salvage something out of it. Your proposition takes this from a bad scenario and turns it into a living nightmare, one where Nintendo would need every customer to own at least 8 first party titles for them to have a shot at profitability, which is a completely unrealistic expectation for ANY console, let alone one struggling like the Wii U is.

And certainly, the price of the Wii U can't stay at $250 forever. That said, that's no reason to drop it now. You don't see car dealerships selling brand new cars for $500 because they'll eventually have to drop the price that low to sell them. When the production costs of the Wii U decline, then Nintendo can safely drop the price. Until then, this bundle would simply dig them into an even deeper hole than they are already in.