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In what may signal the earliest start for the holiday shopping season ever -- at least as it applies to the video game industry -- Nintendo of America on Thursday confirmed that will indeed be dropping the price of its Wii console by US$50 to $199.
This is Nintendo's first price cut for its market-leading Wii, and it brings the company in line with Sony (NYSE: SNE) and Microsoft (Nasdaq: MSFT), who have previously announced markdowns for their advanced consoles. When shoppers hit the stores Sunday, they will find a $199 Wii and $299 Xbox 360 Elites and PlayStation 3 Slims. An entry-level Xbox 360 Arcade with less data storage space and no headset included also runs $199.
All of the console price cuts were leaked beforehand to various gaming blogs via snapshots of retail store fliers and advertisements. Consumers, therefore, have had plenty of warning, along with plenty of time to adjust gaming budgets, as the holiday shopping season looms on the horizon.
Get Your Console Now
The round of price cuts and a possible rush to retail leads Michael Goodman, a Boston-based independent gaming industry consultant, to offer some advice to shoppers: "When it comes to consoles, the early bird gets the worm."
Goodman was referring to speculation that the cheaper consoles could lead to disappointed consumers.
"I can almost guarantee that they are going to have shortages in November and December," Goodman told the E-Commerce Times. "It's a supply chain issue. You can only manufacture so many consoles. You try to mitigate shortages to the best of your ability, but you have to be careful that you haven't wasted manufacturing capacity. That's expensive to run factories and pay people to build that capacity. You don't scale your manufacturing process to your absolute peak period. You build capacity for the mean, building up excess inventory so you'll have enough for the holiday season."
Shortages have become an issue for Nintendo in the past with the Wii; ever since it was introduced in November 2006, rave reviews and high demand have resulted in many a bare retail shelf, with scarcity remaining a problem through the 2008 holiday season.
Nintendo's Wii Strategy
Nintendo's move is only partly due to a weak economy having an impact on gaming industry revenues for most of this year, according to Goodman. Price cuts have always been part of the natural life cycle of consoles, and assuming a life cycle of five years, one would normally see reductions hit ever year or 18 months, he said. However, Sony's ultra-high price for the initial version of the PlayStation 3 blew the normal pricing curve out of the water. "The console manufacturers have been able to successfully hold the line and maintain their price points and not commoditized the console right out of the box," he said.
"For Nintendo, three years without a price cut is pretty unbelievable in the console world. The reason why they've been able to hold on as long as they have is because the console has been so popular. They haven't needed to boost sales 
. Cutting only $50 means they're still making a nice margin on the unit," he added.
$199 will still get consumers a Wii, the motion-sensing Wiimote and a copy of "Wii Sports." But new titles geared to the casual/family gaming audience beckon, such as "Wii Fit 2" and a new "Super Mario Brothers" game.
"I think Nintendo's going to have a successful holiday season, and I think they will be No. 1 in terms of console sales," Goodman said. "But I think also that you'll see lower sales figures overall, partly as a function of the economy but also as a function of this being later in this generation of consoles. It's a natural progression."
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