Wii Price Cut Woes

Even with a temporary spike in Wii sales, the PlayStation 3 continues to overrun the Wii in Japan. Nintendo stock remains static as other troubling financial news points to Nintendo’s short-term failure at hitting back against an overly saturated market with a late-in-the-game price cut. One could argue price points do not matter in Japan and a spike in sales means the whole affair was a success. However, everything behind the scenes paints a different picture. The company’s projections are poor, even with time to let the price cut matter state-side. It seems the money-men aren’t buying a Wii price cut as a cure-all to recession and saturation woes.

On the back of last week’s headlines railing Wii sales; there is the silent intrigue of stocks and analysts’ predictions, and the loud booming of week-to-week console wars. While sales have increased, the price cuts for the other machines have netted gains and assembly fine-tuning that far outweighs the Wii console’s current sombre performance. Nintendo had its 12-month share price estimate cut to 29,000 yen from 40,000 yen by Morgan Stanley analyst Masahiro Ono, speaking to Bloomberg news. Annual profit looks to lessen for the first time in six years due to the fall of Wii console sales and a stronger yen.  Net income at Nintendo could lessen 11 percent to 249 billion yen (£1.6 billion) this year, the first drop since March 2004.

Even with a two-year low in PlayStation 3 sales, the price-cut helped bounce the global video game market’s month-to-month slump. Sony’s US$100 price cut boosted the U.S. video game market, ending a six month decline in revenue. Console price cuts all the way around boosted sales, but Nintendo lags behind their success. The addition of motion-control cameras and Wii remote-like devices to the PlayStation 3 and Xbox 360 may leave Nintendo in the dust-bin, at least by the numbers.

Nintendo’s shares have lost a quarter of their value over the past year.  The high tech quality of the Wii console’s rivals could force Nintendo to re-evaluate their hardware decisions. Analyst Yusuke Tsunoda, of Tokai Tokyo Securities, said the Wii has sold so well, that it may take a totally new machine to boost Nintendo sales. “The price cut on the PlayStation 3 was effective because people are getting a high spec Blu-ray disc player for a good price,” he said to AFN news. Tsunoda wonders if Nintendo’s software announcements will be enough for the Wii to pick up the pace.

Nintendo faces a lot of challenges in the months ahead; a strengthening yen, a saturated market, effective rival price cuts, and a global slowdown that has especially hit their biggest market, the United States. Nintendo faces a double-edged sword with holiday sales, boom or bust. Nintendo still contends the industry is recession proof, but perhaps they’re just fooling themselves.