Although aggressive moves by its rivals left it little choice, Nintendo's Wii price reduction was "necessary," says Lazard analyst Colin Sebastian, who also says it'll prove a shot in the arm for the whole industry.
Nintendo's anticipated $50 price reduction on its Wii comes as "another needed boost" for the industry, says Lazard Capital Markets analyst Colin Sebastian. The company had little choice in the matter. Both Microsoft and Sony cut the prices of their consoles to $299, confronting Wii in the "sweet spot" pricing arena that played a strong role in its rapid adoption. With the relatively narrow $50 price difference between Wii and two more sophisticated hardware options -- plus stagnating console sales -- the cuts were "necessary" for Nintendo ahead of the holiday, Sebastian says. Even now, Sebastian isn't so sure the price cut solves everything for Nintendo. "While we believe the Wii price reduction is a necessary outcome from fast-declining unit sales trends, we suspect there is ongoing risk to Nintendo’s full-year Wii shipment targets," he said. But Nintendo products have reigned Christmas in recent years, and the strong end of the company's first-party game lineup, including Wii Fit Plus and New Super Mario Brothers should still drive a "meaningful month over month" in Wii sales, the analyst adds. "Never too late for hardware price cuts," says Sebastian. And with the console market seeing high competition and aggressive price cuts across the board, software sales on all platforms stand to reap the rewards, a promising state of affairs for the industry's flagging monthly numbers in the U.S. and its hope for a holiday turnaround. "While higher hardware prices have constrained sell-through of many traditional video games, in our view, we believe several years remaining in the current cycle, lower console prices, and more innovative and social game-play could help drive a rebound in growth in 2010."
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