Analysts: Nintendo Should Cut Wii Price 'While Their Competitors Are Still Weak'

With both next-gen consoles now priced at $299 and ready to unveil motion control solutions before long, Nintendo would be best served cutting Wii prices to $199 while it still has an advantage, analysts say. Analysts had anticipated Microsoft would lower the price of the Xbox 360 in response to Sony's $299 PlayStation 3 Slim unveil, and move came today, far sooner than some had forecast. The Xbox 360 Elite will receive a $100 price cut to $299.99, putting it on level with the PS3 Slim. The Pro SKU drops $50 to $249.99, but the system will be phased out as its current stock depletes. The Xbox 360 Arcade model, which includes a memory unit and no hard drive, keeps its $199.99 price point. Given that the Xbox 360 has had the most stable sales performance of any current consoles this year, was the price reduction even necessary? EEDAR analyst Jesse Divnich says yes, because $299 is now the "sweet spot" for console pricing and any hardware above that mark will become an outlier. This means Microsoft's pricing move is aimed at remaining competitive, rather than at boosting sales -- Divnich isn't expecting much of a sales lift. Lazard Capital Markets' Colin Sebastian agrees. "We view the Xbox price cut as a proactive measure to maintain market share and boost momentum ahead of the key 2H selling period," he says. Whether the hardware price cuts can drive a turnaround in the summer industry slump, however, depends on how software does in the holiday season. Analysts felt that the price reduction for PS3 placed some pressure on Nintendo -- now that the Xbox 360 has followed suit, they say, the pressure now intensifies, especially as new motion control schemes from both next-gen consoles are poised to attract Wii's demographic. Divnich notes that the Wii's success came both from its lowest price point as well as its library of family-friendly games. "In previous console generations, these price sensitive and casual gamers would have had to wait three to four years before more advanced hardware consoles were in their price range and sported a strong library of cheap casual/mainstream/kid oriented titles," he says. "Essentially, Nintendo stole potential PlayStation 3 and Xbox 360 consumers from this hardware lifecycle three years in advance," Divnich adds. "In order to maintain this position Nintendo should drop their Wii console down to $199, not because the current Xbox 360 or PlayStation 3 pricing structure poses a threat; rather, because they will eventually pose a threat." "Nintendo's strategy should be to capture as many consumer dollars as possible while their competitors are still weak in their offerings to the casual audience and price sensitive consumers," Divnich adds. EEDAR is also joined by Stern Agee in predicting a new $199 price point for Wii before the holiday season sets in, possibly as soon as October. "The truth about consumer goods, something Sony and Microsoft have finally realized, is that you design your product around the price threshold consumers are willing to pay—just because you can cram nine processors into your console, it doesn’t mean consumers will pay a premium for it," Divnich concludes.