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Fans and publishers are asking for a price drop on the WiiU. Having a price drop would push more units, but Nintendo is in a situation where they cannot drop the price for at least six months. Here is why they cannot drop the price:
The WiiU Is Selling At A Loss
According to the Nintendo, the Wii U is already selling at a loss. In order to make a profit, they have to sell at least one game to make a profit at the current price point. Fils Aime stated, “As soon as we get the consumer to buy one piece of software, then that entire transaction becomes profit positive….In the end, the business model is still to drive the install base of hardware, and then to drive a strong tie ration with all of the other software and experiences for the consumer. And if we’re able to do that, then we will create significant profit for the company.” With the position Nintendo is in, how much further could they drop the price before it detriment to their profit margins. If Nintendo drops the Basic to $250, and the Premium to $300 they would have to sell two to three games if they continue their current profit strategy.
Investor Confidence
Investor confidence will be shaken if Nintendo drops the price for the WiiU. Most consoles do not have a price drop at least till a year later on average. This will be the second console by Nintendo to have a price drop in a short period of time. Nintendo will still be financially stable for years even if they are not making a profit on the WiiU, but investor confidence could shrink and that would lower their stock even further. During the Wii phenomena, the stock price for Nintendo was at a high of $71. Now it is averaging $12. If another price drop occurs, investors will further doubt the leadership of Nintendo. Soon they will start to ask if Nintendo “still has it” if they have two consoles in a row with quick price drops.
Consumer Confidence
Consumers will be upset at Nintendo, and in the future, will not buy their console until there is a price drop. Consumers will stop supporting Nintendo products, and will wait three to four months and see if Nintendo drops the price of their consoles. Consumers, who are early adopters, will expect an ambassador program for buying their console early. If Nintendo drops the price again this early, they will have to apologize to early adopters once again.
Conclusion
Nintendo is in a tight spot at the moment. Systems are not selling as expected, because the software is not there yet. Also, the price may still be too high for average consumers who purchased the original Wii. Sadly, there are in a situation where the cannot drop the price of the system to encourage growth. Nintendo’s best bet is to play the wait game a little longer, and hope the consoles start moving when Pikmin 3, Lego Undercover, and Wonderful 101 come out.
The WiiU Is Selling At A Loss
According to the Nintendo, the Wii U is already selling at a loss. In order to make a profit, they have to sell at least one game to make a profit at the current price point. Fils Aime stated, “As soon as we get the consumer to buy one piece of software, then that entire transaction becomes profit positive….In the end, the business model is still to drive the install base of hardware, and then to drive a strong tie ration with all of the other software and experiences for the consumer. And if we’re able to do that, then we will create significant profit for the company.” With the position Nintendo is in, how much further could they drop the price before it detriment to their profit margins. If Nintendo drops the Basic to $250, and the Premium to $300 they would have to sell two to three games if they continue their current profit strategy.
Investor Confidence
Investor confidence will be shaken if Nintendo drops the price for the WiiU. Most consoles do not have a price drop at least till a year later on average. This will be the second console by Nintendo to have a price drop in a short period of time. Nintendo will still be financially stable for years even if they are not making a profit on the WiiU, but investor confidence could shrink and that would lower their stock even further. During the Wii phenomena, the stock price for Nintendo was at a high of $71. Now it is averaging $12. If another price drop occurs, investors will further doubt the leadership of Nintendo. Soon they will start to ask if Nintendo “still has it” if they have two consoles in a row with quick price drops.
Consumer Confidence
Consumers will be upset at Nintendo, and in the future, will not buy their console until there is a price drop. Consumers will stop supporting Nintendo products, and will wait three to four months and see if Nintendo drops the price of their consoles. Consumers, who are early adopters, will expect an ambassador program for buying their console early. If Nintendo drops the price again this early, they will have to apologize to early adopters once again.
Conclusion
Nintendo is in a tight spot at the moment. Systems are not selling as expected, because the software is not there yet. Also, the price may still be too high for average consumers who purchased the original Wii. Sadly, there are in a situation where the cannot drop the price of the system to encourage growth. Nintendo’s best bet is to play the wait game a little longer, and hope the consoles start moving when Pikmin 3, Lego Undercover, and Wonderful 101 come out.
Source
Aka Nintendo is pretty much screwed at this point. Not many people will buy the WiiU with its current price tag, and Nintendo just can't afford to drop the price. Nice knowing you guys.