Michael Pachter, analyst with Wedbush Morgan Securities, predicts that Nintendo will cut prices of the Wii and Nintendo DS hardware in 2010.
Pachter expects that the inclusion of Wii Sports Resort and the MotionPlus accessory with Wii hardware will increase demand this summer. "However, we believe Nintendo will have to cut price later this year in order to keep demand steady," he wrote to investors on Thursday. "Should the Wii price point remain at ($200)... we expect the company to have difficulty meeting its overall sales goal for the fiscal year," he wrote.
Nintendo reported its results for the fiscal year ended March 31, 2010 on Thursday, saying that while the company had the third best fiscal year in its history, net income had dropped 18%.
It expects to sell 18 million Wii and 30 million Nintendo DS (a figure that includes sales of its upcoming 3DS hardware) in the next 12 months. This fiscal year, it sold 20 million Wii and 27 million Nintendo DS consoles.
Pachter said that last year's record-shattering Wii sales were "primarily" caused by a $50 gift card given out with Wii purchases at Wal-Mart – essentially a de facto price drop to $150.
"While we expect similar promotions at holiday next year, we expect the other consoles to be lower-priced by then, further eroding the Wii’s competitive price advantage," Pachter wrote.
Wii launched in November 2006 at $250. At the time, PlayStation 3 cost $500-$600 and Xbox 360 cost $300-400. The low-end model of PlayStation 3 is now $300, and the Xbox 360 $200. Last year, Nintendo lowered Wii's price to $200.
Nintendo has never lowered the price of any of its Nintendo DS consoles. The original console cost $150, the Lite $130, the DSi $170 and DSi XL $190.
Pachter says that the rising prices for each successive iteration of DS makes Apple's iPod Touch "more tempting."
"While we think that the DS is a superior gaming platform, the iPod is a more versatile device, and has a 'coolness' factor that is difficult to overcome," he wrote.
Nintendo doesn't often cut its prices. In fact, its stated goal during this console cycle was to create hardware and software that never required price reductions. It acquiesced to reality last year when it lowered Wii's price underneath the magic $200 level, but if Pachter's read on the Wal-Mart promotion is correct, Wii might go all in and make the move to $150 later this year.
As for the DSi and XL, the introduction of the 3DS might also play a part – I can't see Nintendo pricing it anything higher than $200, and at that price there would need to be much more differentiation between 3DS and the last-gen hardware. It wouldn't make sense to have 3DS at $200 and DSi XL at $190.
Image courtesy Nintendo
