Nintendo rules out Wii price cut
TOKYO - Fresh off bumper earnings, Nintendo Co. ruled out a price cut for its smash-hit Wii video game console Friday and announced the company will being selling the Wii in China next year. — Profits at Nintendo have surged on the runaway success …
Context & Ripple Effects
Nintendo enters the 2007 holiday season from a position of unusual strength: a senior executive had already warned in July that Wii consoles would remain scarce through the holidays, and bumper earnings reported this week confirm demand is outrunning supply. Against that backdrop, ruling out a price cut is less a defensive move than an admission that discounting an under-supplied console would surrender margin for nothing.
The decision also echoes the wider mood of this console cycle: Sony told Reuters in July it had no plans to cut PS3 pricing either, meaning both major console holders were choosing to defend hardware prices rather than buy share. The genuinely new news here is geographic — Nintendo says it will begin selling the Wii in China next year, extending the console's run into a market neither rival has prioritized.
First-order effects
- Holiday shoppers get no relief: with stock already expected to be short, the $249-class Wii will sell at full price into peak season, and any premium effectively accrues to retailers bundling scarce units.
- Nintendo's China announcement commits the company to localizing manufacturing, distribution, and content approval for a 2008 launch while its factories are already stretched supplying existing markets.
Second-order effects
- Sony's hand is strengthened: with Nintendo publicly refusing a cut, the pressure on PlayStation 3 pricing eases and both firms can ride full-margin hardware through Christmas rather than triggering a price war.
- A supply-constrained, full-price Wii pushes resale and bundle markets to absorb excess demand, shifting some of the console's pricing power from Nintendo to whoever actually holds inventory.
Third-order effects
- If both Nintendo and Sony hold prices while demand is strong, this console cycle's competitive axis stays on software, peripherals, and new territories like China rather than hardware discounts — a pattern that could define how long each platform's profitability lasts.
- Sustained scarcity at full price risks training consumers toward gray-market channels and delayed purchases, a structural risk for Nintendo if supply never catches up to the installed-base race.
The trend: In the current console cycle, hardware leaders with demand in excess of supply are defending price and expanding geography instead of cutting, making distribution and software attach rate the real battleground.