Given the economic climate and the looming holiday season, why is Nintendo refusing to even consider cutting prices?

Reggie Fils-Aime gave an interview recently to Reuters after his keynote at the BMO Capital Markets Interactive Entertainment Conference. Among other things, Fils-Aime spoke of the continued success of the Wii, DS and Nintendo’s largely positive outlook for the Christmas period, in spite of ongoing economic woes.

“We have very strong products in the marketplace — both hardware and software,” said Fils-Aime. “The Wii console continues to sell out. On the DS side, we are at almost 20 percent growth year on year, on a record year in 2007.”
He continued, “We have had very strong software growth. So we need to execute and continue delivering strong value and strong entertainment choices for the consumer. If we do that we should have a robust holiday season.”

Toward to the end of the interview the topic of conversation turned to the possibility of a Wii price cut. Fils-Aime, to the surprise of absolutely nobody, remained decidedly stoic on the issue.

He said, “The consumer is voting with their wallet and their pocketbooks that the Wii and the DS represent fantastic values. So far this year, month in and month out, the Wii and DS have been number one and number two selling systems for the month. That suggests our value equation is finely tuned at this point. There is no need for price cuts on our systems today.”

On the surface it almost defies belief that Nintendo should seemingly refuse to even acknowledge to the external factors currently weighing in on the industry. However, Fils-Aime is right to point out the Wii’s overwhelming success at this particular price point and that the console continues to represent value to consumers. This months NPD results definitely enforce this suggestion.

What needs to be remembered is that the gaming industry is not just in the business of selling physical products but intangible experiences that occupy a far more complex position in the minds of consumers. By not engaging in a price war with the other consoles, the Wii in particular stands a better chance of holding its perceived position and distancing itself from any ongoing “console war”.

By slashing prices across the board the console manufacturers run the risk of simply devaluing their offering, rather than making it more accessible. Because consumers attach so much emotion to their leisure time and the time spent with friends and family there are many more intangible factors at play beyond the influence of price. In fact, price often acts as an indicator of other factors such as the perceived quality of a product.

When consumers find themselves at the point of sale, comparing the prices of each console they will not necessarily understand, for example, Microsoft’s entire history of price cutting. If all they have to go on is that “sweet spot” price of $199 then they may question why the Xbox 360 is so low compared to the competition, thus confusing its offering. Again, referring back to Fils-Aime, a lower price is not always indicative of greater value. Nintendo seems to realise this.