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Wii Price Hike "Perfectly Justified"
Unprecedented times set the stage for unprecedented measures. The Nintendo Wii could be the first console in history that will not only have held its launch price for over two years, but actually increase it.
On Wednesday news emerged that Nintendo will raise the Wii’s trade price by around £19 per unit. All eyes are now on the retailers, who will either absorb Nintendo's price hike or spread the burden to customers.
Ed Barton, Games Analyst for Screen Digest, believes that regardless of how retailers will react, Nintendo’s reasoning for the price hike is “completely sound”.
“If you look at the Yen exchange rate over the Pound in the previous year,” he says, “it has changed by thirty to forty percent.”
“We looked closely at Nintendo’s figures in the last quarter and this exchange rate has absolutely murdered their operating profit.”
Barton adds that the raised trade price of the Wii is not only “perfectly justified”, but could perhaps be a sign of things to come: “When you look at all the data and financials it wouldn’t surprise me if Nintendo raised the price of Wii Fit. The margin on games hardware and peripherals is a serious problem right now.”
The games industry has lived through decades and eras, but this is the first time it has faced a deep rupture in the global financial market – one which no one completely knows how many industries it has stretched through, nor how long it will last.
The biggest question right now is standing at the shop floors of the retailers. Edge has contacted all the UK’s major specialist and non-specialist outlets affected by the matter, to find out how each will address the Wii’s higher trade price. So far the majority have remained silent, with some – quite understandably – admitting they are “still digesting” the announcement and “need more time” to evaluate how to deal with it.
Barton, however, believes that there’s a chance the specialist and non-specialist retail outlets will approach the issue differently.
“I suspect that non-specialists, in particular the large supermarkets, will just swallow the margin head, simply to get the footfall.”
Yet if the superstores hold the price of the Wii, a big question looms over whether the specialist retail outlets can follow suit. Barton suggests that the UK’s superstores are “financially better positioned” to take a hit, yet the specialist chains may not be able to absorb the price hike.
“I think that one thing we need to keep in mind is the practicalities. I mean, games consoles are relatively large items, these aren’t the cheapest things to be keeping in store rooms and moving around the country. So I think we’re going to see a great deal of pressure on specialists.”
“For all the UK retail industry, an £18-19 climb in trade prices will be enough to wipe out the margins completely,” Barton adds. “System sales are never usually the best thing for specialist retailers anyway, in terms of margins, but at least the retailer has that icing where customers tend to pick up other products with the consoles.”
Yet if the superstores sell the Wii at a markedly lower price than its competition, the specialist retail outlets may be about to lose a key loss-leader.
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Copyright 2006 - 2009 Future Publishing Limited, Beauford Court 30 Monmouth Street Bath, UK BA1 2BW
England and Wales company registration number 2008885
I find the price change justified. Pound is downrated toward Euro lately, when the Wii's price was announced GBP was more than 1,5 euros and now it's around 1,1. As Nintendo of Europe is based in the EU (Germany) i would expect that they are paid in Euros.
I believe they just did what was necessary to maintain their profitability at the same levels.
I think I read in an article at least for US sales, Nintendo was making 6usd per console sold. Regarding them upping the price, remember another thing, Nintendo's primary business is games so they cannot take losses as easily as your Sony and Microsofts.
Amazing... it had outdated hardware when it released, I can't believe its becoming more expensive
OK im looking at all posts (except those from our friend the pied piper) and im thinking ok weak currency, a gray market on one side. Weak economic picture worldwide, the Wii not as hard to get as it use to on the other...
HMMMM why now???
Shouldnt Ninty just eat it and essentially value it as a price cut... i guess those low Japan margins have to come from somewhere.
and here i was thinking that the wii was going to match the 360 by the end of this year
The Wii will match the 360 by selling negative unit amounts?
I was under the impression (and I'm never any good at impressions) that Nintendo were actually making money on each unit sold. Does anyone know how much they were making on each one?
To slap on an extra £19 (or 11%) onto the console due to the Yen exchange rate does seem a bit odd to me. Is everything imported from Japan subject to this price hike?
But then, wtf do I know? I ain't running the freakin' business!
They do make a profit on each one sold. It's just that the British pound is not doing so hot and Nintendo is making less profit on each Wii sold there than they'd like. Hence, an increase in price for RETAILERS. Nintendo is leaving how much consumers will feel the effect up to the retailers themselves. So potentially, this may mean absolutely nothing to consumers (but I doubt it). But of course, everyone is spinning this in the media as if Nintendo is increasing the MSRP for CONSUMERS and that's just not true.
Well, it seems that some retailers don't think they'll be able to absorb the price increase, and so the likelyhood of it being passed on to the consumer is significant. If there is an increase in price for consumers then it will be Nintendo's fault. As a consumer it really irritates me, but, seeing it from a business angle, it's highly logical.
They noticed they can't make a buck off the UK with a weak Pound. Europeans legally importing from the UK and getting the Wii for 60€ (!!!) cheaper than in their country are costing them money too. Either they have to lower the prices in the rest of Europe, or they destroy the UK price advantage. £20 is only the first timid step into the only direction their business sense is pushing them.
Sony and Microsoft soon have to face the same problem. While their suggested retail for a game is around 60-70€, people import it for as little as 45€ from the UK. Go to an independent shop at the corner and you will get that price. Big chains who have to go through Sony are loosing customers. One big German chain already pushed prices of new games down to 55€. How they are doing that nobody knows.
We WILL see this story continue. I hope edge considers all the angles on these price changes, not the sensationalist WTF.
It's time to pay the piper, the meny years of pc gaming bashing comes with a price. I bet the reason for nintendo price rise is because of hardware! The price on all consoles will rise in the future because of hardware and the pc market. There is even a chance AMD may go bankuprt too. Time to pay the piper!
pc gaming is the back bone of pc market and console fanboys, some game devs and media wants it dead so bad.
It's time to pay the piper.
Huh? Your posts become more unintelligible and off-topic by the day.
The resaon for the price hike is the weak £. Maybe you didn't read the article?
He was too busy paying the piper.
Hope he wasn't paying him in British pounds.
you what?? I think you might have been smoking from the piper...
WTF are you bleating on about?
He obviously means that he was suckin tha pipper for weak £'s ;) ha ha a !