After the price cut in Sony’s (SNE) Playstation 3 and Microsoft’s (MSFT) 360 Console, Nintendo is expected to move in the same direction to boost sales. The Nintendo Wii has been a runaway hit with the introduction of the motion-sensing controller.
Recently, Sony Corporation has come up with an enhanced version of the Playstation 3 and reduced the price of the product by $100. This move by Sony had imposed pressure on Microsoft and Nintendo to reduce prices of their gaming consoles and thereby set a price decline trend in the whole gaming space. This apart, the new version of the Playstation 3 came with some enhanced features Incorporatedluding high definition graphics and Blu-Ray compatibility. This is expected to give some competition to Nintendo’s Wii. Following Sony, Microsoft also cut the price of its Elite model.
Nintendo has so far kept the Wii price at the same level at which it was launched. The company has also kept pricing more or less intact around the world. We believe this may have the risk of making Nintendo Wii slightly uncompetitive compared to its rivals. On the other hand, Nintendo has related the timid sales of its Wii to the delayed release of its softwares, but expects to stimulate sales by introducing newer versions like Wii Sports Resorts.
Price cuts are a very common competitive strategy for video game console makers. Microsoft stimulated its sales last September after the company decided to reduce its prices on some of its Xbox 360 consoles by $50. This goes to show that price reduction strategies work for gaming companies.
On the other hand, we fighting through recessionary conditions and gaming devices may be considered to be low-priority items in the current market scenario. So people may be a bit cautious about spending on something which is not a necessity.
As a result, the positive impact of a price cut may be offset to some extent by the change in consumer behavior. To sum it up, a price cut may be necessary for Nintendo to boost sales, but the positive impact of such price declines elsewhere remains to be seen.
Zacks Investment Research
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