If Koya Tabata, of respected financial institution Credit Suisse, is to be believed, the production cost of the Wii has nearly halved since the console launched.
According to the Financial Times, Tabata told investors in a recent note that the cost of making a Wii has dropped by 45% since it was first released back in late 2006. The FT goes on to report that this gives Nintendo the scope to cut the price of the Wii should it need to stimulate sales. What he does not analyse, however, is whether this cut in cost is due to short term currency fluctuations or solid parts and manufacturing pricing.
That would be nice, wouldn't it? The FT's right, of course. Nintendo does have the scope to cut the price of the Wii. Whether that 45% figure is accurate or not, the cost of manufacturing the Wii will have dropped since launch. However, the message from the upper echelons of Nintendo management suggests a price cut is unlikely.
“Why would we?” said Reggie Fils-Aime, president of Nintendo of America, when queried about a price cut at GDC.
UPDATE: Responding to SPOnG's request for comment, Nintendo has told us, "Regardless of the cost price of manufacture - the decision to raise the cost price to retailers in the UK was taken due to the severe depreciation of the pound. From Wii launch in December 2006 to December 2008 the value of the pound fell by 43% against the yen whereas the dollar and euro only fell 22% and 18% respectively."
Source: FT
According to the Financial Times, Tabata told investors in a recent note that the cost of making a Wii has dropped by 45% since it was first released back in late 2006. The FT goes on to report that this gives Nintendo the scope to cut the price of the Wii should it need to stimulate sales. What he does not analyse, however, is whether this cut in cost is due to short term currency fluctuations or solid parts and manufacturing pricing.
That would be nice, wouldn't it? The FT's right, of course. Nintendo does have the scope to cut the price of the Wii. Whether that 45% figure is accurate or not, the cost of manufacturing the Wii will have dropped since launch. However, the message from the upper echelons of Nintendo management suggests a price cut is unlikely.
“Why would we?” said Reggie Fils-Aime, president of Nintendo of America, when queried about a price cut at GDC.
UPDATE: Responding to SPOnG's request for comment, Nintendo has told us, "Regardless of the cost price of manufacture - the decision to raise the cost price to retailers in the UK was taken due to the severe depreciation of the pound. From Wii launch in December 2006 to December 2008 the value of the pound fell by 43% against the yen whereas the dollar and euro only fell 22% and 18% respectively."
Source: FT
Companies:
Nintendo
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Comments
Joe 7 Apr 2009 09:41
1/11
If this is true it makes the recent price increase in the UK even more disgusting. Nintendo are getting way too greedy and arrogant this gen, just like Sony did the last two gen's...
SuperSaiyan4 7 Apr 2009 11:25
2/11
There are many ways at looking at this.
First off lets look at how the GameCube did, it flopped, Nintendo lost tons of money.
Secondly the only income that Nintendo was really generating was from the sales of the Gameboy and then the DS.
Along comes the Wii and Nintendo is now generating tons of cash along with sales of the DS Lite and now DSi.
So overall if Nintendo are selling their products in the millions and it is that popular there is no reason for a price cut, because they way I see it this gives Nintendo a great opportunity to utilise the mass profits to further invest into their next games console.
Imagine if all that profit they make is put towards making a truely amazing HD games console without having to borrow or put soo much money in that they cannot really afford?
I think the Wii should really be at around £149.99 and the handhelds should not be anywhere near the £149.99 price point.
But as I said more money for Nintendo more money to invest into their next console? Only time will tell.
First off lets look at how the GameCube did, it flopped, Nintendo lost tons of money.
Secondly the only income that Nintendo was really generating was from the sales of the Gameboy and then the DS.
Along comes the Wii and Nintendo is now generating tons of cash along with sales of the DS Lite and now DSi.
So overall if Nintendo are selling their products in the millions and it is that popular there is no reason for a price cut, because they way I see it this gives Nintendo a great opportunity to utilise the mass profits to further invest into their next games console.
Imagine if all that profit they make is put towards making a truely amazing HD games console without having to borrow or put soo much money in that they cannot really afford?
I think the Wii should really be at around £149.99 and the handhelds should not be anywhere near the £149.99 price point.
But as I said more money for Nintendo more money to invest into their next console? Only time will tell.
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NinTenDowJones 7 Apr 2009 12:50
3/11
Yes Nintendo, we are well aware of the current depreciation of the Pound, which is only confounded when companies exploit it (price fixing LaLaLaLaLa).... Thanks.
YenRug 7 Apr 2009 14:51
4/11
SuperSaiyan4 wrote:
There are many ways at looking at this.
First off lets look at how the GameCube did, it flopped, Nintendo lost tons of money.
Secondly the only income that Nintendo was really generating was from the sales of the Gameboy and then the DS.
First off lets look at how the GameCube did, it flopped, Nintendo lost tons of money.
Secondly the only income that Nintendo was really generating was from the sales of the Gameboy and then the DS.
Actually, you're only half right; yes, the GC failed to capture market share, but like the Wii it was never sold at a loss. At launch it was sold near to cost and went on to sell at a profit fairly early on in its life. Yes, the handhelds were Nintendo's biggest earner, but they've only ever made a loss in one quarter of trading and that was mainly down to a big shift in the strength of the Yen causing overseas sales to come in under predictions.
As to this whole profit/exchange rate/trade price increase, I consider it to be very bad form. When the Wii was released over here, it's price was set much higher than the prevailing rate indicated, when compared to the US pricing (even when you remove the effect of VAT). The US price was already a reasonable margin above the Japanese price, but the UK price increase was about 3 times as much again, when converted to Yen.
With Nintendo making that much larger a margin on each unit, originally, to then claim that a depreciation in exchange rate justifies a trade price increase is disingenuous, in my eyes. They built in a significant hedge to their pricing from the start, to now act greedy when the production cost has almost certainly been reduced as well, is worthy of investigation.
tyrion 7 Apr 2009 18:07
5/11
YenRug wrote:
With Nintendo making that much larger a margin on each unit, originally, to then claim that a depreciation in exchange rate justifies a trade price increase is disingenuous, in my eyes. They built in a significant hedge to their pricing from the start, to now act greedy when the production cost has almost certainly been reduced as well, is worthy of investigation.
I've said it before when people have kicked off about Sony's pricing; companies price at the level the market will support.
You won't see a price drop until you see a sales drop of a large enough proportion that Nintendo need to bolster their sales with a price drop.
If you want a cheaper Wii, or PS3, then don't buy it until the price reaches your level. If everybody did that, we'd see earlier price cits across the board.
You can't blame Nintendo for not dropping the price when we're buying the things as fast as they can make them!
SuperSaiyan4 8 Apr 2009 07:58
6/11
Exactly Tyrion.
At present you can get what a PS3 with a game or 2 for like £280? A cheap blu-ray player that would need to be updated via a disc or ethernet cable connected to the net would be what around £200? For the extra £80 I think there is no argument the PS3 does prove great value.
With the Wii its one of those novelty items that 'You must have' also this gen I think many own more than one console than last gen due to the larger variance in technology and functionality.
At present you can get what a PS3 with a game or 2 for like £280? A cheap blu-ray player that would need to be updated via a disc or ethernet cable connected to the net would be what around £200? For the extra £80 I think there is no argument the PS3 does prove great value.
With the Wii its one of those novelty items that 'You must have' also this gen I think many own more than one console than last gen due to the larger variance in technology and functionality.
YenRug 8 Apr 2009 11:59
7/11
tyrion wrote:
YenRug wrote:
With Nintendo making that much larger a margin on each unit, originally, to then claim that a depreciation in exchange rate justifies a trade price increase is disingenuous, in my eyes. They built in a significant hedge to their pricing from the start, to now act greedy when the production cost has almost certainly been reduced as well, is worthy of investigation.
I've said it before when people have kicked off about Sony's pricing; companies price at the level the market will support.
You won't see a price drop until you see a sales drop of a large enough proportion that Nintendo need to bolster their sales with a price drop.
If you want a cheaper Wii, or PS3, then don't buy it until the price reaches your level. If everybody did that, we'd see earlier price cits across the board.
You can't blame Nintendo for not dropping the price when we're buying the things as fast as they can make them!
I'm afraid you've completely misunderstood the intent of my post; I wasn't asking where's the retail pricecut, I fully understand that they won't drop that price until sales drop off. My point was: how can Nintendo justify a trade price increase when they built in a large hedge into the UK price and have also reduced the production cost in the meantime? Is it honestly really that bad, the exchange rate, that the Wii was about to start hitting cost price at trade?
SuperSaiyan4 8 Apr 2009 12:44
8/11
YenRug wrote:
tyrion wrote:
YenRug wrote:
With Nintendo making that much larger a margin on each unit, originally, to then claim that a depreciation in exchange rate justifies a trade price increase is disingenuous, in my eyes. They built in a significant hedge to their pricing from the start, to now act greedy when the production cost has almost certainly been reduced as well, is worthy of investigation.
I've said it before when people have kicked off about Sony's pricing; companies price at the level the market will support.
You won't see a price drop until you see a sales drop of a large enough proportion that Nintendo need to bolster their sales with a price drop.
If you want a cheaper Wii, or PS3, then don't buy it until the price reaches your level. If everybody did that, we'd see earlier price cits across the board.
You can't blame Nintendo for not dropping the price when we're buying the things as fast as they can make them!
I'm afraid you've completely misunderstood the intent of my post; I wasn't asking where's the retail pricecut, I fully understand that they won't drop that price until sales drop off. My point was: how can Nintendo justify a trade price increase when they built in a large hedge into the UK price and have also reduced the production cost in the meantime? Is it honestly really that bad, the exchange rate, that the Wii was about to start hitting cost price at trade?
This thing about the exchange rate is complete BS, what about many years ago when the exchange rate to USD was like £1 = $1.44? At present its just above that at around $1.47.
What Nintendo are trying to say is that they are not able to rip off as much as they would like to so putting the price up to compensate is what they need.
Items in the USA are cheaper only because of the exchange rate, so one could argue a 360 costing $400 in the USA is more than in the UK because its say £230 here thats if you want to look at numbers only and not the currency but when has it ever been £1 = $1?
A Wii in the USA is what $250? Our price is £180 = $265 or so.
OptimusP 8 Apr 2009 15:56
9/11
SuperSaiyan4 wrote:
This thing about the exchange rate is complete BS, what about many years ago when the exchange rate to USD was like £1 = $1.44? At present its just above that at around $1.47.
What Nintendo are trying to say is that they are not able to rip off as much as they would like to so putting the price up to compensate is what they need.
Items in the USA are cheaper only because of the exchange rate, so one could argue a 360 costing $400 in the USA is more than in the UK because its say £230 here thats if you want to look at numbers only and not the currency but when has it ever been £1 = $1?
A Wii in the USA is what $250? Our price is £180 = $265 or so.
Actually, that dollar-pound comparison is even bigger BS because the UK is not part of the US market but is part of the EU market. And this market uses the Euro as the standard and the pound has gone from 1.5 Euro to 1.1 Euro.
And even when the pound was 1.5 euro, prices in the UK were lower then on the continent. This all togheter explains Nintendo's logicbehind it a lot better.
And since when do Brits equate themselves with yanks? Where is your pride you mongrel theadrinkers!
DoctorDee 9 Apr 2009 07:00
10/11
OptimusP wrote:
the UK is not part of the US market but is part of the EU market.
The UK is notionally part of the European Economic Community, but we're not actually a part of it. For proof, just note that our currency is the Pound Sterling, while the rest of Europe's currency is the Euro.
But it's academic, the pound has fallen against the dollar, fallen heavily against the Euro ad plummeted against the Yen. We;re ucky that prices for products manufactured abroad are not climbing steeply.
And since when do Brits equate themselves with yanks? Where is your pride you mongrel theadrinkers!
Since we started drinking American soda pop and got our culture wholesale from American movies and music.
OptimusP 9 Apr 2009 12:30
11/11
DoctorDee wrote:
OptimusP wrote:
the UK is not part of the US market but is part of the EU market.
The UK is notionally part of the European Economic Community, but we're not actually a part of it. For proof, just note that our currency is the Pound Sterling, while the rest of Europe's currency is the Euro.
It's indeed quite academic, but the Euro-zone is a seperate institution from the actual EU-market. Many Eastern European countries who are in the EU also do not have the Euro as their currency.
Another example is the so-called Shengen zone which Switzerland and Iceland are part of but both are not EU-members. You brits are just some in kind of grey area. You have to apply all EU laws about the market but none of the EU laws connected with the Euro (like the Stability pact terms). Still, it means that around 40-60% of all your national laws passed each year are actually EU-laws being applied. In countries like Belgium that's around 70% of the laws.
DoctorDee wrote:
Since we started drinking American soda pop and got our culture wholesale from American movies and music.
Gah, at least the french are holding on strong! ... kinda...wel hey, they even still own their car companies.