Nintendo announced today that it is cutting the price of its popular Wii home game machine from $200 to $150.
The $50 price drop, which goes into effect May 15, comes as Wii sales are slipping and as the company is gearing up to reveal a brand new game machine, which it will show to the public for the first time in June.
Though the new machine (reportedly codenamed Project Café) is sure to steal the spotlight from the best-selling Wii, Nintendo of America President Reggie Fils-Aime told me he believes the $50 reduction will bring the Wii to a whole new set of consumers and will be a vital step in reinvigorating hardware and software growth for the company.
"For us this is a very important move," Fils-Aime said. "This is only the second price reduction for Wii hardware since we launched back in November 2006. And in the last home console cycle, the leading system at the time sold almost 50 percent of its volume at a price point of $149 or below."
Fils-Aime is referring to the PlayStation 2, a machine that had an extraordinarily long lifespan and showed significant sales even after newer, more powerful game machines came onto the market.
The Wii has been the resounding winner of the current console cycle, selling some 86 million units globally and 35 million in the U.S. alone - numbers that far outpace Xbox 360 and PlayStation 3 sales.
But why would consumers buy the aging Wii when a newer and reportedly far more powerful game machine (one rumored to have touch-screen controllers in fact) is on the horizon?
"When we launch our new home system sometime in 2012 we think the consumer buying in will look very different than the consumer who's going to be buying a Wii now," Fils-Aime said. "What we've seen in this business it that there are certain consumers who love being first - they have to have the absolute latest hardware - and there are other consumers that are perfectly happy to wait until the game library is much more robust and they have a wider range of options."
When the price reduction goes into effect May 15th, Nintendo will sell the Wii packaged with the game Mario Kart and a Wii Wheel driving accessory. The Wii's new $150 price tag will beat the competition by $50 (the lowest-priced Xbox 360 sells for $200 and the lowest-priced PlayStation 3 sells for $300).
Nintendo will also launch a new Nintendo Selects budget priced line of games which will sell for $20. The first Nintendo Selects games will be The Legend of Zelda: Twilight Princess, Animal Crossing: City Folk, Mario Super Sluggers and Wii Sports.
But some analysts have said for some months now that Nintendo should have already dropped the price on its game machine. Though the Wii has been extraordinarily popular, it has faced increasingly strong competition from the Xbox 360 and the PlayStation 3. Both machines are far more powerful than the Wii and each now boasts its own motion-sensing game controllers - Kinect for Xbox 360 and Move for PS3. And Kinect, which offers first-of-its kind full-body game controls, has certainly hogged the motion-control spotlight once owned by the Wii.
Meanwhile, Nintendo's recent financial report showed that net profits for the last fiscal year fell 66 percent. Nintendo also reported that it had sold 15 million Wiis in the last fiscal year, which was down 27 percent from the year before. The company said it expects to sell 13 million Wii in the current fiscal year.
But Fils-Aime insists the slipping Wii sales are simply part of the natural course of things.
"Typically a system peaks in the second year of availability and then gradually declines," he said. "Wii was fortunate to have a number of very strong selling years in its 3rd and 4th year of availability. And from our perspective, the curve that we're on is natural and to be expected but importantly, the sales curve is higher than any other system."
And he believes a price-drop right before the summer months is the perfect timing.
"There are a lot of households where kids will be off from school and the parents are either looking for celebratory presents as the children finish the school year or they're looking for a fun exercise to keep the kids busy and happy during the summer time frame," Fils-Aime said.
And for these people who are perhaps just joining the gaming flock for the first time, that $50 cut is going to make a big difference, Fils-Aime said. "We think there is a wide range of consumers that are wanting to purchase a Wii and what they have been waiting for is this type of announcement."