Talking Point: The Pros and Cons of a Wii U Price War

Sell, sell, sell, say the retailers

Earlier this week we saw a bit of a Wii U price war break out, in the UK at least, with Amazon UK joining Asda in slashing the price of both Wii U models by £50. At the same time, a number of US retailers are being rather creative with their offerings, not necessarily going for a full-blown price reduction but throwing in extras and free games with the standard price. It's all for one simple reason — after an initial burst of enthusiasm from early adopters, Wii U has struggled to maintain an acceptable sales momentum.

We've been here before, of course, with 3DS, and since that time it's recovered in impressive fashion — as of 31st December 2012 worldwide sales were very nearly at 30 million units. It arguably suffered some issues similar to Wii U, such as a drought of major game releases after its burst of launch day offerings and a dramatic tailing off of interest. At the time the popular phrase — which is bordering on being a meme — came back, along the lines of "Nintendo is doomed", with various predictions that the age of the smartphone and tablet would kill off the handheld market to which 3DS was clinging. While its odds of matching its DS predecessor — the highest selling portable console of all time — are rather slim, it's a system that's selling and showing that, with the right software and price, there's still a market for Nintendo to pursue.

And so to Wii U, and once again we've had a relatively empty release schedule since launch day, and thoroughly decent console sales in November and December have made way for some rather hideous results in January and February. Nintendo seems to be on the alert, with a Wii U Direct building hype for major games coming later in 2013 and into 2014, while a fair number of exclusives are starting to get closer to release, with a few examples about to make their entrance. The "Nintendo is doomed" chorus is around, of course, and Nintendo has the look of a company rolling its sleeves up for a bit of a dust-up.

So we've made the 3DS comparison, but Nintendo has been at pains to deny that a price cut is coming to Wii U. That doesn't mean it's not, to be blunt, but could imply that the company doesn't want to alarm shareholders or prompt savvy consumers to think that waiting a few months will save them some money; yet for now, let's take the company's word. The focus is on sales through software, hitting us with a steady stream of games and experiences that are either exclusive or unique to the Wii U setup.

So with retailers starting to cut prices or give incentives with bundles, is that a good or bad thing? Naturally, it's a bit of both, so let's start with some positives. From a consumer point of view, promotions from individual retailers are making the console more affordable, with UK examples such as Amazon and Asda putting the basic model at £200 and the premium SKU at £250. In the U.S., a simple online browse brings up offers such as this from Best Buy, where you can receive a $20 voucher, as well as various bundles and packages elsewhere. There are also regular and fairly aggressive Wii U software deals in the U.S. particularly, with offers of discounts or even free titles when buying two or three at a time. It's reflective of the different markets that Wii U bundles and software deals are prominent in the U.S., whereas European retailers set their own prices more freely and have opted to cut the hardware's going rate.

Another positive, beyond some picking up good deals for a new Wii U, is that lower price points in some places are coinciding with an upturn in new games and exclusives arriving on the system. LEGO City Undercover and Monster Hunter 3 Ultimate are imminent and receiving a fair bit of marketing, while more titles only on Wii U are due in the next few months, such as Pikmin 3; we also doubt Nintendo will take too long to see if lightening strikes twice — three times if you count the software expansion — with Wii Fit U. Many will see adverts or these games in stores, and may also find offers or prices a little more appealing than could be found on launch day.

So what could be bad about that? For one thing, it's clear that retailers, particularly those directly cutting prices in Europe, will be doing so at their own cost — if Nintendo had cut the trade price, the "Wii U price cut" headlines would be everywhere. These retailers are probably responding to the undeniably low demand of the past two months, with the latest NPD results in February highlighting the issue. If sales are boosted, then that's theoretically very good news, but Nintendo will need to then convince these retailers to re-stock with more systems to keep the momentum going. Much rests with software, in that case, as Tony Bartel of GameStop recently stated. If Nintendo holds firm and keeps the trade price at the same level, this scenario will give its teams a big task in keeping retailers on board and enthused with the system.

As with practically anything in business, cash talks. The rest of 2013 will place huge importance on high-profile releases noticeably capturing the public's imagination, and no doubt retailers will closely watch the system's momentum to decide how much stock to buy. Retailers, we'd argue, have no favourites, and their only agenda is to make as big a profit as possible, so if Nintendo can demonstrate that these early troubles are a blip that will be forgotten in months and years to come, the stores will buy up stock and happily open up shelf space.

So the task for Nintendo, assuming a price cut isn't forthcoming, is convincing consumers that it's worth their while to buy Wii U at something close to the recommended price; if stores can only sell stock at a nasty loss, they'll be a lot less inclined to re-fill the shelves. As we've argued elsewhere on Nintendo Life, the big N's certainly making the right noises and lining up some tasty software exclusives; so the big test is yet to come.

Or a 3DS-style price-cut will catch us all unawares, again.