Analyst: Wii production costs down 45%

Credit Suisse analyst Koya Tabata tells Financial Times that Nintendo is in a position to cut console's price to stimulate demand.

Nintendo's market-leading Wii holds a significant lead over its competitors in terms of total sales across the globe. As noted in a recent Financial Times report, the Nintendo Wii has sold 8 million units in Japan, easily outpacing the PlayStation 3's 3 million units, despite the fact that both consoles launched within a month of one another in 2006.

However, as noted by the FT, Wii sales in Japan slipped 63 percent year-over-year in March. And though Nintendo has downplayed its unseating from the top position in Japan during the month--the PS3 outsold it 146,948 units to 99,335--Credit Suisse analyst Koya Tabata believes that the publisher may consider dropping the Wii's price to stimulate demand.

As reported by the FT, Tabata said in a recent note to investors that production costs for the Wii have fallen 45 percent since the console launched more than two years ago. That being the case, Tabata believes that Nintendo has an opportunity to either cut the price of its console to bring in new buyers, or introduce a lower-priced Wii to emerging markets.

However, a Wii price cut would be at odds with Nintendo's decision last month to charge UK retailers an additional £19 ($28) more per wholesale unit, due to fluctuations in currency exchange rates. Speaking to Edge, a Nintendo representative clarified this seeming inconsistency, saying that, "Regardless of the cost price of manufacture, the decision to raise the [Wii's trade] price to retailers in the UK was taken due to the severe depreciation of the pound."

Also speaking to Edge, Screen Digest analyst Ed Barton took exception with Tabata's estimate, saying, "No one outside of Nintendo knows how much the company pays for all its components... It's a reasonable assumption that manufacturing costs have dived a bit, yet the effect of a cut in manufacturing costs hasn't exactly shown up in Nintendo's recent financial results."

Despite record revenues and profits for its first nine months of its current fiscal year, Nintendo said in January that it has revised its full-year earnings estimates down 9 percent to ¥1.82 trillion ($20.2 billion), with net income also seeing a significant rescaling down 33 percent to ¥230 billion ($2.56 billion). The publisher attributed its dramatic revision to the yen's increasing valuation against other world currencies.

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Discussion

122 comments
cjasko94
cjasko94

So Sony is putting out the new "psp go" for $250.00 (the price of a wii) And now Nintendo is lowering the price to say $200.00? Thats awesome, I might buy a used wii or something. Since they will be so cheap. I mean it has some good titles. (Zelda: Twilight Princess Not included aka GameCube port) and Ive beat it.

Legend-of-Evil
Legend-of-Evil

Even though the cheapest, the Wii does need to drop in price a bit, considering there has been close to no drop in price since its release.

gameking5000
gameking5000

Nintendo's advertising must have played a mjor role in it's selling. Wonder what would happen if Nintendo didn't have advertising. Porbably no where near how much it's selling now.

GDI_SOLDIER_94
GDI_SOLDIER_94

[This message was deleted at the request of a moderator or administrator]

Peaches1347
Peaches1347

yea the wii is way past its time for a price cut.

flyingteddy
flyingteddy

I'd have probably bought a Wii if it came down in price, I got a PS3 first and as with ALL consoles you expect the initial price to come down after a year or 2. But it never happened and now its even more (in the UK). So I wont be buying one unless its cheaper than the Xbox.

Link_Destined_1
Link_Destined_1

For crying out loud, people, when did the idea that Microsoft and Sony were CHARITIES? You keep calling Nintendo greedy just because they're making more money without having to kiss your rear ends and obey your every command. But the video game industry has always been for profit, and it always will be. Call casual gaming what you will, Nintendo is only going to change its tune if a large majority of the casual market sudden turns hardcore. And I doubt that's going to happen.

stereotype14
stereotype14

First off this is just an analyst saying that Wii production costs are down 45%, this isn't Nintendo saying this. These analysts know nothing and couldn't even predict that the Wii would be a success so they obviously aren't doing their jobs well or at all. I like how "hardcore" gamers are doing their best Michael Pachter impression. These articles are only to create controversy and it is doing a pretty good job of it considering some of the crazy comments from the obsessed "hardcore" gamers.

android_M
android_M

Why must the fanboys and the Wii haters always turn these things into some sort of system wars spinoff. Nintendo fans you dont have to defend the Wii it can do that on its own with its sales figures, PS3/360 fanboys its pointless for you to bash the Wii because all your Wii-hating doesnt change the fact that the Wii is kicking the PS3's and 360's rumps in hardware and software sales. Its a simple sales report and nothing more. Oh, and I think some of you have it backwards; just because the PS3 took the lead for the month in question, even if its a big lead, isnt any sort of indication that its gaining any significant ground on the Wii. Declining Wii sales at this point simply mean that the consumer population is becoming saturated with the Wii; i.e most people who want a Wii already have one. The PS3 on the other hand hasnt achieved such a level of saturation so its sales figures may continue to appear impressive at this point in time, and I say appear because the overall sales of the PS3 pale in comparison to those of the Wii.

Sins-of-Mosin
Sins-of-Mosin

Nintendo is so cheap, they won't even pay for the movie dvd license. Everyone knows that the cost of making a Wii is low but they still charged a high price for old technology and naturally they won't bother with a price cut until they stop lying about how they can't keep up with demand. The greed of Nintendo has no bounds.

-ColinR-
-ColinR-

I got rid of my Wii and I've got no regrets. GameCube FTW!!!

LindBergh2007
LindBergh2007

BtmnHatesRbn. Doesn't that make the Wii an outdated, underpowered machine? Like I said, everyone here except fanboys makes excellent points aobut Wii and what Nintendo needs to do in order to lower developments cost and why they must drop the price. But my thing is that Nintendo NEEDS to cut out this casual gaming B.S. It's hurting not helping the industry. All the 3rd party developers except SEGA of America and the first party developers are losing money not earning from Wii software. We all know Wii's library is subpar and I'm glad that people aren't afriad to admit that. Fanboys complain that it's not Nintendo fault but the publisher's fault for making shovelwhere. But did you ever stop and think why the publishers are only making shovelwhere? If they had more power say psuedo-360 power to work with, you would see better quality titles on Wii. But they don't. Casual gaming isn't gaming. It's a footnote in the industry that makes gaming look stupid and like a novelty.Gaming is entertaiment a meduim. Not a fad. Nintendo has soured out on me for the last time. I'm done with Nintendo consoles. What happened to the Nintendo that I loved and grew up with?Every time I pull out my NES and play it I wonder that aloud. Even popping in a old copy of Gradius III(an extrodinary game) in a SNES makes me wonder that. Nintendo listen now. You are disinfranchising your base and hardcore gamers with this Wii-fit nonsense. Go back to your roots. SEGA of Japan is doing that with RingEdge and RingWide why don't you do what you always did and give us are franchises back. Nobody wan't to play another Wii-sports game.

enoslives7
enoslives7

The wii is just a repacked gamecube which is old technology....ofcoarse the production costs are down.

mariokart64fan
mariokart64fan

mfd what a mistake you made just by looking at your last section the only reason youd be interisted in it is if they lowered the price? then why did you sell it to begin with lol, you wouldnt have to worry about a price if you kept it but any how , i do think they will lower the price , some time this year , to stimulate sells again in japan ,

MFDOOMED
MFDOOMED

I got rid of my Wii a couple months after it came out and never looked back. I am much more happy with my 360 and PS3. The only way I would even be interested in a Wii again is if they lowered the price!

r_gam3
r_gam3

my drem right now: 1) drop wii price 2) release Wii ver 2 that has an upscaler 3) release colours but dreams don't come true in this corporate world!!!

jmrwacko
jmrwacko

"Now think about MGS4, Gears of War2, GTA 4, Fallout 3, Bioshock, Elder Scrolls Oblivion, Halo 3, Killzone 2, Orange Box, Assassin's Creed and of course, Call of Duty 4." Most of those games are superior on the PC. Only MGS4, GoW2, Halo 3, and Killzone2 are console exclusives. Wii games, meanwhile, can only for the most part be played on the Wii.

cajunstrike
cajunstrike

Agreed. Simple supply and demand. Regardless of production costs, there is no urgency in reducing the price point of the Wii if the sales continue to outpace that of its competition.

taylormadederek
taylormadederek

Look at the news on IGN and you will see that a recent poll suggests that the Wii is the least played console.....hmmm wonder why?

mattcake
mattcake

There is no way on this earth the wii hardware costs more to produce than an xbox360, yet look at the difference in price... this coupled with the pathetic pricing of the DSi is making me massively lose respect for the big N :(

SemiMaster
SemiMaster

I don't know where people are in the world, but if you can't find a Wii in a store on any given day nowadays, the store is probably closed for the night, NOT out of stock.

riou7
riou7 moderator moderator

just for a moment, it'll sell like before

condelirios
condelirios

Nintendo is barely meeting demand with the Wii and until stores consistantly have them in stock... don't look for a price change. It took 2 years+ for them to reach the point of having them sort of in stock here in the US.... They are still selling like crazy at $250, and a price drop seems really kind of silly.

taylormadederek
taylormadederek

@SephireX You are right about the 360 especially having better content. And you are also right in the justification of a PS3 for MGS4. However you are very wrong when you say there is nothing for the hardcore gamer on Wii....There is nothing coming out anymore or lately and man that burns my @$$. However you are really missing out having not played Legend of Zelda: TP. Ha TP now that is funny. Zelda was amazing...something about it was as great as Bioshock and Fallout 3. Galaxy and SSB are fine and dandy but you my friend must play Zelda and then sell the Wii because it will be of no other use to you.

SephireX
SephireX

The Wii does not appeal to me in the slightest. I consider myself a hardcore gamer and there are not enough attractive titles on the Wii to justify a purchase in my opinion. The best game on a Nintendo console right now is GTA Chinatown Wars but that's still not enough to justify buying a DS. However, I bought a 360 when it first came out and I could justify buying a PS3 when Metal Gear Solid 4 came out. Maybe the WII suits casual gamers but look at how many critically acclaimed games it has, two. Now think about MGS4, Gears of War2, GTA 4, Fallout 3, Bioshock, Elder Scrolls Oblivion, Halo 3, Killzone 2, Orange Box, Assassin's Creed and of course, Call of Duty 4. Now think about Super Smash Bros and Super Mario Galaxies. Wii may be ahead on sales but it is lagging way behind when it comes to quality and that's the bottom line.

hajjjustin
hajjjustin

taylormadederek that is a good point and i think it holds true.

dzimm
dzimm

I think it just irritates the Wii bashers that they're obviously in the extreme minority.

taylormadederek
taylormadederek

First of all casual games don't "run out and buy" anything. They sit and stew and then go out and get it reluctantly but willingly (if that makes any sense). When I say Wii games don't sell what I mean is the people that first bought the system aren't buying them. The sales would be from mostly new people to the system. They have undeniably sold a lot of systems. And with each new system people are excited and pick up games for it. So the 10 million whatevers that sold this year are for mostly new Wii customers. Notice that they are the same games in the top for Nintendo always. But (as Denis Miller would say) that's just my opinion I could be wrong.

Rect_Pola
Rect_Pola

This wouldn't be so bad if they hadn't just raised the price to compensate for the pound's value. Before, it was a necessity for their marginal profit per console (I recall it was about $6 in the US, but I assume the rates balanced out). Now they could drop it considerably and do the same. In the US, down to $140-150. Nintendo originally made the wise move building the Wii to it's price point. The technology to make the Wii far more was there, but Sony went that route and ended up charging too much at a huge loss before equally huge concessions brought production costs down. Nintendo came off as the responsible ones, the "nice guys" bringing fun at a price fun should be. And it paid off. I'm pretty sure they've never been in such a position before. Of course they don't want to; a price drop wouldn't be in response to the market or competition, it would be extending their savings to the people for its own sake. It's hard to be "nice guys" when you're on top of the world because the fact you're on top means you're doing fine without making an effort to appeal to people. I could see this going either way. They'd look real bad if they didn't announce a cut, but are genuinely in a position to choose not to.

KieranCottrell
KieranCottrell

@Rontor: Thanks for the balanced argument. Interesting reading.

Avenger1324
Avenger1324

Yet another price reduction that seems to benefit everyone apart from the UK :(

Rontor
Rontor

The Wii is the worst thing that has ever happened to the video game industry. Casual Gaming FAILS.

Weddum
Weddum

The Wii has potential to make really good games, but developers take the easy, risk free way to make money off it by making endless shovelware that they know the casual gamer will run out and buy. Hopefully Nintendo drop the price on it soon. $250 (and $400 in Australia) is just simply too much, especially when you consider a 360 Pro is the same price as a Wii in AU. Argue it all you want, the Wii is just differently designed, renamed, and slightly overclocked Gamecube hardware. Here's an idea. Reduce the price, slow the flow of shovelware, get some more genuinely good games in Wii's library, and then you'll have a console that will be hard to beat regardless of its hardware limitations. Its time for a change of attitude from Nintendo, if the drastically slowing Japan sales of Wii are any indication.

BLuFAlc0n
BLuFAlc0n

It's pretty clever how Nintendo makes profit.. The Wii, on it's own (no premium,elite, 80GB whatever...) This will bring out the good games soon enough! If the Wii had a price cut, so will the DS..... that's why I think it's quite hard to cut off the Wii's price tag... but if it did, the Wii will sell probably like the DS will.. All we need is some sort of upscaler for the Wii...

fiskefyren
fiskefyren

well... i dont really have any love for any consoles... i just bouth a ps2 because it had some games i wanted to try... and when am done with those am going to give it away to someone. but then again i also have alot more money than most people do so i dont really care to much about then price of things.

BtmnHatesRbn
BtmnHatesRbn

@ LindBergh2007 You don't know that the Wii has a PowerPC-based CPU. The PowerPC CPU was put into production in 1991 and appeared in computers by IBM, Motorola, Apple, UMAX, Sun, Amiga, Atari, Microsoft, Nintendo, and Sony. The latest version of the PowerPC, Cell, is inside the PlayStation 3, and a 3 GHz G5 PowerPC is inside the Xbox 360. A slightly slower version of a G5 PowerPC CPU is inside the Wii. Also, the DS, PSP and various iPod models and clones, including cellphones, all use the ARM CPU, which is a portable version of PowerPC design. The PowerPC is second behind the Intel-AMD x86 designs. Programmers have mountains of experience with the PowerPC, and many, many, praise how easy and reliable the CPU is over the x86 architecture. So, next time you write something, LindBergh2007, know what you're talking about by actually working in the industry, or visiting game studios, or talking to programmers, because, otherwise, you're a horse's rear-end.

BtmnHatesRbn
BtmnHatesRbn

Oh, great, this website just cited Edge magazine as a source! Plegh!

Vlad27145
Vlad27145

mariokart64fan, you're just like the Scarecrow in the Wizard of Oz, lacking something...

kavadias1981
kavadias1981

@aBathingApe I just wish Nintendo would use the huge amounts of money they earn to bring us waves of top quality hardcore games. Instead (since SSBB a year ago) we get a sequel of a sequel of Animal Crossing on the Gamecube, Miyamoto's biggest disaster, Wii Music. And what do we have to look forward to? Another Punch Out which will be downgraded to make it accessable to non-gamers and a DS Zelda with a freakin' choo choo train! Where the hell are the HUGE games for the hardcore? Where is the next Zelda, Mario, Metroid, Earthbound, Starfox, Kirby, F-Zero, Pikmin and more? Hardcore titles with depth and complexity, a steep learning curve and hours and hours of joy!!!! I gotta stop typing because I am so frustrated with Nintendo for denying us these quality franchises and just feeding us garbage that I am going to throw my Wii at the wall!

razgriz_101
razgriz_101

if your costs to manufacture are down why aint you taking advantage and making yourself the cheapest console again? Then you would be running with the PS2 and the 360 arcade and would most likely increase sales as its a cheap and fairly easy to use machine i know for a fact if i was running nintendo i would most likely take good advantage of this.

Dante2710
Dante2710

price cut during christmas would be a very smart move

ASG_
ASG_

Despite sales Wii is a really boring console, not a lot of fun games at all.

kavadias1981
kavadias1981

Didn't Nintendo say in a report a couple of weeks ago, that they were increasing wholesale prices of the Wii and yet, according to this report, production costs have been reduced... does anyone remember me saying that Nintendo was being greedy? Try and dispute that now! Oh and I agree with all the comments below me that say they own Wiis but dont play them. I'm in that boat too. Whip it on when the family comes over but that's it.

red-orc
red-orc

My Wii isn't even connected to my TV anymore.

fredwv
fredwv

I haven't touched my Wii in ages. That being said, I'll prolly pick up the new Punchout game and dust the cobwebs off my Wii. :)

NoLifeGamin
NoLifeGamin

LOL the ps3 and 360 and PC will have superior technology all thanks to SIXENSE! so when it arrives in december that is when the wii will be sayin BYE BYE XD ahahahaha oh ya google Sixense if u dont no wat im tlakin about cuz its wat the wii SHOULDVE been but sadly is not it will fail terribly....or maybe not due to its affordability but we all shall see when the time has come