Analyst: Wii games hit bargain bins sooner

Earlier this week, Nintendo of America president Reggie Fils-Aime criticized third-party publishers for not putting their best content on the Wii. A report released yesterday from Electronic Entertainment Design and Research analyst Jesse Divnich might shed some light on one reason third parties aren't wholeheartedly embracing the system.

According to Divnich, Wii games are subject to "early price protection"--deep discounts at stores for which the publisher actually pays--at a rate double that of Xbox 360 games and 66 percent higher than PlayStation 3 titles. Divnich considers early price protection to be when a game's average selling price drops by more than 20 percent within the first three months of launch.

When a game ships to stores but doesn't sell, retailers eager to get rid of the stock will work with the publisher to find a lower price point to sell the game at. After the new price is determined, the publisher then credits the retailer for part of the cost of each remaining copy with the new lower price. Publishers generally engage in price protection because retailers would be excessively conservative in ordering games without it, lest they be saddled with warehouses full of a poorly performing game.

Roughly 7.5 percent of Xbox 360 games and 9.1 percent of PS3 games go into price protection in their first three months, according to Divnich. Meanwhile, 15.1 percent of Wii games have publisher-supported price drops in the first three months.

"This disparity on the Wii reinforces concerns that the market has had with third-party publishers developing successful titles on the Wii," Divnich noted in his report, adding, "Because of the highly competitive and unpredictable mainstream and casual markets, EEDAR believes retailers and publishers are overly aggressive on expectations for Wii games."

Divnich points to a number of factors that could be playing into that accelerated rate of early price protection. For instance, while publishers typically make sure not to release their top-tier hardcore-focused games against competition outside the holiday season, they seem to have no problem releasing the casual games that make up much of the Wii catalog against other casual games aiming for the same audience. Furthermore, with profit margins anecdotally said to be significantly higher on casual titles, publishers wind up taking smaller losses when similar-sized price cuts are made.