Nintendo Wii sales lose momentum despite price cut

Nintendo Wii sales lose momentum despite price cut

Tokyo: Japanese video game and console maker Nintendo Co. reports fiscal first half earnings on Thursday. The following is a summary of key developments and analyst opinion related to the period.

Nintendo, whose profits have gained every year for the last six years, may be facing a loss of momentum in sales of its Wii home console.

Rivals Sony Corp. and Microsoft Corp. have not only come up with similar wandlike controllers that track player’s motions but they have also slashed prices on their offerings, the PlayStation 3 and the Xbox 360 machines.

To stay competitive, Nintendo, which also makes Super Mario and Pokemon game software, recently cut the Wii price to 20,000 yen ($217) from 25,000 yen ($272) in Japan and to $200 from $250 in the U.S. But an earlier price cut for the Sony PlayStation 3 to about $300 has been effective in boosting its sales.

The Wii is now about the same price as Microsoft’s low-end Xbox 360 Arcade. The price on Microsoft’s Xbox 360 Elite was cut to about $300 in August.

The strengthening yen is another factor hurting the bottom line of export-dependent Nintendo.

Nintendo is forecasting a 7.5% rise in net profit to 300 billion yen ($3.3 billion) for the fiscal year through March 2010 from the previous fiscal year, on 1.8 trillion yen ($19.6) revenue, down 2.1% on-year.

The Kyoto-based manufacturer expects to sell 26 million Wii machines and 30 million DS machines in the 12 months through March 2010. The Wii is still the top-selling home console, having sold nearly 53 million globally since its 2006 introduction.

Analysts surveyed by Thomson Reuters, on average, expect fiscal year profit of 279 billion yen ($3 billion), about the same as the record profit in the previous fiscal year.

Analyst take

Yusuke Tsunoda, analyst with Tokai Tokyo Securities, said the Wii has sold so well, nearly to the point of market saturation, that it may take the arrival of a totally new machine to get sales to take off significantly again. “The price cut on the PlayStation 3 was effective because people are getting a high spec Blu-ray disc player for a good price," he said. Nintendo is expected to give some hints on game software in the works, which should be useful for gauging its prospects, Tsunoda said.

What’s ahead

Like other gaming and electronics makers, Nintendo faces a big test in wooing consumers during the year-end shopping period. The global slowdown has taken its toll on Nintendo’s key US market, although company officials have repeatedly said the game business is relatively recession proof.