Wii U: Fantastic games make up for high price

Nintendo strikes again, showing off its software prowess and winning over the doubters

As it prepared the Nintendo Direct videos which would announce the launch details of its new home console, Nintendo must have recognised the uphill struggle it was facing. Ever since E3, price speculation around the console - which boasts similar performance to the Xbox 360 and PS3, rather than "next-gen" hardware per se - has tended towards the low end. Yet a combination of a controller that's expensive to manufacture and a deeply unfavourable exchange rate means that the Wii U is actually going to be a pretty expensive piece of kit. How could the company turn around the negative sentiment that would create?

"The reality is that most buyers during the launch period will be people who already own an Xbox 360, a PS3 or both"

This is Nintendo we're talking about, so the answer is apparent - software. As simultaneous global streams announced details of the console to different territories later in the day, the launch date and pricing details were dealt with swiftly (although infuriatingly, Nintendo still refuses to set SRPs in Europe, presumably on the basis of some insanely over-cautious legal advice following its fine for price-fixing many years ago), leaving the firm's spokespeople free to move on rapidly to software, software and more software.

That's a very wise strategy for a company whose true strength, after all, is in the quality of its software and its IP. The company's first-party titles - NintendoLand (which is bundled with the more expensive Premium Pack Wii U) and New Super Mario Bros U, with Pikmin 3 and Game & Wario following early in 2013 - were joined by a surprisingly strong line-up of third party support, most notably in the form of exclusive titles from Ubisoft and Platinum Games. ZombiU, Rayman Legends, The Wonderful 101 and Bayonetta 2, along with Traveller's Tales' LEGO City Undercover and Capcom's Monster Hunter 3 Ultimate, are pillar titles upon which the Wii U's launch period will rest heavily.

The company was careful to ensure that there's plenty of cross-platform support there too - FIFA 13, Skylanders, Mass Effect 3, and of course Call of Duty Black Ops 2, to name but a few - but the real focus was on the fan-pleasing exclusive titles. That's about right. While it's important to build up a base of recognisable mass-market brands on the Wii U, the reality is that most buyers during the launch period will be people who already own an Xbox 360, a PS3 or both. They don't want a new console to play FIFA 13 on; they want a new console with new core games and new experiences. Wider mass-market appeal can come later.

It's a good strategy, and it's worked. The buzz around Wii U, in spite of the high price point, is largely positive. People are enthused by the range of games they've seen; and for a product like Wii U, that kind of core enthusiasm should be enough to carry it through the Christmas period and well into 2013. The pricing ($299 / $349 in the US) is unattractive, but it won't dissuade a core audience that's been chomping at the bit for new hardware for the past year or so anyway.

It's after that audience has been sated that Nintendo's going to have to work much harder to make Wii U stick - especially given that it's going to be competing with extremely competitively priced PS3 and 360 bundles aimed specifically at undercutting it in the market. A great catalogue of software will give the company a nice head-start, but there are two pieces of the puzzle which will need to fall in place in 2013 if this console is going to work out - firstly, a compelling mass-market price point, and secondly, at least one strong piece of "casual" software which can take up the crown of Wii Fit or Wii Sports.

"Without the Yen's appreciation, the Wii U could certainly afford to be at least $50 cheaper in the USA - a much more appealing launch price"

The latter is something that's almost impossible to speculate on, and may ultimately end up being a convincing line-up of moderately successful casual titles rather than a single blockbuster like Wii Fit. No doubt analysts and commentators everywhere (here included) will be scouring Nintendo's future product announcements for evidence of that kind of title coming through the pipeline. The former aspect, though, the price point, is something we can think about in a somewhat more educated way.

Although the expense of manufacturing the controller is a major part of the cost of Wii U, the real reason for the console's price point is the Yen exchange rate. We've talked about this in the past, but it bears reiterating - the exceptionally strong Yen, whose value has grown by around two-thirds since the start of the last console generation, is seriously limiting the pricing options of both Sony and Nintendo. Without the Yen's appreciation, the Wii U could certainly afford to be at least $50 cheaper in the USA - a much more appealing launch price.

However, the chances are that the console is going to sell out its initial shipments in all territories, at least for the first few months - the software line-up (and especially the Monster Hunter title in Japan) practically guarantees that. It will sell to a core audience who don't mind paying a premium for early access to the hardware and its titles - or who might complain and grouse endlessly about the price, but will still pay it, which amounts to the same thing in the end.

Further down the line, the audience will become more price-sensitive - probably quite rapidly, as Wii U ends up sitting next to steeply discounted 360 and PS3 bundles in stores. It's entirely possible that Nintendo's launch price allows for this, giving the company a certain degree of financial latitude - meaning that it will be able to push through a price cut for the Wii U in 2013 without taking too much of a haircut on its profits. The ideal world situation for the company is that the Yen starts to lose some of its artificially inflated value (its strength right now is largely a result of US and European economic weakness, with currency markets favouring the "safer" Yen during the present storm), meaning that Nintendo can cut international Wii U prices in 2013 with only a marginal hit to its Yen-denominated earnings. That doesn't look entirely likely right now, but with elections due in both the US and Japan later this year, the potential for currency volatility is fairly high.

"This is still ultimately a business that's about selling games. Nintendo still does that better than almost anyone else"

In other words, there's a chance that this could all play out very nicely for Nintendo - and who would have expected that we'd be talking about a $300 Wii U in such terms, only a few scant days ago? The company has delighted core fans and will sell strongly to them at a high price point, and may then have the flexibility it needs to drop the price and appeal to more price-sensitive consumers later in 2013, once the software library has grown and the value proposition is more clear. That's a good position for a console to be in, and one enabled solely by the strength of the launch line-up the company has prepared.

Perhaps this is a reminder to everyone in the industry, that for all the talking we do about hardware and specifications and platforms, this is still ultimately a business that's about selling games. Nintendo still does that better than almost anyone else. For the fourth time in a row (DS, Wii, 3DS and now Wii U), the industry finds itself having somewhat underestimated the extraordinary talent and market strength of the gaming legend from Kyoto. The real proof will start to pour in on November 18th (or 30th in Europe), but for now, my feeling is that Nintendo has done enough to ensure a solid launch - and demonstrated the kind of abilities it'll need to climb the steep slope ahead through 2013.

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Latest comments (6)

Peter Dwyer Games Designer/Developer 7 years ago
"Fantastic games making up for high price"

They're really not you know.
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Rick Lopez Illustrator, Graphic Designer 7 years ago
"Fantastic games making up for high price" of the console I hope, cuz Im not willing to spend anything over 60$ for a new game, and all this stuff with DLC made me hold back on games like border lands. Right away after release they have 30$ worth of DLC, making the game I bought reallly worth 90$. I put borderlands 2 on the back burner, waiting either for a price drop or GOTY edition.

but they make good games. Just wished they made more inovations with Zelda, i really dislike running over empty fields, but aside from that I love it. 300$ is a bit steep but its my limit. I wouldnt pay anymore than that for a console. The 350$ version comes with an extra game and a few other goodies that makes it worth considering. And the fact that you can connect external storgae media, really doesnt make the internal storage problem relevant.

I think Nintendo is at good price point for a NEW console. Plus its backwards compatible with all Wii games and periphirels. It also has a good online offering. The SNES was 199$ when I bought it and after almost 20 years its only a 100$ increase.

Bottom line, I own over 20 Wii games. That is hardly dissapointing I enjoyed my Wii, and its the only console I can play with my girlfriend. So Its natural that I give the WiiU a shot, and at that price point im getting it on day 1. Its because of the Wii that I can talk to my girlfriend about other games like mass effect, uncharted and metal gear. She no longer see's them as merely games, but an interesting storytelling medium and artform. Nintendo is to thank for that. She now sits down next to me while I play more hardcore games and I talk about them just like I would a movie or a song.

Edited 1 times. Last edit by Rick Lopez on 14th September 2012 1:52pm

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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.7 years ago
Rob, can you do us all a favor? Can you forward your articles directly to all the major analysts out there?
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Show all comments (6)
James Wells Gaming Contributor - 7 years ago
Break out the thermometer, we have a sick duck here!
Quaaaack quaaaaaack...
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Jason Sartor Copy editor/Videographer, Florida Today7 years ago
If the Wii U continues to sell well Nintendo will not drop the price point of the Wii U until after its second Christmas in the U.S. market.

All evidence suggests the Yen will remain strong against the U.S. dollar (or the U.S. dollar will remain weak compared to the Yen) considering the U.S. Fed just approved QE3 and the government is printing more money - again. I know this usually increases the value of currency (oh wait, no, it doesn't) Weimar Republic here we come (Thanks, Ben Bernanke).
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Jason Sartor Copy editor/Videographer, Florida Today7 years ago
I would like to add that I disagree with the 360 and PS3 price cuts (assuming they happen) causing Nintendo to drop the price of the Wii for several reasons.

First, at the midpoint of next year, assuming the price of the 360 and PS3 are dropped, I don't believe it will affect Wii U sales because no "hardcore" gamer is still waiting to purchase a 360 or PS3 so those consoles are no longer in competition with the Wii U for hardcore gamers, the Wii U still will be the only new console on the market for the "hardcore" gamer.

Second, the price point of $150 is to draw the "non hardcore" or "casual" gamer or parent of kids. By this measure, a lot of these players also will be Wii owners. But at this point, it is most likely the PS4 and next Xbox are only five months away for a Christmas launch, so why would a parent purchase a system for their children that they know will be outdated and unsupported so soon by Christmas?

Thirdly, continuing with the second part of only casual gamers would still have yet to purchase a PS3 or 360, The Wii U is offering CoD, FIFA 13, Madden, Mass Effect 3, Darksiders II, etc. and you know the Wii U will be around for years, so the 360 and PS3 make no sense to purchase at this point because you have already missed the earlier versions of these franchises and would be jumping in new anyway - and at a time when the "hardcore" gamer who plays these games are moving on to the new Xbox and PS4.

Fourth, The Wii U is backward compatible, parents and gamers who own a Wii can upgrade to the Wii U, keep their current Wii game library playable and now also get the new Nintendo releases and the major third party releases (FIFA< CoD, etc.) which again is why the PS3 and 360 price cuts won't affect the price of the Wii U.

What will affect the price of the Wii U is when the next Xbox and PS4 are released and everybody knows the specs and sees the performance of the machines and knows what the competing price is against the Wii U. At which time, Nintendo could wait for a huge Black Friday price drop announcement and compete on price starting with Christmas sales of much higher-priced consoles offering the same CoD game, while perhaps throwing in Bayonetta 2 and a new 3D SMB game as exclusives.

Edited 1 times. Last edit by Jason Sartor on 15th September 2012 12:19am

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