Retail Sources: PS3, 360 Price Cuts are Legitimate, Wii Cut Possible

Vgchartz has received confirmation that price cuts of some nature, likely as Ars Technica reported the other day, are in the works for both Sony’s PS3 and Microsoft’s Xbox 360. Both cuts are expected by the early fall. The sources expect the systems to have different components – more memory, less parts, and any remaining inventory of older skus the two companies want to get rid of will likely be bundled with compelling catalogue software developed in house at Sony and/or Microsoft.

The big news though is that Nintendo is considering a price cut. At the moment, the company has not planned a price cut according to sources. However, if Wii Sports Resort does not sufficiently lift Wii hardware sales long-term, Nintendo is willing to forgo its previous plan and consider dropping the price of the Wii. Given the sales of Wii Sports Resort in Japan week one, there probably will be a 500k to 1 million debut for the game in both the Americas and Others. Whether that kind of debut accompanies a small, big, or no hardware lift remains to be seen though.

If there is some kind of ‘middle lift’ below what Nintendo expects, that still raises Wii above current levels Nintendo is only expected to introduce new Wii colors. Assuming the lift is not enough for Nintendo to meet its projection of 26 million Wiis in the year ending March 2010, Nintendo is supposedly willing to cut the Wii price to $200 by the fall while simultaneously introducing new colors. Our sources did not speculate when such a price cut would occur. If I had to guess, I would put it between the release of Wii Fit Plus (early September?) and New Super Mario Brothers Wii (mid-November?). The advantage of this time slot is that much of the initial impact of Sony’s and/or Microsoft’s price cuts would be diminishing already if they occurred in August or early September. A price cut in mid to late October would probably allow Nintendo to beat its December 2008 Wii figures in the Americas as Wii supply is now "normal" in the Americas.

With 220m games forecast to be shipped for Wii by Nintendo in May – not including Wii Sports in the west and not presuming a price cut, Nintendo probably believes that it can almost make up the difference in thinner hardware profits by selling many more games than forecast with a lower hardware price. The record for software shipped in a year (production shipments) on a single platform is 252 million for the PS2 in the year ending March 2005, on 87m PS2s through that March. Wii was forecast to reach 76m units life time with 220 million games shipped for the year at $250. At $200, the hardware figure would probably stay the same since Nintendo would not lower price if demand was still rabid. But with a lower Wii MSRP, it probably is possible for Wii software shipments to top 250 million for the year.

A Wii price cut in say, October 2009 would mean that the system held up for roughly 35 months at its original price point - easily a record. Sony and Microsoft momentum from a price drop may be seriously blunted by a $50 Wii price cut, as the first drop is often the most impactful long term.