Nintendo has come a long way from its humble beginnings in 1889 as a manufacturer of playing cards. While the company no longer dominates the industry the way it did in the days of the original Nintendo Entertainment System, the recent demonstration at E3 of the Wii and its innovative motion-sensitive controller have brought the company back into the media spotlight.
As such, comments made by Nintendo president Satoru Iwata recently have been receiving quite a bit of attention by the online press. In a question-and-answer session, Iwata discussed the question of retail game prices. The Nintendo CEO was already on record as early as 2002 as stating that he believed lower software prices could ultimately harm the gaming industry, and he was asked to elaborate on his views:
“Maybe the question is based upon the fact that Nintendo is selling Brain Age at 2800 yen in spite of the fact that I had expressed my opposition towards the tendency of lowering software prices.
“We believe that each software should have its own price point depending on its volume, theme, contents or energies and time spent for the development, namely, the development costs. Once the suggested retail price is announced, we should stick to it.”
Iwata was careful to point out that he didn’t believe that a single retail price point should be stuck with forever, but he held on to his conviction that discounted software pricing in general could harm the industry:
“Of course, we should be flexible. If the software was first introduced 5 or 10 years ago, we don’t need to stick to the original price. However, if the suggested retail price of any and all software is marked down in 6 months or 9 months, the customers will learn the cycle and wait for the discounting, which will simply aggravate the decreasing sales of new software. We need to be cautious about this.”
These comments appear to contradict statements made by Iwata earlier this year, in which he criticized next-generation systems for pricing games too high:
“In the US, we’re going to see the next generation cost an awful lot,” said Iwata. “I really don’t think that there’s going to be a lot of acceptance by current customers of the $60 price tag. They may allow that for a limited number of premium titles, but not all.”
However, he went on to say that he expected first-party Wii titles to be priced at no more than US$50. Assuming that the company holds firm at these prices and doesn’t discount them, his two statements could both be valid.
Iwata may have a point about the dangers of game discounting. In the great video game crash of 1983, retailers tried to stop the initial sales slide by offering higher and higher discounts, and this spiraled out of control to the point where companies like Atari wound up burying thousands of unsold games in a landfill. However, the crash of ’83 was precipitated by a decline in game quality, which doesn’t appear to be an immediate problem today.
One growing problem for game producers is the fact that game development budgets continue to increase dramatically. Nintendo is not immune to these effects, and Iwata was quite open about the need for the Wii to do better than the GameCube in terms of sales:
“Wii will be a failure if it cannot sell far more than GameCube did. In fact, we shouldn’t continue this business if our only target is to outsell GameCube. Naturally, we are making efforts so that Wii will show a far greater result than GameCube.
“When we launched GameCube, the initial sales were good, and all the hardware we manufactured at that time were sold through. However, after this period, we could not provide the market with strong software titles in a timely fashion. As a result we could not leverage the initial launch time momentum, and sales of GameCube slowed down. To avoid repeating this with Wii, we have been intensifying the software development, both internally at Nintendo and at developers outside the company, in order to prepare aggressive software lineup for Wii at and after the launch.”
Nintendo has reported sales of 24 million GameCubes, continuing the decline from the 32 million N64s, 49 million SNES, and 60 million NES systems that were sold over their respective lifetimes. In contrast, Microsoft sold approximately 25 million Xbox consoles, and Sony continues to rule the roost with over 105 million PlayStation 2 units sold. The Xbox 360, introduced last November, has shipped approximately 5 million units so far.
Game software sales have been in decline lately due to the slow summer season and the continuing transition to next-generation hardware. There is also the issue of the high cost of the full Xbox 360 package and the even higher cost of the fully-stocked PS3, which may leave gamers’ wallets too dry to contemplate picking up tons of new titles. The thriving used game industry is also a concern for publishers. If the industry is to pick up speed again, it will need a whole slew of hot new next-gen games at prices that consumers are willing to pay.