NPD: Behind the Numbers, October 2009
November 16, 2009 Page 3 of 5
Nintendo: Wii Price Cut Should Have Been Earlier
Whereas Sony's console is doing well and its handheld is faltering, the story is nearly the reverse for Nintendo. The Wii had seen diminishing sales through the middle of 2009 while the Nintendo DS Lite and DSi maintained extremely strong sales.
However, Nintendo's Wii experienced a tremendous turnaround in sales during October, shooting up to nearly 127,000 units per week, compared to only 93,000 units per week in September. While this falls well short of the 188,000 units per week that Nintendo enjoyed in February of this year, it does demonstrate that cutting the Wii price to $200 was immensely effective.
However we do feel that Nintendo took too much time to drop the price of its console. Looking at a simple 12-month moving average of Wii hardware sales for the past two years reveals that sales of the system peaked in February of this year, and have dropped steadily since then.
A key part of the picture here is that Wii hardware sales were extraordinarily high during the last half of 2008 and into the first half of 2009. As those insane sales figures drop out of the back end of the 12-month moving average and are replaced with the strong-but-lower sales of mid-to-late 2009, the average is bound to drop.
But we fail to see any reason for Nintendo to have waited as sales dropped so dramatically before dropping the system price. October's Wii sales show that the demand is still there for Nintendo's console, and we believe an earlier price drop would have given the Wii more momentum heading into the end of the year.
We don't wish to overstate Nintendo's difficulties. We hasten to point out that the Wii is still well ahead of both the Xbox 360 and PlayStation 3 in hardware sales and, to a lesser extent, software sales for the year.
The real puzzle going forward is what to make of the slower growth rate of Wii software sales in 2009. According to data from Wedbush's Pachter, the Wii software market contracted by 20% in September and by 35% in October.
The graph above shows both Wii and Nintendo DS sales and reveals an interesting trend. The running average dropped slightly for both the Wii and the Nintendo DS in March, and Wii has been declining since.
The launch of the Nintendo DSi appears to have reversed the trend for the Nintendo DS platform, and in fact the average weekly rate of sales has stabilized at just over 200,000 systems per week for seven months running.
Page 3 of 5