Is $299 a Fair Price for Wii U?
Nintendo (OTC: NTDOY) has announced a $299 starting price for its new console -- the Wii U -- which will arrive in the United States on November 18. Is this a fair price for a Nintendo console, or is the company charging too much?
That depends on what consumers want. Nintendo made a surprise announcement when it unveiled Nintendo TVii, a new service that converts the Wii U Game Pad into an impressive television remote. With the service (which will be free in the United States and Canada), Wii U will connect to all of the user's content providers -- such as Netflix (NASDAQ: NFLX) or Comcast (NASDAQ: CMCSA) -- and seamlessly display all available videos on both the TV and the Game Pad. The layout is rich and colorful, featuring large, clickable images that serve as an interactive video guide.
During an online presentation this morning, the company demonstrated how Nintendo TVii differs from the features and services of other devices. Let's say that a user wants to watch the TV series Modern Family. When he clicks on the show image, all available viewing options appear. They might include Netflix, live TV, or pre-recorded material from TiVo (NASDAQ: TIVO). Whichever the user chooses, the show will play instantly.
If Modern Family is on live TV at the time, users can click the "tune in" icon that appears. This is where things get interesting. After the show begins, Nintendo TVii immediately starts to populate the Game Pad with still images and brief text descriptions of everything that has been happening in the show thus far, enabling viewers to catch up if they missed anything. Users will then be able to take those stills and instantly share their favorite moments across various social media channels, such as Twitter.
While watching sports, Nintendo TVii will provide viewers with a quick listing of all the recent games and their latest scores. If a game is still going on, users can click on the score and instantly start watching (provided that the game is available through users' content providers).
These features might make the average gamer yawn, but they will go a long way in getting mainstream consumers to take a second look at Wii U. This could be crucial to the device's long-term success.
That said, no one pays a few hundred dollars for a set-top box that does not record video. Apple (NASDAQ: AAPL) has struggled to turn its video streaming device, Apple TV, into anything more than a hobby. Other companies, such as Western Digital (NASDAQ: WDC), have faced similar challenges.
Nintendo cannot sell Wii U on its multimedia capabilities alone, not when many households already contain an Xbox 360 or PlayStation 3, which can provide a lot of the content Wii U claims to deliver -- albeit in a less cool and less attractive way. From TVs with built-in Wi-Fi to tablets and other devices, consumers are overflowing with connectivity options.
Microsoft (NASDAQ: MSFT) knew this, and it was one of the first to build a game console that truly served as a multimedia device. When the Xbox 360 was released, Microsoft did everything it could to push the games. Then, in the following years, it slowly transformed the machine into something everyone -- even people who rarely play games -- could enjoy.
This strategy was effective for two reasons. First, by promoting Xbox 360 as a hardcore gaming device, Microsoft helped ensure that the system would sell out at launch. Second, by implementing a gradual transformation, it gave everyday consumers the chance to slowly warm up to the idea of owning an Xbox 360 while the price continued to drop.
Nintendo is taking a different approach. While its Nintendo TVii strategy may be smart and surprising, its philosophy toward gaming is as perplexing as it is problematic. After an hour of demoing games, American consumers still have no idea when they will get to buy most of the 50 "launch window" games that Nintendo and its partners plan to release by the end of March.
Consumers who choose to pre-order a Wii U at GameStop (NYSE: GME) today will be taking a leap of faith. They will invest their faith in a company that has a questionable track record with keeping promises, particularly those relating to release dates. One would assume that Pikmin 3 -- which was hyped to no end at this year's Electronic Entertainment Expo -- will arrive before Christmas. But Nintendo made no mention of the game this morning, only showing a brief video during a demonstration involving several other games.
Nintendo also failed to show any new games that will be released after March 2013. This is a serious problem. While the company might be saving that information for the Tokyo Game Show (which starts next Thursday), there will not be many other opportunities to make a big announcement. If Nintendo continues to sit on this information, consumers will begin to think that it is because the company does not have anything to announce. That would be the worst thing that could ever happen to Nintendo.
Right now, it is hard to justify Nintendo's pricing structure for Wii U. It can be rationalized -- the console is as powerful as an Xbox 360 and comes packaged with a unique touch screen controller that will be sold separately for $173 in Japan. That is more than half the cost of the basic Wii U package.
Rationalization and justification are two entirely different things, however. Nintendo can rationalize the price ($299 for the 8GB model, $349 for the 32GB edition) all it wants. But that does not mean that consumers will justify the purchase.
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