To start off I'd like to say that this article will have nothing about the quality of the Wii, Nintendo, games, or any products there of. It's a purely analytical view of the console market based on past generations, and observations. If you're looking for me to praise, or condemn the Wii, or Nintendo based on sales, product quality or software I suggest you try system wars.

Anyway back to the main topic.

At the end of September Nintendo announced that the Wii would be dropping from $250 to $200. This is obviously a move to combat declining Wii sales, but unfortunately it won't work in the long term. In the console industry there's a term called "the sweet spot". The sweet spot refers to the price point in which we see a dramatic jump in console sales, and a majority of the total sales for a console. Last generation the sweet spot was $200, in the days of the NES it was $100 (not sure on this need more research) and my prediction for this gen is that the $250 price point is the sweet spot. The sweet spot can be a blessing for consoles since it's when a console sees a majority of its sales, but it can also be a burden to consoles since many companies don't know what to after they hit the sweet spot, and time takes it's toll as sales begin to decline.

In the past companies have tired lowering their price past the sweet spot to gain sales, and though this works in the short run, after a month or two sales are right back in the gutter. A famous example of this was the Sega Dreamcast. As a last ditch effort to compete against Sony's PS2 Sega dropped the price of the Dreamcast expecting to see a boost in sales, but after a few months they fell flat again, and Sega discontinued the system. We've seen this pattern w/ just about every system since the NES days. After the sweet spot is hit there seems to be an inevitable decline in sales, and price drops from then on out only provide a very temporally solution. This maybe tough too see w/ the Wii right now since it's only been 1 month since the price drop, but by February we will have the numbers to show once and for all price drops past the sweet spot are not going to help system sales long term.

So what should of Nintendo done? Was there anything they could of done, or is the Wii in a permanently downward spiral for the rest of its life? The answer is Nintendo already figured on the solution, but it perplexes me why they didn't use it for the Wii. The one system that has shown tremendous resilience against the seemingly inevitable trend of declining sales is the DS. Why has the DS been able to combat declining sales? It's because the DS has re-released new iterations of the system instead of dropping the price. First we saw the DS lite which generally improved the system, and sales greatly increased w/out a price cut. Then we saw it happen again w/ the DSi which was actually an increase in price (and honestly it has me baffled it's doing so well). If Nintendo could of released a new iteration of the Wii they wouldn't off needed the price cut, and sales wouldn't decline again in a few months.

It's quite possible Nintendo is planning to this and only using the price cut to clear old inventory, but I haven't really seen many signs that point to this as actually happening any time soon. Nintendo seems perfectly confident that the price cut will increase sales over the long term.