Nintendo of America (OTC:
) President Reggie Fils-Aime has hinted at the possibility of a
partnership with Comcast (NASDAQ:
) and other cable companies that would allow them to sell the Wii
U. In an interview with the
, Fils-Aime was asked if Nintendo would sell its new console
through Comcast or other TV partners.
"It's certainly possible," said Fils-Aime, opening the door
for the device to be sold at a reduced rate or given away for
free to those who sign up for cable.
This strategy, where a service provider subsidizes the cost of
a device by requiring buyers to sign a multi-year contract, has
been hugely successful for Apple (NASDAQ:
) and Samsung. It has been widely speculated that Apple will
attempt to do the same with its television set, which is expected
a hefty price tag
During the interview, Fils-Aime spoke about the potential
benefits of studying the TV viewing habits of consumers.
"Certainly the way the system works, it gives us access to a
lot of information, as long as the consumer agrees to share it
with us," said Fils-Aime. "How we utilize that, we'll find out as
"Again, we're not in the ad-serving business. We're not in the
micro-targeting business. But certainly I can imagine as we build
out the service that's something that Comcast or AT&T or any
of the cable companies are really going to be interested in,
When asked if that gives Nintendo leverage in negotiating with
cable companies, Fils-Aime replied succinctly. "Sure," he
Fils-Aime was also asked why Nintendo did not buy TiVo
) and "go the whole DVR route."
"That's not what we do," he replied.
The Real Cost of a Free Console
Comcast is unlikely to sell a game console unless it views it
as an enticing device that will bring in more customers. But if
it decides to start offering game consoles as an incentive to
subscribe, consumers might be less troubled by the $100 monthly
Wii U might not be the console to pull this off. At a maximum
price of $349, the device is only $50 more than the price of
) PSone (released in 1995) and PlayStation 2 (released in 2000).
After 17 years, $50 is not much inflation.
However, the price of the Wii U's competitors is likely to be
much higher. When the Xbox 360 came out, Microsoft (NASDAQ:
) offered two packages -- one for $299 and another for $399.
PlayStation 3, which also came in two packages, debuted at $499
and $599. Despite the high price, both Sony and Microsoft argued
that they lost money selling the new hardware.
Hardware prices are likely to continue rising. As it stands,
Wii U is $50 to $100 more expensive than the original Wii,
depending on which models consumers choose.
Without subsidies, console manufacturers are forced to sell
new hardware as cheaply as possible. They may push boundaries,
but the prices will always be kept in check. Otherwise they
will not sell
If subsidies become an option, console manufacturers will no
longer be forced to keep the prices in check. They will be free
to follow in the footsteps of smartphone manufacturers, knowing
that if consumers want a cheap option, they can sign a two-year
contract with Time Warner Cable (NYSE:
This would be a disaster. It may benefit the guy who wanted
cable and a new console and planned to pay for both anyway. He
might save some money on the deal. Everyone else will be screwed
as console prices inflate and monthly cable fees rise.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.