In recent years, Nintendo has ramped up their efforts to have a digital presence. These days, almost any game for a Nintendo platform that you can find at retail will also be available on Nintendo’s 3DS and Wii U eShops. Many game publishers with an online store will sell digital copies of games cheaper than physical retail copies, but Nintendo usually launches both at the same price. While retailers will eventually discount games to lower prices, eShop prices (except in the case of temporary sales) typically stay the same, which means many digital games are actually more expensive than their physical counterparts.
During Nintendo’s 75th Annual Shareholders meeting, one of Nintendo’s shareholder brought these points up to Nintendo CEO Satoru Iwata, asking for an explanation of the price gap. Iwata responded by stating that Nintendo believes physical and digital games have the same value, and should be priced the same.
Question: There are two types of software for Nintendo 3DS and Wii U, packaged versions and download versions. Currently, it seems that the actual sales prices of the download versions appear to be higher than those of the packaged versions (due to retailer discounts). What do you think about the price gap between those two products?
Iwata: I would like to supplement this question for the shareholders who do not usually play games. Nintendo 3DS and Wii U software is sold through two sales methods; one is the “packaged version,” which we sell in the form of ROM cards or optical discs, and the other is the “download version,” which we sell by transmitting software content through the Internet. With respect to these products, this question is pointing out that the sell-through price of download versions may be higher than that of packaged versions because Nintendo eShop (where Nintendo directly sells the download versions) does not usually give discounts and retailers tend to give greater discounts on packaged versions than on download versions.
As for the prices of the packaged versions and download versions, we, at Nintendo, cherish the value of our software and believe that we should sell both versions at the same price because they have equal value (as software products). However, there are various viewpoints on this matter. For example, some software publishers lower the prices of download versions, giving weight to the fact that download versions cannot be sold to secondhand stores or that download versions are rarely sold at reduced prices in retail stores and even sometimes never discounted in the case of direct sales by the publishers. While the prices of packaged and download versions reflect the attitudes of software publishers, Nintendo would like to offer these products to our consumers at the same prices given that their software value is the same.
Now, the reason why the prices of the packaged and download versions are actually different is that the retailers take different levels of business risk with each of them. Retailers take inventory risks for the packaged versions from the moment they order these products. When it comes to the download versions, purchase and payment is completed at the same time when the consumer pays for the product and the download card (only available in Japan) is registered in the cash register. This system does not require the retailers to take inventory risks for download versions. Taking into consideration this difference in the retailers’ inventory risks between the packaged and download versions, our company sets a different wholesale price for these two versions. However, please understand that Nintendo does not decide the ultimate retail price, but rather the retail prices of those versions differ as a result of the decisions made by each retailer.
While it doesn’t look like Nintendo’s eShop pricing model will change anytime soon, Nintendo does have a new membership program in the works to replace Club Nintendo. Iwata brought this up, reminding shareholders that he has previously teased an upcoming program in which repeat Nintendo customers will be able to purchase games at a discounted price.
“We understand that consumers who buy many download versions may not be fully convinced if all of these products cost more than the packaged versions. In the new membership service that we are now developing to replace “Club Nintendo,” we are thinking about providing a system where Nintendo can give (individual) offers to each consumer. I would like to explain the details when we have everything in place for the new membership service, which is targeted to launch this autumn.” — Satoru Iwata
Do you agree with Iwata’s statements, or do you think digital games should be cheaper than (or at least relatively equal to) their physical counterparts? What sort of discount system would you like to see Nintendo use in the future? Sound off in the comments!