What do steep discounts on Wii U games say about Nintendo’s new console?

Retailers like Target are offering huge discounts on Nintendo Wii U games, an unusual move following the release of a brand new gaming console. Are these price cuts say the Wii U's in trouble or is this a sign of a fast-changing business?

A new console launch has always been a boon for retailers almost more than game console makers themselves. Releasing new hardware is an immensely expensive endeavor between ramping up manufacturing, marketing, and shipping the device, not to mention double timing the development of games for that early window. For the businesses selling those new consoles, it’s all good news. Consumers get hyped for a new machine, especially when it’s in short supply, and they’ll buy whatever games are available, at full price or in extravagant bundles. A strange thing is happening with the Nintendo Wii U, though: Retailers are heavily discounting Wii U games.

Target is running a promotion where customers get 50 percent off a third Wii U game when they buy two at full price. Toys R Us goes one better, offering a 40 percent off a second game when you buy one at the full $60 price tag.

According to analysts, though, video game retailers have to adapt to a new market where getting people through the doors is much harder than it used to be. Discounts on Wii U games aren’t a measure of Wii U’s success or failure, just a sign of how retail has changed. “Keep in mind that they don’t have many Wii U hardware units, and that the total shipped to the US is probably well under 1 million for the launch,” Wedbush Morgan analyst Michael Pachter told GamesIndustry International, “So their risk is that they sill 100,000 or so titles at no profit. It’s a loss leader to drive traffic. I don’t think it’s a signal about the health of console sales at all.”

Then again, Pachter’s analysis might be off. Within the past year, retailers have been burned by a lack of consumer enthusiasm for a new Nintendo console and had to aggressively discount new games to generate sales, and not just brick and mortar retailers. Amazon, for example, offered $10 off a second Nintendo 3DS game when a customer purchased one the week the handheld launched in 2011. That’s not quite as steep a discount on games as those offered by Target and Toys T Us on Wii U games, but it’s comparable timing.

Pachter is right about this: These discounts are not a measure of the Wii U’s success or consumer interest in the platform. They are simply representative of the fact that people are less and less likely to pay $60 for a physical copy of a video game at a store.