 Why are Nintendo consoles not getting more expensive? At a time when the cost of manufacture and shipping is increasing, many companies around the world have been raising the price of their goods. Following the announcement that Sony would put up the price of the PlayStation 5 in Europe, a Nintendo spokesperson insisted that the Switch console would not experience a similar bump in retail cost. They said, As our President Mr Furukawa stated at the 82nd Annual General Meeting of Shareholders in June, while we cannot comment on pricing strategies, we currently do not have any plans to change the price of our hardware due to inflation or increased procurement costs in each country. We will determine our future pricing strategies through careful and continued deliberations. While the final price to consumers is always determined by retailers, as Mr Furukawa stated, Nintendo has no plans to increase the trade price of its hardware. The last line about the trade price of the console is crucial. Even if they wanted to, the higher-ups at Nintendo couldn't raise the cost of the Switch because they don't set its retail price. Nintendo sells Switch units to retailers for a trade price, which is lower than the retail cost of the device. Retailers then decide how much they will charge for the consoles. They may stick to the retail price recommended by Nintendo, but if they disagree with the pricing, they'll make whichever decision they feel maximizes their profits. What's more, previous experience will make Nintendo very wary of raising the trade price of their consoles. The launch price of the 3DS and its subsequent slow sales showed how even a small increase in the trade prices can have disastrous effects on sales. In his autobiography, Reggie Fizer may explain how the initial launch pricing for the 3DS caused big problems. In Western markets, companies can only suggest retail prices, not dictate them. In some European countries, manufacturers can't even discuss pricing with retailers. Also, in the West, retailers prefer price points above $100 that end in either $49 or $99. Retail margins on hardware are typically slim, around 4%. So even if we were to suggest $219 or $229 for the 3DS retail price, retailers instead were likely to price at $249 on their own and take a higher margin. This would create a missed opportunity to maximize our profitability and potential future problems as retailers would never want to revisit a 4% margin on next-generation hardware. Fizer may explain how to anticipate predicted retail prices, Nintendo tries to set the recommended retail prices at multiples of 50 wherever possible, hence why in the United States, the Switch has an RRP of $299. The Switch Lite retails at $199 and the Switch OLED retails at $349. Prices are similar in euros, generally rounded to the nearest 50. While in Britain, we take whatever inflated prices we can get. At least we have things better than Australia. Individual retailers are flexible on prices, but if Nintendo were to try raising the Switch price by $20 or 20 euros, it could lead to some retailers putting up the price by $50 or euros. Thus, it's safer to tolerate the increase in manufacturing and transportation costs than to risk a business arrangement that is currently working out nicely for Nintendo and retailers alike. Microsoft has similarly confirmed that there won't be an immediate price increase for the current generation of Xbox hardware. David Gibson of MST Financial has speculated that the price increase for the PlayStation 5 is less to do with the cost of materials and more reflective of the exchange rate between US dollars and European currencies. He said, Sony would have budgeted on certain cross-rates versus its cost in dollars, but the pound and other currencies have all moved because of rising interest rates. Yes, freight rates have gone up, but the semiconductor market is improving and RAM prices are falling. The fact Sony didn't charge US prices shows how it's largely a forex situation versus cost in dollars and not inflation. It's also worth noting that Sony is in a uniquely unfavorable position at the moment. Because of the cost of manufacturing PlayStation and Xbox consoles, Sony and Microsoft have traditionally sold consoles at either a very slim profit margin or even a loss with the expectation that game sales will mitigate this in the long term. Unfortunately for Sony, while the PlayStation 5 is still experiencing stock issues several years after its release, people aren't actually playing on the console as much as Sony had forecast. According to a recent financial report, while Sony had shipped over 21 million PS5 consoles, actual playtime was down 15% in the first few months of 2022 compared with the same period in 2021. According to the report, we believe the primary reason for this is that the growth of the overall game market has recently decelerated as opportunities have increased for users to go outside due to a reduction in COVID-19 infections in key markets. Less playtime means fewer games sold, which hurts Sony's profits given the aggressive price of the PlayStation 5. With Microsoft pursuing game pass subscribers and Nintendo being Nintendo, the other major players in the console space aren't likely to be impacted as much by changes to manufacturing costs or currency rates, yet. Things could well change in the future as the current cost of living crisis is forecast to escalate. While it may be difficult for Nintendo to raise the price of the Switch console, the company does have other options for increasing prices namely raising the cost of individual games which won't be subject to the unspoken $50 price point rule. It remains to be seen what decisions Nintendo makes both in the immediate and long-term future, but the moral of the story is that the games industry is far from stable and small changes to sales practices can have far-reaching effects.