Will the new cost of the Wii benefit Nintendo investors?

Some pundits would argue, however, that analysts shouldn't be so nonchalant about the recent moves made by the console makers. Indeed, the video-game statistics haven't been great as of late. There is evidence suggesting that the industry is in a rough spot, and that the challenging economy has finally caught up to it.

Did Nintendo make the right decision? I suppose Nintendo had to answer the new price levels of the competing systems. But I think it would have been a fascinating experiment for Nintendo to have held the price at $250 for a little while longer and simply ship less units. Take the theory of supply and demand out for a ride, so to speak. It would have taken guts, though, probably more than Nintendo actually has.

Should Nintendo have been more aggressive with the reduction? Why not $179.99, for instance? If Nintendo wanted to really defend itself, I believe it should have evaluated a price point even lower than $200. This article highlights some not-so-impressed opinions concerning the benefit the company might receive from a $199.99 Wii. And here's something that might be telling. Over at our sister site, WalletPop, attached to a post about the $199.99 Wii, a reader left the following comment: "They need to lower the game prices as well!" I tell you, when it comes to the suggested retail value, consumers want it all!

What about the trading potential of the news? Well, Nintendo ADRs closed up only 1% on Thursday. Volume was nothing to write home about, either. And the stock was still near a 52-week low.

While this suggests that the market isn't buying that a $199.99 Wii will do much for Nintendo, I do have somewhat of a contrary point of view. When the Christmas season is in full swing, I have to presume that the Wii will start to fly off the retail shelves. This might make Nintendo an interesting candidate for short-term money.

It's difficult to say what will happen. Speaking for myself, I continue to hold a long-term position in Activision Blizzard (NASDAQ: ATVI) as a way of playing the sector. In fact, when I saw the Wii news yesterday, instead of buying Nintendo, I put in an order for more shares of Activision Blizzard. I was thinking that I might get a quick trade out of all these hardware cuts through the publisher since companies that make the software that go into the machines stand to profit handsomely, via their higher-margin business models, from increased numbers of users. And readers have reminded me in the past to mention GameStop (NYSE: GME) as a useful vehicle of exposure to the industry once hardware deflation takes hold.

Alas, my limit order was never filled. But I'll be back to the market again, I'm sure, trying to get a trade in before the big rush begins. I wish Nintendo the best of luck. And I'll say again that the gaming giant should seriously look at the concept of keeping available inventory at a conservative level. Combine that with a cheaper price, and you've got the recipe for a spike in demand.

Disclosure: I own Activision Blizzard; positions can change without notice.