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Nintendo Again Faces Wii Supply 'Challenge'
by Leigh Alexander [PC, Console/PC]
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February 11, 2010
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The Wii is apparently once again facing shortages, and Nintendo is answering media reports of strapped retailers, saying that keeping up with current production demands is going to be tough.
"In the short term, replenishing Wii inventories will be a challenge," corporate communications VP Charlie Scibetta told consumer weblog Joystiq. "But we are doing everything we can to satisfy consumers looking to purchase a Wii system."
Facing languishing demand during the summer and fall months, Nintendo actually reduced Wii production ahead of the Christmas holiday, an unusual move.
But amid widespread analyst reports that supply and demand for the popular family-friendly console were finally in balance, Nintendo had what it called a "healthy" holiday for Wii following its September price cut from $249 to $199.
Now, apparently, demand is outpacing production again, with retail employees claiming they can't keep the Wii in stock. Frequent supply constraints have been something of a pattern for Nintendo since the 2006 launch of the Wii. Analysts have estimated that the company could have sold even more consoles to date if its production kept pace with demand.
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Are you serious?
So you believe that Nintendo is artificially raising demand for their product which has been on the market since 2006, has already sold about 70 million units, and right before Valentine's Day?
If this is true, it's apparent that Nintendo's console is selling way better than Microsoft's console or Sony's console, so why don't the other guys adopt the same plan? If this is true, why didn't Nintendo take this route with their last console?
If you mean it ensures that the price remains high, then isn't that simply the valid meeting point of supply and demand? It would only work if demand was high in the first place.
Please provide examples where this has been shown to work if possible. Thanks!
Whatever shortages Nintendo is claiming at this juncture are strictly on paper; the Wii can be purchased anywhere and everywhere.
As I mentioned above, I don't feel the earlier shortages were manufactured. However, in regards to your question, there is a psychological component to the notion of a product that is so successful that it literally cannot be found on store shelves. Once this product has been mentioned in enough headlines and appeared on enough blogs and articles, there is the possibility that some people who were initially uninterested in that product may decide to investigate or even purchase it because of the scarcity. We've seen this kind of thing happen with everything from PS2's to the Furbee. Whether or not these shortages were intentional or manufactured is irrelevant; the psychology behind people wanting what they cannot have is elementary.
That said, I think this recent announcement by Nintendo is PR blather to grab a few quick headlines. To be fair my evidence is anecdotal but I see Wii hardware wherever I go. By contrast, seeing a Wii sitting on the shelf two years ago was like spotting a yeti.
Maintaining the perception that an item is in high demand can lead to increased sales - no-one wants to be left out and getting hold of an "exclusive/rare" item can boost people's social standing. However, given how long the Wii has been out, it's more likely that this supply/demand issue is down to the inevitable delay between exhausting built-up stocks and producing new units!
You didn't checked the Wii numbers for a while, haven't you? The Wii plummeted? Nintendo sold almost as much Wii consoles in 2009, as they did in 2008, the Wii wasn't supply constrained in the holiday season 2009 and it sold extremely well.
My latest blog article is titled, "The Role of Scarcity in Video Game Marketing."
At the end of the article, I mention an unnamed video game console launch. Although I don't say which console or console maker, I think you can guess. There are other examples in the book, but suffice it to say that often these shortages are indeed manufactured.
1. A shortage of Wiis due to sourcing/manufacture/logistics issues
2. An intentional shortage of Wiis to stimulate demand
3. No shortage, just PR to pretend there is one
I can now see how number 3 might benefit Nintendo, though this kind of statement doesn't seem quite like them. In Japan there seems to be a bit of a different corporate culture where they tend to be more straightforward and CEOs take personal responsibility for things etc. Also, before we get ahead of ourselves, let's examine the statement from Nintendo: "In the short term, replenishing Wii inventories will be a challenge. But we are doing everything we can to satisfy consumers looking to purchase a Wii system.". This is not really a strong statement. It's a lot of consoles, anyone would find it challenging. There is not even any indication they expect a shortage and he uses a qualifier "In the short term". Note that this was not a press release. The Joystiq article clearly says that they pushed Nintendo for a comment after being prompted to by a report of shortages from a Best Buy employee. Nintendo don't appear to be trying to get in people's faces with this... the gaming sites do.
What about number 2 then? This is possible, but I'm not sure whether the benefit of limiting their console sales since it reduces the installed base size to which they want to sell software. Surely they would want to get as many units out as quickly as possible during this generation while the iron is still hot for selling games, attracting third-party publishers etc. This is not quite the same as fashion items and Zhu Zhu Pets (whatever they are lol) since you don't buy other products to run on those, unless I'm really wrong about Zhu Zhu!
No I am not working in any form for Nintendo, but if I recall correct, you seriously accused Nintendo on this site a few weeks ago of assassinating Ex-Employees. Maybe this helps to see your Point of View.
All three consoles saw price cuts during the last 24 months. All 3 consoles got a temporary sales boost from these price cuts, in a long term, these price cuts (that were more frequent on the PS3 and the 360) didn't change the general market share. Nintendo still sells around as much consoles, as MS and Sony combined.
Your logic is flawed. as Chris Melby pointed it out, if you are able to generate demand by constraining the supplies, why didn't Sony used this technique with it's Slim PS3, a console, that had massive media coverage and was highly anticipated?
I read your article. You use an example of number 3 above: No shortage, just PR. From my comment above you can probably agree that wasn't the case in this story unless it was something *really* devious on Nintendo's part (i.e. engineering the conversation between Joystiq and the Best Buy employee, ignoring Joystiq's requests for comment a couple of times before finally giving a mildly worded statement that they measured would be exaggeratedly over-reported, or simply buying a writer at Joystiq). Do you know of any examples of no. 2? An intentional true shortage. This is the common accusation made of many console manufacturers.
Scarcity marketing is not always successful and as I point out in my article, can be viewed as unethical when done deceptively. It is also a good way to make enemies in your industry, particularly among retailers who are losing revenue from constrained supplies. You also risk losing customers to the competition if your product is not sufficiently unique and has numerous substitutes that consumers can turn to.
@Prash
You are right. The example in the article and the examples used in the book are all about creating the "perception" of a shortage.
Assuming the Wii shortage was not intentional. If Nintendo had increased production to meet demand levels and then demand suddenly fell off, that could create the opposite perception, namely that the console was a fad. The last thing you want is retailers trying whatever they can to get consoles out the door.
Then there is the cost of warehousing. Nintendo at one point was warehousing 5 million GameCube consoles. They finally had to stop production to clear out excess inventory. All that costs money, which is anathema to a company as fiscally conservative as Nintendo.
I think most people can agree that Microsoft will do and probably have done anything that works. They are basically a marketing/PR company that dabble in software and gaming.
I have been thinking more about what benefit *actual* supply shortages would create for a console manufacturer and it seems increasingly pointless. The buzz surrounding a sold out console would be a very short term thing and would only affect people while it was in the news. Then if people went out to the shops to find no stock, what would be the point? If the buzz is there you need the stock to take advantage of it, and as pointed out by David above, there are other reasons it is not always provide a solid advantage, and not one that could be a main driver of demand for an already very popular console.
If being a mindless FUD machine is your thing, that's your right, but wouldn't your rhetoric be better served on sites that cater to tweens?
Just another pointless Anti-Nintendo trolling, we saw much to much on this site in the last months, it's not about liking a console or not, it's about the facts, you write:
"casual gamers, for the most part, are letting their Wiis and Wii Fits collect dust. New Super Mario Bros has changed that temporarily, however"
If this would be the case, I wonder, who bought all the Wii Fit Plus and Wii Sports Resort units in the last 6 months? These titles (especially Wii Fit Plus) are aiming the casual gamer and they sold extremly well. Both sold over 10 million units, for comparsion on the PS2 only 3 games ever sold more then 10 million copies, on the 360 and on the PS3 no game so far sold that much as these both games in the last 6 months.
So I can't see on what basis you are building your argument.
"I was saying that it's the same piece of hardware that had been around 5 years prior, yet it isn't even reaching the graphical potential its predecessor accomplished years before."
This is the talk of people, who measure graphics in 100 point ratings for games reviews, this has nothing to do with reality. Most people don't buy a console, because of it's graphical potential, but because of the games. Microsoft learned that the hard way with the XBox and even with the 360, when a game like God of War on the PS2 drove more PS2 hardware sales than all the 360 launch titles. A game like Wii Sports had the perfect graphics for it's concept, even if hardcore gamers hated them.
"First of all, I'm pretty positive Nintendo did have Gunpei Yokoi killed."
You should start all your posts with this statement, this would at lease help people to see immediately, that all you say here comes from a true fanboy and who lives in Fanboy Universe.
As game developers do we care? The Wii only makes money for Nintendo and people who sell Nintendo games and accessories.
Paranoid talk, any proof or just trolling again?
I also love the fact that a game selling 1-2 million is minor now according to you.
The problem is that they where successful with their business model and where able to outsell the "True Next Generation" with outdated tech as far as hardware built in console is concerned and it made Hardcore gamers Mad Men that have no explanations for this base in reality. Just sit back and let history be written.
Besides, what Leon Terry already said, it is interesting, that you bring up this point. It is completely uninteresting for the argument I had. Adam Coate said, that people aren't satisfied with their Wii, he said
"casual gamers, for the most part, are letting their Wiis and Wii Fits collect dust. New Super Mario Bros has changed that temporarily"
I answered him, that Wii Fit Plus and Wii Sports Resort sold extremly well, what has this to do with attachement rates or 3rd party success on the Wii?
Besides that, the overwhelming success of Nintendo is an often heard argument, but if you take a look at the real numbers, a slightly different picture emerges.
Pachter (not known for being overly Nintendo friendly) compiled last years NPD numbers
(http://www.gamasutra.com/view/news/26983/NPDPachter_FirstParty_Comprised_47_Of_W
ii_Game_Revenue_In_2009.php)
He comes to the conclusion, that 47% of games revenues on the Wii are Nintendo games, if you break down his numbers to sold units, you see, that 62% of all games sold on the Wii are 3rd party games. The higher revenue factor comes from the fact, that Nintendo is able to sell games at a higher price, hardly something, you can blame Nintendo for, people tend to pay, what they think is appropriate for a game.
But even the revenues are showing, that more then half of the revenues is made with 3rd party games. Let us don't forget, that more games are sold on the Wii, than on the other consoles (Wii software sales exceeded 360 software sales, despite the fact, that the 360 is 12 months longer on the market and PS3 sales are only a fraction of 360 or Wii sales) and you can easily see, that is not the case, that 3rd party publishers can't sell games on the Wii.
Sega, the company, that complained about sales on the Wii lately sold a combined 5.6 million units of Mario and Sonic at the Olympic Winter games for the Wii and the DS, at the same time they are complaining about Wii sales. I don't know, when Sega last sold so much units of a game, I am sure, they didn't sell anything near as 5 million for the 360 and PS3.
In the end, the whole argument about Wii owners only buying Nintendo titles is about insulting customers. The customer is stupid, he only buys Nintendo games, he can't see that games from other companies are as good as those from Nintendo, etc., etc.
From my point of view, companies should start take a look, what Nintendo games (or Square Enix games or the Mario and Sonic Series or EA Sports Active or on the DS the Professor Layton Series or the Drawn to Life Series) make different, than their own games.
Cause lets face the facts again, the 360 and the PS3 are both massive flops for MS and Sony. Both companies reported multiple billions of US$ in losses since the launch of their consoles. The installed user base for these consoles is smaller than in the last generation after the same time and the developement costs are much higher. If the video games business wants to survive, it must learn to make games for all customers, it is downright stupid not to try to develop games for the console, that sold as much units, then both competitors combined and is outselling them on a weekly basis in every corner of the world.
People buy the system for Nintendo games. The purchasing patterns of a great deal of the Nintendo audience has been exactly the same as in the gamecube and n64 days. 2 games a year, one for birthday and christmas for the huge part of their audience that is little kids which syncs perfectly with Nintendo's release schedule.
As for mega-sellers being third-party as well on the 360/PS3, you do understand that coincides more with my argument than yours. Third parties do not break more than 1-2 million copies on Wii and even then they have to do so at a discount to compete with Nintendo's own games. Microsoft and Sony do not depend on first-party titles to make money, they depend on licensing deals and third-parties doing well and do their best to build up an audience willing to buy games in general on their system.
As for your example, that was disingenous to combine DS and Wii sales especially since DS sales were higher thus that 5 million number becomes closes to 1-2 million when you only consider the Wii and half of the brand involved was Nintendo's.
As for bringing up the profits of the parent company it is irrelevant to a developer. Sony took a huge hit to make the PS3 299. As a developer, I couldn't be happier to have more systems for my work out there. People on 360 and PS3 buy games and good games are rewarded. On Wii, you have to basicallly ape Nintendo with Wii like with EA Sports interactive and there is only room for maybe one big competitor for Wii Sports or Fit as Nintendo has all the cards.
Besides, I agree with you, that the PS2 had many games selling between 1 and 2 million, but the actual consoles 360 and PS3 don't have near as much titles in this range, the vast majority of HD console titles sells much lesser, so here 1-2 millions are a massive hit.
And because of that, only the overall numbers are important and you can be sure, more 3rd party games for the Wii are sold, than for the PS3, that's the reason, why the PS3 gets almost no exclusive titles, except from Sony, but regarding to sales, the most succesful titles on the PS3 are from Sony, not from 3rd party developers.
On the 360, the picture is different, MS is selling next to nothing, except Forza and Halo, but if you say
"As for bringing up the profits of the parent company it is irrelevant to a developer. Sony took a huge hit to make the PS3 299. As a developer, I couldn't be happier to have more systems for my work out there. People on 360 and PS3 buy games and good games are rewarded"
It shouldn't be irrelevant to you, cause as a developer you depend on the support of the platform by the manufacturer, you can't expect Sony or MS to drag these costy consoles forever and as far as I can see it, there will be no successor for the PS3 and Microsoft will take another look, at the billions of dollars, they dumped with their consoles, before deciding, if it is wise, to dump an even higher amount for a new console.
On the other side, the total software revenues of the Wii are high enough, that even 53% of that allow publishers to make money. Besides of that, developement of a Wii game is possible for smaller publishers, that couldn't afford an HD title and the risk of going out of business when producing one flop is much smaller, Lair killed Factor5, if they had done a Wii game, I would say, they were still in business, even if it flopped.
" the titles are only 50 dollars to begin with". What? Didn't developers make money with $50 titles on the PS2?, Or the X-box? I remember this hugely profitable title called Halo, It cost $50 bucks. Geez, man. Wake up. Everyone knows that there is more profit margin in a Wii title than a 360/ps3 title. The Wii is just "two Gamecubes duct-taped together!!" Don't get mad at Nintendo because HD is killing the industry. Take a deep breath. THINK about it. Where could I get crazy rich? Maybe not rich, but at least appreciated. On a blockbuster title on the Wii that cost my company less than 7 million develop. Check out Just Dance from Ubi. Play it with your family and friends. Friends who are NOT in the industry. Soak in the laughter. Absorb the fun. That's what gaming is about, fun. Then figure out how you can add the "fun'" element to your next project.
...conspiracy theories...
...neo-trolling...
stfuajpg. 'nuff said.
If this would be the case, not as many different Wii Titles would sold so good in the last year. And why do you think, the best sold games in the last year had an "audience that is little kids". From my experience, most "little kids" find Wii Fit Plus boring to death and New Super Mario Bros. Wii much to difficult to master.
Maybe you are talking about Wii Sports Resort, a game, were the first title seemed to appeal to a wide of players of all ages. Do you have any data, that backup your theory?
By the way, when was the last time you checked the games, that Nintendo is making for the Wii. I see there many succuesful titles, that aren't exactly for "little kids".