Wii unavailability costing Nintendo a billion in sales

by Alexander Sliwinski on Dec 14th 2007 11:58AM

Those who don't learn from the past are doomed to repeat it. Or in this case, the consumers are doomed to repeat it. The New York Times reports that when it comes to getting a Wii in 2007, its looking remarkably similar to 2006. Analysts say Nintendo is leaving $1 billion in sales "on the table" by not having enough consoles to satiate demand this holiday.

Nintendo of America's George "One foot out the door" Harrison tells the NYT that the company hasn't made any mistakes, though it does worry about consumers purchasing another system. Lazard Capital Market's Colin Sebastian is quoted in the piece as saying 86,000 Wiis have hit eBay since Dec. 4, with the average end price for the system being $320, a 28% increase over retail. If you're still looking for a Wii this holiday, just keep calling stores every day -- obtaining one at this point is not for the weak.

Source

Tags: nintendo, shortage, wii, wii-shortage, wiishortage

Reader Comments (57)

rdj75: in 'standard economics', the producer will match marginal cost to marginal revenue as I'm sure you know. And you are correct that a monopolist has an incentive to underproduce. What Cronus points out is that Nintendo could quite easily sell more units without needing to cut its price. Hence Nintendo does not face diminishing revenues from increasing production. Your reference to the law of diminishing returns is inapplicable unless you are proposing that Nintendo faces a rapidly rising marginal cost. Yes Nintendo's returns will fall with every extra unit, but that is marginal returns, and that assumes rising marginal cost.

Lone Starr: following on from your post, the strategy of creating a perceived shortage in order to gain hot item status has many complications. It is unclear how creating a risk for the parents that the Wii will be unavailable can create a demand boom of these proportions. If I were a parent and I heard a toy could be unavailable at Christmas time, I would be unlikely to spend hundreds of dollars to insure against the risk that this toy will be the hot
item. You could argue that the shortage prediction also tells parents that their child is likely to catch the 'Wii bug', but surely the parents have good reason to believe their children will want one, beyond this vague indicator.

Moreover, if I were Nintendo and I had spare capacity, I would hold stock back and release it once hot item status has been achieved.

kinda makes sense during this holiday season.
if the parents can't find the wii, I'm sure they'll go get something else for their kids... maybe a 360 or a ps3, or just some new toy or ipod.

first, where did they get the $1b figure?

second, its not like they have $1b worth of Wiis that they arent selling and never will sell. this makes no sense.

That was pretty shoddy reporting by the times. A couple of stories for color. How about figuring out how many consoles nintendo would have to pump out a month to meet demand? Or what is the target monthly production of unit's for nintendo? Or whether ds production impacts wii production in any regards?
If Nintendo has to determine supply 5 months out- then what have they determined for supply 5 months from now? And beyond that, what are they predicting for holiday 08.
If nintendo was pumping out 2 or 3 million units a month, would that meet demand? Does anyone know what the ceiling is before it stops being hard to find?

From my perspective, it doesn't really matter: they get back as much as they can produce.

It's a potential billion dollars they never had in the first place. Crying over stuff you can't afford is being spoilt and greedy.

I've been playing with my Wii for 390 days now... It takes dedication, warm clothes, and insomnia... but just keep on standing in line, folks... you'll be on the road to freedom soon enough...