Wii Shortage: Shrewd Marketing or Flawed Supply?

[wraggster]

Even with the fluctuating currency issues, Nintendo is far outpacing its rivals in console profitability. A May 2007 analysis of the profit/loss derived from the consoles of Microsoft, Sony and Nintendo showed that Microsoft lost at least $126 per Xbox 360 unit and maybe as much as $300; Sony's PS3 lost $300 per console; and the Wii delivers a $92 of profit for each unit sold.

Nintendo announced in its most recent quarterly results that it had sold 5.2 million Wii consoles in the quarter, a 50 percent increase compared to the same period in 2007, and that profits jumped 34 percent. In Japan, however, Wii sales were cut in half. In total, Nintendo said that it had sold nearly 30 million Wiis since 2006.

Recent NPD Group data showed that since January 2008, Nintendo has sold 4 million Wii consoles, compared with Sony's 1.8 million PS3s and Microsoft's 1.6 million Xbox 360s.

So while Nintendo's financials look good overall, has the shortage affected the long-term prospects of the Wii in the ultracompetitive U.S. market? "Well, it depends on if you think that a loss sale of a Wii results in someone buying a competitive product or substitute, so they won't buy a Wii in the future," Pachter says. "And they [Nintendo] don't think so, nor do I."

In addition, because manufacturing costs are high, he adds, Nintendo appears to be reasoning that a "deferred sale" in the U.S. -- meaning that consumers will most likely wait for a Wii and eventually buy one -- is a strategy that's working quite well.

AMR's Richardson is less convinced. "I think you lose your lead-for every product that exists on the market they'll soon be a better version," he says. "In consumer electronics, you've got to be very fickle and pay close attention to the product lifecycle. You have to take a much more holistic approach from linking all of that demand sensing back to supply planning. And if this stuff is all coordinated inside Nintendo, it doesn't appear that way in the U.S. market."

So when will the U.S. shortage end? Nintendo pledged in mid-2008 to increase manufacturing capacity over the summer to meet the ongoing demand. It plans to sell 25 million Wiis during its upcoming fiscal year (which ends March 2009). Pachter expects Nintendo to manufacturer around 27 million consoles.

But, he adds, "It's just a question of when are they going to start showing up."

http://www.pcworld.com/article/15018...ed_supply.html

[TVarmy]

Strikes me as shrewd marketing. The Wii isn't exactly using exotic components. If any console would be set up for flawed supply, it'd be the PS3, since I heard IBM has trouble getting proper yields on Cell processors, and they had to resort to building the processors to have two more cores just to get a good percentage out (they disable the two worst/defective cores). This could be interesting for homebrew, though, because this may mean there are two reasonably good cores on many consoles that could be enabled, unless it's actually hardwired not to use those cores.

So long as Nintendo keeps the Wii leaving the shelf as soon as it gets in, they have a good excuse to keep the Wii at $250. Since Microsoft looks to be imitating the Wii with "Avatars" and a rumored motion controller, they could easily start a price war by dropping the Xbox 360 Arcade to $200, which they would probably make up in software sales/license fees since it's meant for DLC. It'd make sense, as the Xbox 360 with the 20GB hard drive is just $20 more than the Arcade, so right now the Arcade is a terrible deal. A system that's more powerful than the Wii which has the same gimmicks for $50 less would be devastating to Nintendo. A good one-two punch would be to also drop the one with the hard drive to $250, and slash prices on the 20GB HD to make it affordable for people with the Arcade to get the hard drive when they run out of space. $60 would be fair enough.

[trugamer]

I don't believe its marketing- here in the UK its pretty easy to get your hands on one, a couple of my mates recently got them straight away from a shop no waiting for stock to come in. I believe it is simply a combination of Nintendo's conservative targets (from the poor success of the gamecube) and the weak dollar meaming Nintendo isn't shipping as much to the states.

And MS having a motion controller and avatars isn't a threat- don't forget the extra cost for the periphals. There is also the wii marketing, thats the real reason why it's a success. Just because the Xbox will be "better" (cheaper, more powerful, same features offered) doesn't mean it will automatically overtake the wii, just persuade a few people who are sitting on the fence.

[grossaffe]

how can you gain by people not buying your product? Not only are they missing out in hardware sales (which they make profit from), but then they miss the money in software sales as well. How can they gain from people not being able to purchase their system and therefore don't buy their software?