We Want a Wii! (Still)

I have never been a huge video gamer but, having run into the Nintendo Wii a few times in the past couple of months, I can see why it is beloved.

But here’s the question: why is the Wii, which was famously scarce before Christmas this year, still so hard to buy?

Paul Kimmelman, a technical architect who has guest-blogged here before, poses this question and walks through some of the various wrinkles:

You guys may be interested in the Nintendo Wii and its serious availability issues. They released this in Nov 2006, and have not been able to supply properly to this day. The national availability runs around 2-5%, with most stores out of them most of the time, and no legit online retailer carrying them at all. This has had two effects: the average price paid has been around 150% to 180% of retail price, with none of that going to retailers or the manufacturer. Only scalpers are profiting. It is interesting to me for 5 reasons:

1. Nintendo clearly made a colossal blunder in setting up their manufacturing. Even if they assumed it would not do very well, their inability to ramp up production in 4 months is pretty unusual in this industry. Note that there are no known parts shortages.

2. Retailers are benefiting in extra store traffic, as people come to check to see if they have it available. So, even if they lose potential sales of this device, they probably make up much more in sales to people who are in the store looking for one. Perhaps the retailers are paying Nintendo not to ship them to the US?

3. Game vendors (including Nintendo) are hurt by this, since their TAM/CAM is held artificially lower. Since shelf life of a game is very much based on release date, this hurts the game developers.

4. It is unclear how much this has pushed sales of XBox360, PS3, PS2, and even older Gamecube devices. Since Wii has a quite different controller design, people are attracted to it. Normally, this would have benefited their competitors a lot according to economic theory.

5. Nintendo has not addressed this issue publicly at all. No apologies, no status reports, nothing to say what they are doing about it. Surprising for a company in this situation. It is unclear if they feel this shortage is a PR advantage or problem.