GameStop Theorizes Wii Shortage Deliberate

In GameStop's quarterly public conference call, company COO Dan DeMatteo called out Nintendo on what he sees as intentional supply shortages. Along with the news that the company hit $5.3 Billion in 2006, Next Gen reports that the call contained several remarks on the next gen systems. The Wii, Dematteo thinks, has been short supplied because 'they made their numbers for the year ... [Nintendo's] new year starts April 1st, and I think we're going to see supply flowing.' They also commented on the Euro launch of the PS3, with CEO R. Richard Fontaine saying, 'I think the summary of that was that it was a very good launch falling somewhat short of what [GameStop's Euro managing directors] would call a great launch.'

Comments

Nintendo Retaliates

[bym051d]

By stopping supply of Wiis to Gamestop.

Re:Nintendo Retaliates

[c0mmanderb0nd]

Yes the only company actually turning a profit on a console just really doesn't like money so they would rather not make it by holding back supply. Maybe Dan needs to go back to firing managers whose employees sell games to kids and continue with his own exceptional management policies, as in how to ass whip customers into trading in more games or over pre ordering things that will never sell out in a million years. "Yes sir you really need to preorder Barbie horse adventure 2, the first one was a major blockbuster not to be missed, dont forget to bring in your trades, did you bring any trades, did I mention we take trades." Maybe Dan should lay off speculation and go back to his telemarketer like tactics of commerce!

Re:Nintendo Retaliates

[Dorceon]

If Nintendo sold all the consoles they could, they could take over the #1 installed base crown from the Xbox 360, which would force developers to support the Wii, which would lead to future profitability, both from increased console sales (since they'd be the most desirable console due to all the games) and licensing revenue (since Nintendo gets a cut of all the game sales for their console). In this case, short-term sales lead to long-term sales, making it stupid to hold back stock.

Re:Nintendo Retaliates

[xero314]

If Nintendo sold all the consoles they could, they could take over the #1 installed base crown from the Xbox 360 I think what you me is "If Nintendo sold all the consoles they could, they could take over the #2 spot from the XBox (not 360), and still be millions of units behind the PS2 and the number one spot." You can add all the current gen consoles sales together and they don't even scratch the surface of the PS2s install base, which is still growing, even out growing the other consoles individually.

That is a double edged sword

[rolfwind]

You run the risk of having consumers turn to the Xbox360 instead because 3 months after Christmas is a long time to wait for a console.

I don't know if that is what Nintendo did... but it would seem short sighted to lose a customer over the life of this product and reaping in game sales just to have better numbers in one quarter.

Re:That is a double edged sword

[DDLKermit007]

Gamestop is talking out of their ass. Nintendo still can't keep with with the DS Lite in Japan, and the Lite revision has been out for over a year, and thats the last place they want to have shortages.

Re:That is a double edged sword

[Skreems]

The 360 has been out for nearly two years. They've sold somewhere under 11 million units. The Wii has been out for all of 4-5 months and they've sold over 5 million. And they still can't keep them on the shelves. Since they make a profit on their hardware, unlike MS and Sony, this is basically like printing money to them. I think demand has just exceeded everyone's expectations.

Re:That is a double edged sword

[Anonymous Coward]

Reposting anon with formatting
Well before the launch they were talking about how they produced so many units you should just be able to walk into your local retailer and walk out with one(sans waiting in line in cold weather for hours) on launch day.

That is not true.

Here is a story where Reggie Fils-Aime says "not to get complacent."

Re:That is a double edged sword

[@madeus]

I have a 50" HD Plasma, but I've definitely got zero interest in the PS3's Blu Ray. I get my HD TV via my satellite, and later this year those of us in the UK will be able to get additional HD TV via our 360's.

However, I don't have much interest in an HD-DVD drive for the 360 either. My perspective is, if I want an HD player (whichever one wins - Blu Ray or HD DVD) I'd rather get a good one, given how much I've invested already in my home media kit.

While I'm sure the PS3 is a competent console and plays games really well (even though the 'dashboard' and online software is a bit iffy sounding), I don't trust Sony's ability to write a really decent Blu Ray movie player, and I doubt the console is as quiet as a dedicated player (just like the 360 is noisy even when playing back DVD's). I'd be surprised if it didn't have compatibility problems evident in a year or two, just like we saw with most early DVD players.

I might well get a PS3 - despite owning a Mac, PC, DC, X-Box, GC, Wii and 360 I didn't get a PS2 though - it will need to have compelling unique titles to convince me (even if it's just two or three). If it had been the price of an X-Box I would have gone for it I think, but at 425 GBP for base package alone (compared to the 360's 260 GBP for Core - that's a fair step up, not that I'd get 'core'...) it was enough to make me not bother, given how similar it is to the 360.

I wonder how many other HD set owners (especially those of us in Europe who got sick of waiting for the PS3) have already got a 360 for the 'HD game fix', and are similarly not enticed by the PS3's inclusion of a Blu Ray drive. I'm still waiting for some PS3 'killer apps' (hopefully there will be some...).

It takes a thief...

[sqlrob]

This from the company that resells new reprints as used because the used sells for more.

artificially choking supply?

[ravyne]

If they're artificially choking supply at ~6million units sold worldwide already, I'd hate to hear those numbers if they weren't.

Re:artificially choking supply?

[soft_guy]

If Nintendo was really intentionally choking the supply, it would make them the biggest idiots of all time. There is a short window after launch where you are everybody's baby - if you don't make it then, then your platform will fail. Cutting off supply during this period would be beyond idiocy.

It is possible that Nintendo underestimated demand when they were reserving factory time for the Wii to be built. Then again, it is possible they just can't get enough units to market as quickly as they would like due to some factor beyond their control (this is most likely).

Re:artificially choking supply?

[Chris Burke]

If Nintendo was really intentionally choking the supply, it would make them the biggest idiots of all time. There is a short window after launch where you are everybody's baby - if you don't make it then, then your platform will fail. Cutting off supply during this period would be beyond idiocy.

How many times have we discussed on /. the importance of momentum and marketshare? Despite a very healthy start and the apparent success of getting non-gamers to buy the Wii, Nintendo is still sitting at less than half the market share of the 360. You are absolutely right; deliberately stunting their marketshare would be utterly retarded as it would hurt them in 3 ways: 1) Lower marketshare means less appealing to 3rd parties 2) People unable to buy a Wii would perhaps buy another console 3) Word-of-mouth advertising that gets the non-gamer interested in the Wii would be cut short.

I think they simply underestimated demand, and now it's both difficult and expensive to try to meet it.

Re:artificially choking supply?

[tknd]

Release date: November 19, 2006.
Today: March 27, 2007.

Days between the two dates: 129 days (including today)

Wii's produced till today: 6,000,000+

6,000,000 Wiis / 129 days = 46,511.628 Wiis / day.

Each Wii sold includes 1 remote, 1 nun-chuck, 1 sensor bar, 1 a/v cable, and 1 power brick. In addition to this, Nintendo must also produce additional remotes, nun-chucks, and classic controllers at roughly the same rate.

I don't know about you, but you find me a manufacturer that can produce electronic hardware at a rate of 46.5k units a day without running out of any supplied part in the process. Even if you give them an additional 30 days to buffer the launch dates with units to sell you'd still get roughly 37.7k Wiis per a day. In order to pull this off Nintendo has to have good engineering (low defect rate), good manufacturing process (low manufacturing defects, fast/efficient production lines), and good supply chain management (can be compensated by better engineering to accept multiple part alternatives in the event a supplier cannot keep up with demand--I've seen this with their battery manufacturer changes that ship with the remotes). That doesn't even begin to include what you're going to do when people send back defective units during the warranty period.

For a global/multilingual launch and a company that only deals with gaming hardware/software, I'd say they're doing a damn good job.

I don't think anyone expected this kind of demand; it's not everyday that your mom, aunt, and grandma (literally) say "I want a Nintendo (Wii)." If there was a new product that was the next big thing compared to sliced bread, this is pretty close.

Re:artificially choking supply?

[macserv]

Of course, I meant, "well over half the marketshare of the 360". I need sleep.

Re:artificially choking supply?

[Tom]

Nintendo is still sitting at less than half the market share of the 360. Half, yes. Sitting, no. The 360 has been out for what, four times the time the Wii has been around? Getting half the market share of a competitor who's been around four times as long isn't exactly "sitting", it's more an "in the process of overtaking".

Give it another 4, maybe 5 months and the Wii will be the best-selling next-gen console.

Re:You mean like the PS3 or XBox 360 launch?

[elrous0]

The sad thing is, that same dude that got stabbed in the parking lot later got stabbed on ebay too.

ya think?

[mstahl]

I'm shocked....

I'm not so sure that's the case though. There definitely does seem to be more demand than can be quickly supplied. Remember kids, the PS3 was the intentionally shorted console, and now they're on shelves everywhere. The Wii on the other hand is actually selling still and there's tremendous demand for them.

One can only guess...

[7Prime]

But I'm not sure this makes a lot of sense. "Making goal" for the quarter isn't exactly the most important issue in the world, in comparison to the livelyhood of an entire console generation. I'm not saying that they didn't intentionally short the supply, but I doubt that it was for this reason alone, it's just too risky. I doubt it was to make the launch look incredible either, because they still did incredibly well, and would have sold out even if they had put twice the number of units into circulation.

Probably a more practical reason is to short the supply of units during the innitial games draught, a game release slump which is simply unavoidable for any console. If 5 million people get their Wii off the bat, and then have to wait 6 months for good games to start coming out, you're going to have a lot of angry people. Currently, most people are still focused on getting the damn system itself, and don't have time to bitch about the lack of games. Now that some big titles, such as Super Paper Mario, and possibly MP3 are on the horizon, they can satisfy more customers, with less public backlash.

Re:One can only guess...

[Chris Burke]

But I'm not sure this makes a lot of sense. "Making goal" for the quarter isn't exactly the most important issue in the world, in comparison to the livelyhood of an entire console generation.

It doesn't make any sense at all. The claim is that Nintendo, having easily met their fiscal goals, deliberately clamped production/shipments. First, so long as you don't appear to be sacrificing long term stability, investors would love for you to exceed your goal. Nobody complains about making more money, and I can't see why Nintendo would. The theory is that they want to move what would-be current-fiscal-year sales into the next fiscal year to make those numbers look better. That theory implies Nintendo thinks the demand for Wii is going to slack, which it doesn't show any sign of, and also that they think they aren't at any risk of frustrated customers buying one of the competitor's consoles. I think the opposite applies -- demand for Wii will continue to be strong, but only if people can actually buy one. The best advertising for the Wii is word of mouth (as in "come over and play Wii Sports"), and that only works if people can get them.

It would be a dangerous market game for Nintendo to play, and I see them as too conservative. If they can make a sale today, they will, because you never know if that sale is going to be around in six months.

Probably a more practical reason is to short the supply of units during the innitial games draught, a game release slump which is simply unavoidable for any console.

I think the Wii is more immune to a game slump than most consoles, simply because the mom/grandpa non-gamer demographic that is the whole "expanded market" thing the Wii is after is probably going to be happy with just Wii Sports for longer than any traditional gamer. This is also why the Wii is still very vulnerable to 3rd party issues, since if game uptake is low for the Wii despite the large number of systems out there 3rd parties may still be wary. Which means that right now not having a large number of Nintendo-published games for the Wii is good for 3rd parties; every sale of Trauma Center or Elebits or Rayman helps show the Wii as a 3rd party friendly platform.

Anyway, I know I personally am much more frustrated by my inability to play any Wii games than I would be if I owned the console and had to deal with a drought. If I owned a Wii and was pissed at the games drought, well, I already gave Nintendo my money and they made a profit on it. If I don't own a Wii because I can't find one, then if I don't like the lack of games I can go buy a different console and Nintendo has gained nothing. I really can't see this as being a rational reason for Nintendo to limit supply.

Here's the only thing that makes sense to me: Nintendo paid for an amount of manufacturing capacity based on their expected sales, and had every intention of meeting that demand. Actual demand far outstripped their expectations, so this supply was inadequate. Now they could have tried to increase their manufacturing capacity, and may have decided not to for two reasons: One, to keep the one-time costs of tooling up the factories off this year's report; and two, because they aren't sure in the long term that such capacity is really going to be needed. You can spend a ton of money building factories, but if demand trails off then you just blew that money for no reason. I'm betting this is the real reason -- again, being conservative, Nintendo isn't going to look at the higher-than-expected sales for a couple months and jump off the deep end constructing new factories.

The theory that Nintendo has the capability to make more Wii at will, but isn't due to some desire to manipulate the market, just doesn't hold any sanity-water.

Gamestop is just frustrated

[elrous0]

I think Gamestop is just angry that they are stuck with shelves of the other consoles and they have no Wii's to actually bring in customers. They're probably also tired of answering the "Is the Wii in yet?" phone calls.

Trying to strong-arm Nintendo won't help, Gamestop.

Pure speculation but possible

[L. VeGas]

It's very, very common for businesses to proceed slowly after sales / profit goals have been met in a fiscal year. Short term planning proceeds on a year-to-year basis. Te vastly ramp up production without fully analyzing consequences is a good way to shoot yourself in the foot, even if every console produced was sold.

Fools rush in where angels fear to tread.

Say what?

[orclevegam]

That dosn't seem to make any sense at all. Now, if you were going to accuse them of holding out on shipments of Wimotes in order to be able to get them in the WiiPlay combo boxes, I'd say yeah, I can see that, but it dosn't make any sense at all for Nintendo to be holding back on the Wii itself. From what I've seen they have been making regular shipments to various retailers, just not very large shipments. If you're patient and willing to make an effort, you can get a Wii, you just need to check in on a regular basis (which can be even easyer if you can find out the shipping schedule for one of the retailers). I pre-ordered my Wii and had it on release night, so I didn't need to worry, but I also know of at least 12 other people who didn't and have since purchased them. Of course, I don't know anybody that's purchased a PS3, but that's not due to a shortage there.

Ok, yeah, that last one was un-called for. And I do like the PS3, but only enough to pay about $350, so till then, I'll stick with the Wii (and maybe a 360 if they release the new hardware and it comes down to $300).

Re:Say what?

[rhombic]

In the midwest, Walmart, Target, Best Buy, Circuit City, EBGames/Gamestop ALL have plenty of the white DS Lites in stock. Target had a few black ones, and I haven't seen any of the pink ones.

Now, thats a variety of stores from KC MO, KC KS, St. Louis MO, Columbia MO, Springfield IL, Peoria IL, Urbana/Champaign IL, and Little Rock AR that I've personally been in in the last two weeks, at various times of day, and various days of the week.

Dude, you gotta find a better hobby than browsing the electronics section of discount stores over a four state area. I mean, dude. Wow.

Re:Say what?

[fotbr]

Job travel...I just stop in to see if any place happens to have a Wii.

Its either that or sit in the hotel room drinking beer and posting to slashdot. And we all know how well drinking and posting works.

Re:Online Multiplayer

[7Prime]

Yes it is, and for good reason. Online multiplayer is the last psychographic Nintendo wants to hit, there are many consiquences for doing so. Blinding going into the online multiplayer market before establishing a good, solid, lineup of single-player and offline multiplayer games could have dier consiquences. It's quite possibly the single biggest reason why the DS and the Wii are doing so well, by heavily concentrating on offline gaming. Many many people are annoyed, intimidated with, and turned off by online multiplayer gaming. Currently, they're getting their fix (and thus fairly silent), but with the current trend toward strongarming developers into putting their games online, that could change very quickly.

The other consoles are taking over the huge gaping hole left behind by PC gaming, Nintendo has an opportunity to remain the bastion of traditional console gaming, and the followers that that genre has produced. I think its very wise of them to stay as far away from online games as long as they possibly can, in order to build up a pretty substantial library of single-player and offline multiplayer games.

Personally, my favorite version of multiplayer is sitting around, discussing games with my buds over a beer at the bar.

Shortage?

[Applekid]

Is it at all possible that Nintendo didn't expect the system to do so well in the US? DS-Lite is still the #1 seller in Japan while here its sales are more down to earth. By looking at that performance and equating DS = Wii, I'd call it reasonable to assume that they didn't expect demand to be so high.

Oh of course

[Anonymous Coward]

I know when I want to drive demand from my customers, I always intentionally ship less and less product. Just seeing their little faces tighten up with anger as the realization they have ONCE AGAIN failed to buy my product warms my heart.

I think before too long I'll just stop shipping product all together, why the sheer panic as people riot in the streets for my items is sure to make me millions and millions of dollars

*point at lip with pinky*

Re:Online Multiplayer

[pl1ght]

Id rather be drinking beer at home on the couch playing GoW or Resistance online with my buds. Its 2007. Nintendo needs to get their online MP act together. I dont think there is any good excuse these days to not have an online multiplayer component.

Re:OH SNAP

[spun]

Oh, I know they didn't just talk trash about my beloved Wii.

They totally did, dude! I saw 'em, they said your Wii was short and aged.

Re:Online Multiplayer

[Skreems]

I'd second the sentiment that online play pisses me off. If it's done well, as an added mode on top of a great game, then fine. But a lot of developers these days are using it as an excuse to deliver extremely half-assed single player content. I don't know how many times I've heard, "The story mode for Gears of War is kinda short and not that interesting, but the multiplayer is a lot of fun." Somehow, playing against a trash-talking pre-teen with nothing better to do than practice 8 hours a day just doesn't interest me in the same way as a well written story mode.

Long suspected

[Aggrav8d]

For quite some time now I've thought the shortage was deliberate to help them liquidate their stock of GameCube titles. I was never interested in the GC but there's such a shortage of good Wii games (that I have not already played through) I am forced to look in other directions. The online retro titles don't interest me so I'm forced to choose between lego star wars and mario sunshine.

As for april 1, I don't think we'll see anything new unless Nintendo issues with their shares has ended. Miyamoto couldn't announce anything new at the GDC because of it, so why would the company be able to make any april 1 announcements? If the issue is resolved then it's news to me.

Re:Long suspected

[metamatic]

For quite some time now I've thought the shortage was deliberate to help them liquidate their stock of GameCube titles.

I don't buy it, for the simple reason that the Wii can run all those GameCube titles too. With the relatively small number of upcoming Wii releases, I'm expecting to work my way through the GameCube back catalog to fill in the gaps.

No, as a GameCube owner I can tell you that Nintendo has always had distribution problems. They just can't keep stuff in stores for whatever reason. Even high profile well-reviewed 'Cube games like Burnout 2 are difficult to find in stores and often go for a premium on eBay.

Re:Maybe it's true...

[wiz31337]

Be cautions. You may walk in to find a pallet of 60 PS3 consoles and a sign saying "April Fools!"

Mmmmm...

[MWoody]

Would you like a little ketchup to go with that hand that feeds you?

Re:You mean like the PS3 or XBox 360 launch?

[senatorpjt]

Then again, after a month of trying to get one, I gave up the Wii and bought a PS3 instead.

Re:Doesn't make sense...

[MeanderingMind]

The book you mention is titled "Game Over - Press Start to Continue", and it is highly informative concerning the games industry if you a blissfully ignorant child at the time it all went down (as I was). I recommend it to anyone here who hasn't already informed themselves of what happened then.

Nintendo certainly had a Monopoly, and they used that power in the industry. How much of it was greed and how much of it was necessary corrective action to prevent the mistakes made in the Atari era is up to interpretation.

What they did (for whatever reasons) was unpopular with developers (however necessary it may or may not have been), hence the mass exodus around the N64 era to the Playstation.

I'm personally one who gives companies, as well as people, significant amounts of "benefit of the doubt" whether Sony, Microsoft or Nintendo. If there are problems with Nintendo and the shipment of development kits I'd much sooner chalk it up to logistical or supply issues (they can't seem to keep normal Wiis on shelves, developement tools are likely in a similar state) rather than any malevolence. Iwata is not Yamauchi, and I think he's eager to avoid the mistakes that made third parties abandon Nintendo for Sony in the first place.

This doesn't mean that he or Nintendo doesn't want my wallet, simply that he and the company he leads recognizes that in order to get at it properly they need third parties, and in order to get third parties they need to play nice.

The only logical reason to keep a third party away from a Wii dev kit at this point in time is to keep them from making a game with a pathetic excuse for a control scheme. Given that there are already games which have fallen into this category, I think we can largely rule that out.

Well I've rambled enough.

Re:You mean like the PS3 or XBox 360 launch?

[tktk]

Consumer Buddhism is the Key

Desire is the root of suffering. Therefore if you desire a console too much, you won't obtain it and suffer.
I don't want a 360 or PS3 and they're plentiful.
I do have a Wii, but I went to the store half-heartily, stood in line, expecting to be turned away, and was 3rd to last to get a ticket.
I want to play games on the Wii but don't really like the games.
Some of the games that I'd like to play are on a different system.
And I have no time to play.

Hmmm....I started this as a joke, but maybe there's a grain of truth in there.

Japan?

[Chimera512]

Here's a question that i haven't heard asked:
Are there Wii shortages in Japan? clearly /. is largely english speaking US/UK/Ireland and there's no japanese /.er's coming on and saying that they've got no idea what the US consumers are talking about and that there isn't a shortage in Nintendo's home market. I'd be interested to see if the Wii is selling out in Japan too.

Re:Online Multiplayer

[theorangesven]

You're right, for the most part. Case in point, I hated fighting games as a kid, cause they're only good multiplayer and I was horrible at them. Now I go to tournaments for them. Also, it is more a about skill than time spent playing. For me, the real problem is multiplayer games that only really have online play. Online is nice, but pales in comparison to playing against someone in the same room. Far too many 360 games have a complete lack of local multiplayer support, and that's just stupid. Oh, and the real problem w/ 13 year olds playing shooters isn't that they've got so much more time to practice, but the fact that most shooters degenerate to twitch reflexes more than strategy, so the hyperactive 13 years olds are great at them. You'll notice a lot less of them performing well at strategy or fighting games.