Why does nintendo do this...[underproduction]

I don't condone Nintendo's actions during the NES days, that sounds down-right dirty to me, and it's one reason I very much oppose Microsoft getting 100% of the console market. Nintendo seems to be more lax now with their policies and the GBA, while solely held by Nintendo is no longer excessively priced. Sure it could be better, we could be seeing $15 GBA games new instead of $30, but the fact of the matter is that no one is willing to risk a huge loss in the handheld market and Nintendo's is making good use of it. And even with the handheld market all to themselves, they already lowered GBA games from an excessive $40 to $30 now which is more reasonable.

I never said they were ethical business principles...

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Originally posted by burgundy
GameHED - Then, if Nintendo's franchises are so instantly recognizable and unique and create their own demand, why would Nintendo have to do such economically stupid things to artificially raise demand?

It's a Catch-22. Either it doesn't work, or it doesn't work.

Videogames aren't Furbies. A favorable experience with one does a lot more to increase demand than sheer "I can't have it, so I want it!"

Jay - Every sound principle of business goes against cutting supply to increase demand. It's a marketing tool, and one that doesn't work very effectively in most cases.

Anyone remember Tickle-Me-Elmo, or any such holiday crazes? Sure, they were popular when they were scarce, but the producer couldn't reap the benefits since, by definition, they were scarce. By the time the things were available en masse, no one cared anymore, and in all likelihood, they didn't all sell at full price.

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I agree with you all the way down to that last bit. The produces were able to reap the benefits, as the retailers were pining for the product. The producers sold their product to make the same profit on every single unit. The producer deals with consumer demand only indirectly, and the reseller demand directly. Consumers go ape-crap for a product, the resellers go ape-crap to stock the product, the producer makes out. The retailers, after all is said and done, are theones left holding the immovable product, and that in no way hurts the producers. Nintendo makes the same amount of money, if not more, when demand is artificially increased. They could care less if EB and GameStop move all of the games, outside of EB and GameStop ordering more...which is why they underproduce. Underproduction = gauranteed sell out = more retail orders for the product.

If they create the illusion that the game sells out every time it\'s stocked, the retailers order more. Nintendo already has predictions of market saturation, supply and demands curves, and any other number. The retailers do not. All they know is that the game keeps selling out, so they\'ll order in huge quantities.

When the product sits on the shelf for months and doesn\'tmove at all...Nintendo has already made the money they forecast.

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Originally posted by Jay
I never said they were ethical business principles...

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Neither did I. I'm talking about economics. If anyone has reason to complain about ethics, generally, the business is making sound (if unethical) economic choices.

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Originally posted by Captain Vegetable

I agree with you all the way down to that last bit. The produces were able to reap the benefits, as the retailers were pining for the product. The producers sold their product to make the same profit on every single unit. The producer deals with consumer demand only indirectly, and the reseller demand directly. Consumers go ape-crap for a product, the resellers go ape-crap to stock the product, the producer makes out. The retailers, after all is said and done, are theones left holding the immovable product, and that in no way hurts the producers. Nintendo makes the same amount of money, if not more, when demand is artificially increased. They could care less if EB and GameStop move all of the games, outside of EB and GameStop ordering more...which is why they underproduce. Underproduction = gauranteed sell out = more retail orders for the product.

If they create the illusion that the game sells out every time it\'s stocked, the retailers order more. Nintendo already has predictions of market saturation, supply and demands curves, and any other number. The retailers do not. All they know is that the game keeps selling out, so they\'ll order in huge quantities.

When the product sits on the shelf for months and doesn\'t move at all...Nintendo has already made the money they forecast.

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This is assuming that the resellers don\'t have some buyback provision in place. And that\'s a question of market power. You can be pretty sure than PaCrappa isn\'t going to be able to sell stock back to MS (at least not at a favorable price), but can Wal-Mart or Babbages get a favorable deal from Conspiracy? I bet they could. That\'s all ignoring distribution channels, of which I\'m totally ignorant.

Big retailers know the retail market as well as or better than big publishers. This is their business, and I\'m pretty certain they have the means to make market predictions themselves.

But you raise (inadvertently, maybe?) an important point. If anything, manufacturers want to create the illusion that their product is scarce without the product actually being scarce. Then, they get the hype *and* the sales.

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Originally posted by burgundy
This is assuming that the resellers don\'t have some buyback provision in place. And that\'s a question of market power. You can be pretty sure than PaCrappa isn\'t going to be able to sell stock back to MS (at least not at a favorable price), but can Wal-Mart or Babbages get a favorable deal from Conspiracy? I bet they could. That\'s all ignoring distribution channels, of which I\'m totally ignorant.

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Agreed. Assuming the retailers have no buy-back clause in the arangement they've made with the producer/distributor, what I said holds true. A buy-back clause would significantly change the geography of the business environment; however, a clause such as this is never an issue with huge publishing houses such as Nintendo, Sega, and their ilk, because they hold the reigns as far as how business is done. EB and GameStop's business is reliant solely upon the procurement of video games, which they buy from the distributor/producer. If GameStop doesn't do business the way Nintendo says they're going to, Nintendo won't let GameStop cary their product...dun, dun, DUUUUUUUUN! GameStop caters to The Big N, not the other way around. It might float with small pro/dev houses because the smaller companies are reliant on EB and the like to keep them in business. But it works the opposite way with the bigger pros/devs.

And distribution is another issue. Chances are, if a buy-back clause exists, it's with a distributor, not a developer/producer. So, either way, Nintendo has already made their money.

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Big retailers know the retail market as well as or better than big publishers. This is their business, and I\'m pretty certain they have the means to make market predictions themselves.

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Sure. I probably should have phrased what I said differently. The retailers do, in fact, read the market. But they read on a much more short term basis. The retailers business focuses on who is going to be in their store tomorrow or in a week from Tuesday, and what they're going to buy based on todays numbers and statistics. If Mario Sunshine was hot today, they assume it'll be hot tomorrow, and order accordingly.

Nintendo will be looking further into the future, and so their predictions and forcasts have a higher likely-hood of being less risky.

I.E.

GameStop: "Mario's HOT! Let's stock more for tomorrow's/next week's sales!" *places order for X additional units*

Consumers: "We've already purchased all the Mario we can handle, let's buy something different tomorrow/next week." (This info GameStop is not privy to until the consumer acts, but at this point they've already placed the order and given Nintendo their money. Nintendo, however, anticipates this)

Nintendo: "Hmmm...we have set a goal for X units of Mario to be sold. We'll tell the retailers they can't have it unless they order a certain amount, and that way we'll be covered if the Mario market crashes tomorrow/next week."

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But you raise (inadvertently, maybe?) an important point. If anything, manufacturers want to create the illusion that their product is scarce without the product actually being scarce. Then, they get the hype *and* the sales.

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Brought it up on purpose. ;)

Nintendo is not the same as they were during the 8-bit era. They don't and probably will never have a strong hold on the home console market. The numbers that MVS is complaining about is from JPN sales. There are a few points that I'm not sure a few of you are aware of or remember so let me give you my take on the whole 400k (shortage?):

Nintendo hasn't been meeting the hardware numbers they've anticipated for the GC and are still fighting to catch up to meet fiscal forcast. With this in mind, they are just being conservative to a degree about SMS and just about all of their other games over in Japan. Wouldn't you be? 400k is still a lot more than most games sell ever (even world-wide) and yet someone feels inclined to bitch about the "initial" print run in Japan that eclipses most other games overall sales. Boggling.