Why does nintendo do this...[underproduction]

[JefmcC]

Originally posted by Rumpy
Magic Box lists SMS selling 380,000 something copies...so there would be something around 20,000 unsold copies.

I'm just nit picking though. *Fans the flames a little more*

I am going to assume that another shipment of about 400,000 more will be on the way any day now. If Nintendo didn't even sell out the first shipment of them, I don't see how they are alienating thier customers. Unless someone is pissed that thier local importer didn't get his/her (technically illegal) gray market import version.

380,000 out of 400,000 seems like a lot to me.

[Rumpy]

I fail to see how selling 400,000 copies in a year, let alone 4 days is a bad thing for any company. Besides, does it really matter? I just want the domestic version now. I could use some Mario lovin'...calm me down from getting my ass kicked in Warcraft III.

[MrKasualUltra2000]

Originally posted by burgundy
You apparently didn't do too well in Econ 101.

Companies aren't interested in maximizing demand. They're interested in maximizing profits.

Neither supply nor price change demand. They simply determine how much of demand is met.

I am. I have a B.A. in Economics from Rutgers University. I got an A in every single Economics class I've ever taken.

wrong. a high profile game like SMS would not be affected by a weak first shipment, your grades mean nothing in the real world (i know business graduates from top west coast schools who cant find a job, so that shit does not impress me) , i WORK in a marketing team doing co-op sales, co-op marketing strategies, etc.... and when there is a lot of hype and anticipation for any product, empty shelves can do nothing but increase demand, people are not going to go to the store for mario and pick up Extreme Surfing or some other shit game because mario is sold out, the casual gamer would wait, especially when the clerk tells them more will be on Friday and asks if they want to reserve a copy. 50 bucks is too much money to throw around nowadays, a 20 dollar product would be another story.

kepp in mind im not talking about a month without SMS on the shelves. perhaps a max of one week between shipments would suffice.

for the record, that qoute is from my boss, not me.


you seem to have forgot that Nintendo wants to increase preorders, etc...so shipping the games out in small increments over a two week period would not affect the overall sales.

[Blockbusta]

i don't understand why people are sooo stupid. Ofcourse shortages pump up shit even more look what playstation did. The next shipment people flooded because all the hype it generated and they didnt want to miss out.

Nintendo did this shit on purpose look at everyone in here sweating over mario now. This shit sure made me want it even more and go down to eb and pre-order it to make sure i get it!!!

You are a complete moron if you don't understand this tactic. Also "somethign selling out fast" makes you want it more! it just sounds good.

[radiogeak]

me thinks Cyco doesn't understand how retail works... you cow!

[GameHED]

I know this is old but I think it deserves to be dug up.

An interesting article for mattvanstone that I think explains the history of nintendo's behaviour well. (brings some insight into why shortages are good for nintendo and ends this thread by pretty much answering the original question):

extracted from http://www.geekcomix.com/vgh/fourth/nesbad.shtml

Nintendo began orchestrating game shortages sometime in 1988. This was called "inventory management" by Peter Main, an executive in charge of public relations at Nintendo, but was really to keep the customers on a short leash. By limiting the amount of product available, Nintendo could keep the demand for the product high. The editor of one toy-industry journal noted that "Nintendo has become a name like Disney or McDonald's. They've done it by doling out games like Godiva chocolates." By design, Nintendo would not fill all of the retailers' orders and kept half or more of its library of games inactive and unavailable. In 1988, for instance, 33 million NES cartridges were sold, but market surveys indicated that upwards of 45 million could have been sold. That year retailers requested 110 million cartridges, almost 2.5 times the indicated demand. These practices would greatly benefit Nintendo, but drive many smaller software firms out of business. Certain titles would be produced, then sold very slowly over the span of a year, and the profits would not come in fast enough to keep these small companies afloat. The toy and electronics as well as department stores became dependent on Nintendo, in addition to most game producers. This gave Nintendo a great deal of clout in dealing with companies who were used to throwing their muscle around. 9, 6

One such company was Child World, at the time, the second largest toy-store chain in the United States. They refused to play by Nintendo's rules, and ended relations with them. By 1989, they were experiencing severe financial difficulties due to the loss of 20% of their sales through video games. They came back to Nintendo, trying to appease them, and were met with open hostility. Nintendo agreed to sell them product again, but they would have to pay for the product a year in advance.

Another Nintendo policy that made retailers furious was their return policy, or lack thereof. Because Nintendo's quality control was boasting a defect rate of 0.9% for hardware and 0.25% for software by 1988, Nintendo executives did not see a need for their previous 90 day guarantee. A new policy was announced to the retailers: no returns. Once a game cartridge box or system box was opened, a refund was out of the question. Concerning this, Sheff wrote:

"Pandemonium followed. One of the largest retailers in the country threatened to stop carrying Nintendo Systems and products. Nintendo refused to change the policy and the retailer refused the products. The retailer held out for three months; after that it crawled back and agreed to Nintendo's terms."

Nintendo's next atrocity would be to use the considerable monopoly they had to control the consumer. Because of the game shortages, consumers would be more concerned about getting a particular title than the price. And because of Nintendo's domineering stance with the retailers, they were able to dictate the expected prices for their games.

It's all about nintendo wanting to be a control freak.

In 1988, when it was becoming apparent that 16-bit technology was becoming inexpensive enough to warrant inclusion in the next breed of video game consoles, Nintendo issued a press release that sounded very similar to that fateful statement by Atari made in 1982. Nintendo said, "We feel that the average game player is not mature enough for a 16-bit system, and that the demand is insufficient for it to be a high priority."8 They were wrong. In the summer of 1989, the first 16-bit system, called Genesis and produced by Sega, would arrive in the stores. By the next Christmas, they were outselling Nintendo's NES 3 to 1 9 and Nintendo was losing many of their licensees to Sega. This forced Nintendo to reconsider its decision about 16-bit technology, and begin designing one of their own.

When these events are considered with those that occurred during the Third Generation and caused the gaming market crash, the flaws of a single system market become painfully obvious. The fact that more software innovations and higher employment rates in the industry transpired during the Fifth Generation where we find a multple system market and increased competition adds to this argument as well.3 I personally think that the inherent risks of a signle system market are sufficient to warrant concern if the industry becomes dominated by one company again.

Thank god for sega entering into the market.. (or we'd still be playing NES games and be happy with obsolete machines... Whoops just described the mainstream ps2 fans for a mintute )

[burgundy]

What may have been true in 1988 is no longer true now. Nintendo doesn't have an iron grip on the market, or even any grip at all.

Impact means nothing without sales. In an environment where the next chart-topper is only a week away and promos are out of gamestores before preorders, publishers are making a mistake by not meeting demand. Mario Sunshine came out what, a whole two weeks ago? And it's already old news. How far down this forum are all the SMS threads? Forget about the other consoles - SMS has already fallen under the Gamecube radar.

The marketing benefit of giving up a definite sale today for an uncertain sale next week just isn't worth it.

Oh, and GameHED? Take a look at the last paragraph of your first excerpt - it shows that Nintendo intended to secure a higher price through its business practices. A monopolist will often constrict supply to raise price and possibly maximize profits. Nintendo isn\'t a monopolist anymore, and in any event, it\'s going to sell SMS with an eye towards an MSRP of $50. If Nintendo is cutting supply and not raising price, it\'s giving away a whole bunch of money that I don\'t think it\'s recouping on the marketing end, and if Nintendo is behaving this way regardless, it\'s because it has some delusion that it still drives the industry.

[GameHED]

Nintendo isn\'t a monopolist anymore

What about the GBA? Don't they pretty much own the whole handheld game market now?

Forget about the other consoles - SMS has already fallen under the Gamecube radar.

To the hardcore. But not the maintream gamers or kids who want a specific game. Namely mario, because they recognise and worship him. Maybe the people buying the game aren't the type to spend much on gaming as a hobby (they are not tempted to buy whatever else is on shelves like you and me) and only interested in playing nintendo games. The next zelda or pokemon game isn't exactly treated by it's fans as an unknown game by some unknown company they never heard of. To these little obsessed kids eyes, what other games are out at the time, don't offer the same thing that is contained within this specific nintendo title. So a retailer can't profit from them if they don't give in to nintendos demands. That is if they still want to finally cash in on this mainstream/kiddy market.

If Nintendo is cutting supply and not raising price, it\'s giving away a whole bunch of money that I don\'t think it\'s recouping on the marketing end, and if Nintendo is behaving this way regardless, it\'s because it has some delusion that it still drives the industry.

Where else can people play mario but on a GC? Why is it still important that Microsoft or Sony buy exclusive rights to X-franchise of games for a year to secure the profits from fans of the series of games who are buying those games? Answer: recognition of the games is big enough that having it excluded from competitors machines, traps the consumer into having only one way to get the games. Nintendo's own games have big recognition amoungst a lot of people. They are valuable and exclusive. If fans of the game want to play the game, they will do it at any price, begging retailers to just get the thing ASAP in desperation, even if it means paying a bit extra for it, because to them it's worth it. Even when the game gets old and the price stays the same they won't complain because it's the only way to get it. If nintendo know there are people who want the game right from the start, retailers have no choice but to listen to nintendo if they want to appease the growing demand by armies of kids bothering parents to get the game in.

-Sales of nintendo games stay in the top ten for ages,
-retailers know nintendo games consistantly sell well,
-nintendo gets to control retailers, or those retailers are forced to listen if they want to start making profits from the kiddy gamer market. (These are toys, kids whinng to parents is a powerful thing. word-of-mouth hyping dictates what is popular and in demand)

Maybe it's changed, and nintendo don't benefit at all, but it's just 1 possible theory as to why nintendo do it. Marketing isn't that important when your base knows your games so well and go into a store knowing what they want, (regardless of what else is sitting on a shelf to 'tempt' thier dollars, they aren't considered competition if the fan-kid has no interest in them from the beginning) but my point is: IF you want to play a specific nintendo title, not 'what else is being offered' and is common, or what will be released next week by some no-name company, then you are going to have to complain about it to a retailer to get it. Those complaints you make raise demand amoungst those hearing about it ("why is it so popular?" kid thinks to him/herself, "now i want one mommy! my friends have it" Go to the Ikaruga thread for an example ), and as a result of all this fooling around, nintendo can ensure more sales of the game over time. More sales = more demand = more profit. Retailers see the profits being made and must suck up to any demands nintendo make if they want to make the $. Isn't that what sony is doing with the whole "pulling posters down of the other competitors machines", and threats "to not supply the machine" if retailers don't give more favourable position to thier machine? It may be an old thing, but it is still very relevant today. It's just the names of the company using the tactics that changed. (probably a good lesson for all those people out there that think the industry could actually benefit from a single standardised platform. )

[Jay]

Nintendo is simply making us of some simple principles of business when they do this kind of thing. It's not rocket science.

[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.