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236 comments

So what (5, Interesting)

truesaer (135079) | more than 6 years ago | (#21787192)

Are they not allowed to do to sell them on eBay? Legally it's fine. Nintendo doesn't want them to, but they have to be very careful about cutting off shipments or Nintendo could get busted for price fixing.

Re:So what (3, Insightful)

Anonymous Coward | more than 6 years ago | (#21787216)

Nintendo doesn't want them to, but they have to be very careful about cutting off shipments or Nintendo could get busted for price fixing.

Ummm, price fixing is setting an artificially high price. If anything, Nintendo is dumping (selling below cost to gain market share).

In this case, the MSRP is much lower than market price. So why not charge the market price? That's capitalism.

Re:So what (1)

king-manic (409855) | more than 6 years ago | (#21787230)

In this case, the MSRP is much lower than market price. So why not charge the market price? That's capitalism.
They would then be accused of arrogance and lose market share ala Sony. It's a tough game.

Re:So what (-1, Redundant)

truesaer (135079) | more than 6 years ago | (#21787274)

You've got your terms all mixed up. MSRP != market price. The price on eBay is a market price, which is why the store is selling them there.

Re:So what (4, Insightful)

Maxo-Texas (864189) | more than 6 years ago | (#21787560)

It's not dumping. It's well known that Nintendo makes a profit on every Wii sold at the MSRP.

Raw capitalism yes-- but not friendly capitalism. Raw capitalism will maximize profits but might cost nintendo a lot of good will.

For example- Sony pissed me off in 2001 and I have not bought another product from them since. So their short term gain resulted in probably $20,000 to $30,000 in lost sales.

Nintendo has been managing their market for a looooong time.

Short-term vs. long-term profit (1)

tepples (727027) | more than 6 years ago | (#21787880)

Raw capitalism will maximize profits but might cost nintendo a lot of good will.
Then it won't maximize profits, especially long-term profits. Difficulty seeing more than a quarter into the future has become disturbingly common among publicly held companies.

Re:So what (0, Redundant)

DarkProphet (114727) | more than 6 years ago | (#21787958)

The Wii "shortage" that has been going on since its release a year ago is also undoubtedly hurting Nintendo's image. Its totally bogus. Why can't I walk into Walmart and pick one up when I feel like it? I can get a PS3 or a 360 that way, even now during the holiday season. But I have to investigate the stores to find out when and where they will have them if I want to stand in line to have a CHANCE at a Wii. Seriously Nintendo, increase supply, or raise the price. That's Econ 101, and I ain't exactly a math major.

I've been lucky enough to borrow my buddy's Wii for the last month, and it is way fun. But -- if I can't buy my own Wii and on my schedule by March, then fuck it, I don't care that much about it. Nintendo made a huge mistake by underestimating the Wii's popularity, and an even bigger one by not adjusting for it. They've had a year to get this right, and they are still playing pocket pool. What gives?

Yes, I'm bitter.

Re:So what (0)

Anonymous Coward | more than 6 years ago | (#21788078)

Raising the price would be suicide for Nintendo. In addition to bad will and accusations of 'gouging' or 'price fixing', their hype machine would whither and die, and their market share would decrease since fewer people could afford the Wii (and others might just opt for the competition if the prices are the same). Since they sell and license software for the device, losses and gains for the console are amplified beyond simply the consoles themselves.

Increasing supply might cost Nintendo more money per unit and would certainly kill the hype machine. There is no reason for them to do this when they can simply continue at current costs knowing people will scoop up the units. Plus, it means they don't have to drop prices until (and maybe even after) the other units drop in price. _And_ it gives them time to get a larger library of games to market.

Re:So what (1)

batkiwi (137781) | more than 6 years ago | (#21788090)

You didn't see that Nintendo has more than doubled output (perhaps tripled) due to shortages? They're doing everything they can as they make money on each one as is...

Re:So what (4, Informative)

TooMuchToDo (882796) | more than 6 years ago | (#21787220)

Lots of manufacturers have reseller policies that dictate how you can sell a product and the minimum price you can charge. Nintendo could simply decide they won't be selling anymore Wii consoles to any stores not following their policy.

Re:So what (2, Informative)

truesaer (135079) | more than 6 years ago | (#21787256)

Lots of manufacturers have reseller policies that dictate how you can sell a product and the minimum price you can charge. Nintendo could simply decide they won't be selling anymore Wii consoles to any stores not following their policy.


No, they don't. There are techniques to maintain minimum prices but they aren't in the form of the manufacturer dictating to the retailer what price they can sell at. Apple's a good example...Apple products wholesale for just 1-2% below the MSRP and retailers aren't permitted to advertise Apple products below a certain price. However if they WANT to sell them below MSRP they're welcome to. Since advertising iPods is a great way to get people into your store almost everyone accepts the MSRP.


Generally, manufacturers can't dictate a price to retailers. There was a supreme court case this past year that changed the situation somewhat though.

Re:So what (5, Informative)

TooMuchToDo (882796) | more than 6 years ago | (#21787308)

Oh, snap.

July 03, 2007
Supreme Court lets manufacturers set minimum prices
Decision reverses 1911 ruling -- what does it mean for consumers?

http://blogs.consumerreports.org/shopping/2007/07/supreme-court-l.html [consumerreports.org]

Re:So what (1)

truesaer (135079) | more than 6 years ago | (#21787330)

Try reading the last line of my post. It still is usually illegal, just as I said. Unless having a minimum price higher than market price somehow can be shown to not harm competition. Thats going to be a hard burden of proof to meet.

Re:So what (3, Informative)

queequeg1 (180099) | more than 6 years ago | (#21787532)

It may not be a hard burden at all. The court held that vertical price fixing of this type of not per se illegal if (i) the seller doesn't have "market power" (i.e. such a high market percentage that it can influence prices throughout the entire market), and (ii) the seller can make an arguable justification for the price limits as improving competition. Note that "arguable" when used in this context means nothing more than presenting some argument that is not completely laughable. It does not mean proving the point beyond a reasonable doubt, with clear and convincing evidence, or with a preponderance of the evidence.

Re:So what (1)

truesaer (135079) | more than 6 years ago | (#21788002)

Nintendo clearly has market power in the gaming console industry.

Re:So what (1)

queequeg1 (180099) | more than 6 years ago | (#21788102)

Does it? Proof may be difficult to come by. In the anti-trust world, market power is generally considered to be the ability to command prices above normally competitive levels. In this case, the Wii is priced well below all other competing consoles. Granted, it does not have the same hardware specifications as its competitors, but given the lower price and lack of clear comparables, a plaintiff might have a difficult time showing that the Wii is priced abnormally high.

Re:So what (2, Interesting)

Skynyrd (25155) | more than 6 years ago | (#21788136)

Generally, manufacturers can't dictate a price to retailers. There was a supreme court case this past year that changed the situation somewhat though.

Yrs, but there are way around it. I do some consulting work for a 4x4 shop that sells a lot of hardware on the net. Many of their vendors have MAP pricing (Minimum Advertised Prices). Your cost (as a dealer) is set by how much volume you move - sell more, get lower prices. However, if you are selling below a certain price point, your purchase price goes up. If you keep lowballing the price, your cost will end up the same as the MAP pricing. You're welcome to sell as cheaply as you want, as long as you're willing to lose money on each sale. They are trying to make sure a shop that services, installs and understands their products can make the same money as some guy selling boxes out of his garage.

Re:So what (3, Interesting)

Breakfast Pants (323698) | more than 6 years ago | (#21787454)

The record companies tried to stop Best Buy from selling CDs at a loss and they ended up convicted of price fixing.

Re:So what (1)

Anonymous Coward | more than 6 years ago | (#21788144)

your sentence is a little vague - who was convicted of price fixing, the record companies or best buy?. . .

Re:So what (2, Insightful)

Barraketh (630764) | more than 6 years ago | (#21787682)

The ability to set a *minimum price* has nothing to do with this particular case, as the retailers are selling at above MSRP. At no point was the manufacturer allowed to set the maximum price for the product, so if Nintendo stopped shipping to the retailers that do so they'd have a price fixing suit on their hands.

Re:So what (1)

InvalidError (771317) | more than 6 years ago | (#21787284)

Given that Nintendo frowns on store bundles, they are unlikely to endorse the retail eBay business as well. The store could see its next few Wii and other Nintendo-ware shipments cut off for a while.

Re:So what (1)

Tony Hoyle (11698) | more than 6 years ago | (#21787420)

Nintendo doesn't give a crap about store bundles.. try buying a wii that is *not* part of a bundle.. I've never seen one.

Re:So what (3, Insightful)

Kadin2048 (468275) | more than 6 years ago | (#21787456)

Huh? You can go to any Best Buy or WalMart and buy a Wii that's not in a bundle. Or at least you could until they ran out of stock for the Christmas rush, but I'm sure if you stand around on the day they get their resupply that they'll sell you one in the regular retail box, which is nothing but the the console, one Wiimote, and Wii Sports, just fine.

Gamestop seem to be notorious for its bundling policies, but then again I think Gamestop is one notch up from a guy selling electronics and Persian rugs out of the back of a van.

Re:So what (3, Interesting)

Rallion (711805) | more than 6 years ago | (#21788168)

Nintendo of America's president recently made what sounded like a subtle threat in regards to retailers that forced bundles on consumers:

"Retailers have already been given feedback that we are not big fans of that. We think it masks some of the price advantage we have versus our competition and, frankly, the consumer should decide what they want."

Re:So what (1)

xenocide2 (231786) | more than 6 years ago | (#21788198)

It's not a price advantage if you can't actually ramp up production.

Re:So what (1)

Fishchip (1203964) | more than 6 years ago | (#21788278)

You're right, I'd love to be sitting on unsold PS3s and 360s right now.

I wonder if Sony and Microsoft would be mad if retailers just went ahead and slashed prices to compete with the unavailable Wiis, without their permission.

SO, people are advised not to fucking shop there. (-1, Flamebait)

Anonymous Coward | more than 6 years ago | (#21787434)

"OMG, guys, why are you ragging on NAMBLA? They aren't violating the law!"

Okay, we get it. You're "open-minded". You don't personally pass judgment on dickish behavior so long as it is not illegal. Now fuck the hell right off.

Re:So what (1)

mzs (595629) | more than 6 years ago | (#21787518)

Nintendo probably can't do a thing, they most likely get the Wiis through a distributor.

Re:So what (1, Informative)

Anonymous Coward | more than 6 years ago | (#21787520)

Are they not allowed to do to sell them on eBay? Legally it's fine. Nintendo doesn't want them to, but they have to be very careful about cutting off shipments or Nintendo could get busted for price fixing.

Your second statement is essentially false. There is nothing exceptional in antitrust law that prevents a company in Nintendo's position from refusing to deal with with a customer who wants to resell the product a different price, especially if that price is higher than the MSRP. In addition, the Supreme Court's Leegin Creative Leather Products decision this year made it much easier for a company like Nintendo to obtain actual agreements with its customers that products cannot be sold for less than the MSRP.

Even before Leegin, companies could impose so-called Colgate pricing policies where they could unilaterally refuse to sell to distributors that resell at prices other than list price, and terminate distributors who fail to comply with the policy. Those policies are not "agreements" under Section 1 of the Sherman Act, so that the manufacturer would have to be a monopoly under Section 2 in order to be subject to antitrust scrutiny.

In Nintendo's case, even if it were to be rules to be a monopoly, it would be difficult to prove that the termination of a distributor for selling products at a higher price than it desires creates an anticompetitive market for consumers and creates a monopoly rent.

Re:So what (4, Informative)

DRJlaw (946416) | more than 6 years ago | (#21787564)

[Repost - didn't notice that I hadn't logged in correctly]

Legally it's fine. Nintendo doesn't want them to, but they have to be very careful about cutting off shipments or Nintendo could get busted for price fixing.

Your first statement may be true, especially if there's no distribution agreement price ceiling. Your second statement is essentially false. There is nothing exceptional in antitrust law that prevents a company in Nintendo's position from refusing to deal with with a customer who wants to resell the product a different price, especially if that price is higher than the MSRP. In addition, the Supreme Court's Leegin Creative Leather Products decision this year made it much easier for a company like Nintendo to obtain actual agreements with its customers that products cannot be sold for less than the MSRP.

Even before Leegin, companies could impose so-called Colgate pricing policies where they could unilaterally refuse to sell to distributors that resell at prices other than list price, and terminate distributors who fail to comply with the policy. Those policies are not "agreements" under Section 1 of the Sherman Act, so that the manufacturer would have to be a monopoly under Section 2 in order to be subject to antitrust scrutiny.

In Nintendo's case, even if it were to be ruled to be a monopoly, it would be difficult to prove that the termination of a distributor for selling products at a higher price than it desires creates an anticompetitive market for consumers and creates a monopoly rent.

Re:So what (0)

Anonymous Coward | more than 6 years ago | (#21788066)

creates a monopoly rent.

You mean like in the game of monopoly where you pay rents when you land on your opponent's properties?

Re:So what (1)

budgenator (254554) | more than 6 years ago | (#21787810)

I suppose that technically setting a price lower is also price fixing and maybe illegal, I doubt that any prosecutor would prosecute. I don't think that Nintendo is required to do business with anyone either as long as the reasons are non-discriminatroy.

Welcome to capitalism ... (1, Informative)

Anonymous Coward | more than 6 years ago | (#21787226)

... suckers

Only $3,99 profit per console? Seriously? (3, Insightful)

Manip (656104) | more than 6 years ago | (#21787232)

Honestly if they're only making just below $4 I can't blame them for requiring bundles. In the article it says they're losing money if a customer uses a credit card but even if they don't you have to wonder how they can keep the doors open.

I kind of feel a little bit bad for small games stores right now even if I'm just a consumer with no real vested interest in making the prices higher.

Re:Only $3,99 profit per console? Seriously? (1)

MobileTatsu-NJG (946591) | more than 6 years ago | (#21787662)

"In the article it says they're losing money if a customer uses a credit card but even if they don't you have to wonder how they can keep the doors open."

They make money on the games.

Re:Only $3,99 profit per console? Seriously? (1)

G Fab (1142219) | more than 6 years ago | (#21787712)

Except people buy games at their favorite electronics store. People buy Wiis whereever they manage to find them. So some stores are not going to sell wii games to wii console buyers.

Same thing with iPods. (3, Interesting)

Jester998 (156179) | more than 6 years ago | (#21787866)

I have a friend who was a manager of a computer retail store, including a full line of Apple products. iPods are *exactly* the same situation as Wii consoles are -- retailers make absolutely nothing on them, and either you play by Apple's pricing rules or you get cut off.

I forget exactly how much he said the profit was, but IIRC it was $2-3 on a top-end iPod (which was the 60 or 80GB model at the time). By the time you pay your staff to deal with the customer to explain features, etc, and make the sale, he'd already lost money. If the customer paid by credit card, he lost a lot more.

However, third-party accessories (skins/cases, FM tuners, headphones, etc) had significantly higher markup, and that's where the money is for retailers, just like games are for the Wii.

Capitalism (5, Insightful)

Anonymous Coward | more than 6 years ago | (#21787234)

In a capatilist society it should be possible to buy any item, no matter how rare, with rarer items being more expensive. Should we blame retailers for doing what economic theory expects them to do? When supply is low and demand is high price should rise until supply = demand.

MSRP vs Wholesale (2, Insightful)

TubeSteak (669689) | more than 6 years ago | (#21787250)

"My distributors tell us that Nintendo has an 'attach rate' and we are often forced to purchase four games with each console. We pay $246 per console. If we sell the console for $249.99 retail, it's a $3.99 markup. If a person pays by credit card we lose money."
1. Why is the Manufacturer Suggested Retail Price (MSRP) so close to the wholesale price?
2. Why doesn't the stores sell it for more than MSRP? The "S" does stand for "Suggested"

Re:MSRP vs Wholesale (3, Insightful)

truesaer (135079) | more than 6 years ago | (#21787290)

1. Why is the Manufacturer Suggested Retail Price (MSRP) so close to the wholesale price?


2. Why doesn't the stores sell it for more than MSRP? The "S" does stand for "Suggested"


1) Because it makes MSRP effectively a price floor. Stores have little incentive to undercut each other if they're already making zero profit or a loss on the sale (still beneficial to sell em to get people through the door where they'll buy games and accessories).


2) Thats exactly what they're doing...selling em on eBay above MSRP.

Re:MSRP vs Wholesale (1)

skelly33 (891182) | more than 6 years ago | (#21787300)

Indeed - they would be better off selling them at the eBay pricing in their stores because then they wouldn't have the eBay fees on top of the CC processing fees for the ones sold in store. I think though that the entire gaming industry has been geared towards throw-away hardware for high-profit software. Speculation: perhaps the console-makers are unconcerned with retailers profiting on the consoles when the intent is to make the money on the games...

Re:MSRP vs Wholesale (3, Insightful)

alanshot (541117) | more than 6 years ago | (#21787878)

Yes, the "S" does stand for "suggested". It stands for suggested the same way cousin vinny "Suggests" you pay him back in a timely manner, or the way a mugger "suggests" you hand him your wallet.

I am all for Slackers selling them for the max profit. Price controls dont work. They hinder the market and cause problems. Just ask those in the south that needed their roofs fixed or needed generators after a hurricane.

Since price controls went into effect, it did two things. First it forced retailers to maintain artificially low prices for items such as batteries so that they ran out too quick. Instead of the price of a D cell jumping to say $6 each that would make a person say "hey, maybe I only need enough to get me through this by conserving my light" instead the first few bought all they could carry, forcing others to go without even if they had enough in thier hands to run thier light constantly for 3 months. So instead of alot of people getting what they NEEDED, you had a few greedy bastards that bought extra leaving others without. Generators? cant charge extra even if they had to be shipped in special(which costs more $$), so vendors didnt go through the hassle of getting the extra units down there. Why sell at a loss? They maintained the normal (inadequate) flow of materials because there was no monetary incetive to do otherwise. Once again, people went without.

Second, out of state contractors didnt have an incentive to travel to work, leaving the locals under-covered for construction workers. Instead of companies packing up and coming down with a "hey, due to teh demand, this is what it costs because of the demand, my travel expenses, etc." they were told by the gubment "you cant charge any more than the regular rate." so they said "psssh... screw that, I'll stay here instead of travelling down there to help and lose money." years later many roofs still had blue tarps because of the backlog. Even if somebody WANTED to pay more to get it done sooner, they couldnt (in theory).

They need to GTF outta da way and let the market decide. They'll make thier cash either way.

  Retailers will charge no more than the market will bear. Nintendo wont see any less sales even if this is allowed. If the retailers cant move the units at $500, they'll drop the prices down until they DO move. Eventually the pricing will settle out and they'll sell briskly and at a reasonable amount. Eventually once production increases to match demand, or demand drops, they will be back to where the vendor wants them to be.

Re:MSRP vs Wholesale (1)

_KiTA_ (241027) | more than 6 years ago | (#21787948)



"My distributors tell us that Nintendo has an 'attach rate' and we are often forced to purchase four games with each console. We pay $246 per console. If we sell the console for $249.99 retail, it's a $3.99 markup. If a person pays by credit card we lose money."
1. Why is the Manufacturer Suggested Retail Price (MSRP) so close to the wholesale price?
2. Why doesn't the stores sell it for more than MSRP? The "S" does stand for "Suggested"


1. The MSRP is close to the wholesale price because, well, the manufacturers don't care if the retail chains make money on the consoles, since they let them get away with such huge markups on new games and selling used games (which have a Wholesale price / Cost to the retailer of .. $0.00 -- they're 100% profit).

2. Nintendo won't let them sell for more than the MSRP. Nintendo wants to strictly control the pricing so they can time sales and price cuts to correspond with competitor's price cuts and when their sales start to slump slightly. Not only that, it's not feasable to do -- if Gamestop priced the Wii at $300, everyone would go over to Bestbuy where they're $250.

Re:MSRP vs Wholesale (1)

Mark J Tilford (186) | more than 6 years ago | (#21788170)

:: Not only that, it's not feasable to do -- if Gamestop priced the Wii at $300, everyone would go over to Bestbuy where they're $250.

Only if Bestbuy had them in stock.

Nobody mentioned Wholesale (1)

DreadSpoon (653424) | more than 6 years ago | (#21788018)

Nintendo sets the MSRP, but not the Wholesale price. The distributors (the wholesalers) do that. If the distributors are buying them from Nintendo for $200 each and selling them to the small stores for $255, the small stores don't have much choice. Nintendo probably sells units in 1000 lot batches or something similar, and only large retail chains can afford to buy whole lots at a time. So, not only do the large retail stores get more units, they also get higher profits.

This is the way almost all products are handled. The difference here seems to be that the wholesalers small game stores have to go through are being major asshats. Nintendo doesn't get to change that, though. I'd imagine that if Nintendo raised the MSRP, the distributors would just raise their prices, too. For a product in this high demand and low supply, there is no price competition going on at all, not among retailers or wholesalers.

Why the shortage? (2, Interesting)

calstraycat (320736) | more than 6 years ago | (#21787270)

Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand? It wasn't a surprise that they couldn't meet demand last Christmas. But, this time around they've had a full year to get the production line up to speed.

What's up? Is their a particular component that is hard to come by or has a real low yield?

Re:Why the shortage? (3, Informative)

truesaer (135079) | more than 6 years ago | (#21787310)

They've doubled production this year but demand is still increasing. There was a hard drive shortage a while back. Nintendo also is being careful about how they ramp production to ensure they don't end up with poor quality...if you ramp up too fast you'll end up with higher defect rates.

Re:Why the shortage? (0)

Anonymous Coward | more than 6 years ago | (#21787464)

The Wii doesn't have a hard drive.

Hard drive shortage? (1)

Dorceon (928997) | more than 6 years ago | (#21787478)

Wouldn't affect the Wii and its 512M of flash. I think the key is that they've exhausted all their existing suppliers and assemblers. Any new contractor would require hands-on quality assurance time in addition to the usual ramp-up time.

Re:Why the shortage? (1)

torkus (1133985) | more than 6 years ago | (#21787592)

I think it has more to do with scarcity promoting sales. If they're hard to get, EVERYONE who can will buy one and try to hock it on ebay. Nintendo is virtually guaranteed sales. wiitracker and similar are all free advertizing along with the news: OMG it's rare. buy one if you have any opportunity immediately.

Re:Why the shortage? (1)

cduffy (652) | more than 6 years ago | (#21788068)

The other thing is that overestimating demand is risky, while underestimating it is safe. Manufacture too few items and sell them all at a profit, and you've turned a profit. Manufacture too many items, and it's easy to find yourself taking a loss on enough of them to eat up all the profits you might otherwise have made.

Re:Why the shortage? (0)

Anonymous Coward | more than 6 years ago | (#21787644)

>There was a hard drive shortage a while back.

This affects Wii production... how? :-)

Re:Why the shortage? (5, Informative)

thpr (786837) | more than 6 years ago | (#21787594)

Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand?

The way I read your statement, you're making an assumption that I'm not entirely sure is true. It appears that you are assuming Nintendo wants to meet demand.

To be fair, I don't think they are intentionally holding back on production solely to produce scarcity. I think the statements they have made (of wishing they had more product) are honest. However, I also believe that this is not a marketing and sales issue, but a financial one.

Nintendo might be able to ramp up to meet demand, but the problem is one of understanding demand. What no one is sure of is what the real demand is. If they are producing 1.5M units/month, is real demand 1.501M units/month? 3.0M units/month?

The risk that Nintendo faces is the same risk that many telecom and networking companies experienced in 2000-2001. In that case, a capacity shortage of certain components led to over-ordering of the product, and thus when production was ramped to meet the (artificially) inflated demand, the equipment companies sat on billions in inventory that they were forced to write down (because no one wanted to buy it).

This is a slightly different situation (no artificial demand, just hard to forecast the real demand), yet the same lesson applies. I believe Nintendo is taking a cautious approach to its product ramp. Since the supply chain is something on the order of 4-6 months from initial orders to final assembly, they face huge inventory risk if they significantly overshoot demand. Their conservative forecasts and production have lost them some sales, but it may be less risk to lose sales than to risk sitting on a ton of inventory.

Re:Why the shortage? (2, Funny)

Triv (181010) | more than 6 years ago | (#21787848)

...the equipment companies sat on billions in inventory that they were forced to write down (because no one wanted to buy it).


If that's a typo I apologize for the following, but it looks like an idiomatic misunderstanding to me so, in the interests of the free exchange of information, I feel the need to tell you that the expression is write off, not write down. :)


Triv

Re:Why the shortage? (4, Informative)

Tom (822) | more than 6 years ago | (#21787680)

You don't need an inside scoop, you just need to read the news and use your brain.

Nintendo has ramped up production, considerably. However, demand is still strong. Building a new factory isn't a minor investment, and it takes months to do it. Which is why they are rightly cautious doing it, because if you guess wrong, and the demand wasn't permanent, you sit on a million-dollar factory and trucks of devices.

Everyone underestimated both the permanence and the amount of demand for the Wii. Which means Nintendo didn't get a chance to stock any overproduction during the summer for the christmas business, because there wasn't any overproduction.

Re:Why the shortage? (4, Insightful)

MobileTatsu-NJG (946591) | more than 6 years ago | (#21787686)

Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand? It wasn't a surprise that they couldn't meet demand last Christmas. But, this time around they've had a full year to get the production line up to speed.

What's up? Is their a particular component that is hard to come by or has a real low yield?
To date, Nintendo's sold 12 million Wii's. That's a pretty strong demand for consoles. I'm not saying it's neverhappened, but I've never heard of a console selling over 10 million in its first year. Heck, the XBOX 360 has been out for two years and the Wii surpassed it in half hte time. If I'm right about the history of console sales, then the question I'd ask is: "What reason would Nintendo have to think they needed say.. double the amount of Wii consoles available?"

Re:Why the shortage? (4, Informative)

Deslock (86955) | more than 6 years ago | (#21787834)

Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand? It wasn't a surprise that they couldn't meet demand last Christmas. But, this time around they've had a full year to get the production line up to speed.

What's up? Is their a particular component that is hard to come by or has a real low yield?
This was already discussed at slashdot:
http://games.slashdot.org/article.pl?sid=07/12/17/178206&from=rss [slashdot.org]

To summarize, Nintendo more than doubled production (to 1.8 million/month) but underestimated how much demand there would be (can't really blame them as this is the first time I remember one item being the thing to get two Christmases in a row).

It's estimated that they could've made an additional billion in sales this season. However, increasing production too quickly is risky as it can cause decreased quality control. And while it appears they're not trying to manipulate demand, they're also don't want to cause it to plummet by putting too many units on the market.

More details:
http://www.next-gen.biz/index.php?option=com_content&task=view&id=7965&Itemid=2 [next-gen.biz]
http://www.nytimes.com/2007/12/14/technology/14wii.html?_r=3&pagewanted=1&ref=technology&oref=slogin&oref=slogin&oref=slogin [nytimes.com]

Re:Why the shortage? (5, Interesting)

tknd (979052) | more than 6 years ago | (#21788006)

Does anyone have the inside scoop on why -- over a year after introducing this product -- Nintendo has not been able to ramp production up to meet demand? It wasn't a surprise that they couldn't meet demand last Christmas. But, this time around they've had a full year to get the production line up to speed.

I don't have the inside scoop but it isn't hard to see what is going on when you know a thing or two about business.

Suppose you are going into business for developing a widget and you have determined that you can sell the widget for $15. Now suppose that to make the widget you have two components: fixed cost and variable cost. The fixed cost you (almost) can't do anything about; whether you make 1 widget or 1 million this cost stays the same (later we'll see that isn't necessarily true, but it still works against you). Fixed cost would include something like the cost of the building for your factory. Even if your factory only produces one widget, you still gotta pay for the building. So then there's variable cost which as you might guess is the cost associated with each particular widget--it increases and decreases depending on how many widgets you make. Variable cost would include things like raw material or parts you buy from a supplier. When you order more, the cost goes up, when you order less, the cost goes down.

So let's say for your widgets, which are special widgets that only you know how to manufacture, have a variable cost of $5 but a fixed cost of $2,000,000 a month. And that fixed cost only applies to one factory that can make your widgets. Let say if you wanted two factories making widgets, your fixed cost would roughly double to $4,000,000 a month. But we'll only consider one factory for now. So how many widgets do you have to make and sell to break even? Simple, that's just the fixed cost divided by the contribution margin where the contribution margin is the sale price less the variable cost: $2,000,000 / ($15 - $5) = 200,000 units per a month.

Now throughout this we have not considered the capacity of the factory. So let's say that the factory can produce up to maximum of 300,000 units a month. Well, 300,000 is greater than your breakeven which is 200,000 units so you can actually make money off of this factory as long as it produces more than 200,000 and you sell all of those units. Easy enough.

But now you start selling your widget and notice that because your widget is really special, it is in hot demand. But you recognize that at some point, demand will drop when everyone who wants one of your widget will have one. So let's say demand for your widget turns out to be 400,000 units a month. HMMMM. We have a problem. Your single factory can only produce a maximum of 300,000 widgets per a month so in order to meet demand you would have to setup another factory to produce the remaining 100,000. If you setup the additional factory your fixed costs will jump to $4,000,000 instead of $2,000,000 a month. If we now recalculate your break-even point, it will be: $4,000,000 / ($15 - $5) = 400,000 units per a month. But you've already determined that demand is only 400,000 units a month so by setting up the additional factory, suddenly you are no longer making a profit!

To summarize:

ASSUMPTIONS
Fixed cost of factory: $2,000,000 a month
Factory capacity: 300,000 units a month
Variable cost per unit: $5
Actual product demand: 400,000 units a month
Selling price of the unit: $15

Break-even point on one factory: $2,000,000 / ($15 - $5) = 200,000 units
Profit on actual demand (meeting 75% of demand): (300,000 - 200,000) * ($15 - $5) = $1,000,000 a month

Break-even point on two factories: $4,000,000 / ($15 - $5) = 400,000 units
Profit on actual demand (meeting 100% of demand): (400,000 - 400,000) * ($15 - $5) = $0 a month

Nintendo's situation probably has vastly different numbers but the same concept applies. If the make a special case to meet current demand, the numbers may not work out in their favor. Even if the numbers did work out in their favor, at some point demand will drop and the factories will sit around producing zero product. At that point, the factory will basically drain them of their profits due to fixed costs. And because they sunk so much money into building all of those factories, their fixed costs will be much higher.

In my opinion, their strategy at this point will be to do what they can to make their manufacturing process more efficient. Even if they can only get the factory to produce 5% additional than it was before they'll still increase their profits on a monthly basis with very low risk. Setting up new Wii factories is stupid because at some point people are going to stop buying Wiis.

Now in North America we probably are in a different sort of demand cycle so Wiis are probably sold the second they hit the shelf. However, throughout the year, there have been a number of times when Wiis would be in the stores and they'd sell out by the end of the day. Ideally that is what everyone in the business wants: the product sells with minimum shelf time. The longer the product sits on the shelfs, the less the retailers will order and Nintendo will sell fewer units. The other extreme is the product is in high demand and you cannot provide the retailers with enough product (which is also bad because the retailer will start seeing potential profits go down the drain as customers go to other stores). So Nintendo obviously isn't going to setup a new expensive Wii factory just to meet November and December demands. They're basically guaranteed to lose money on that venture because January will roll around and demand will drop again. They're better off playing the "it's the holidays and there is an unusual spike in demand" card than to piss off their company stock holders by sinking a ton of cash into a Wii factory.

Nintendo now has the good kind of business problem: they can't keep up with demand. However, this is not an easy problem because it involves business growth and throughout history, many businesses have gone under due to managing the growth problem. Grow too fast and you'll run out of money. Grow too slow and your business relationships will go down the drain.

In short, expect to see the Wii shelf life of less than a day to be the norm until everyone that wants a Wii has one.

Re:Why the shortage? (1)

Rallion (711805) | more than 6 years ago | (#21788114)

The truth is that Nintendo is producing a massive number of consoles. As far as I can tell, no other system, ever, has sold as many consoles as the Wii in its first year, except perhaps the Game Boy Advance. Even the mighty DS is a not-so-close third, and the PS2 took years to reach its lofty heights.

wrong much? (2, Interesting)

ILuvRamen (1026668) | more than 6 years ago | (#21787280)

I just searched, there's at least 10 brand new consoles, perfectly functional with at least one controller on ebay BUY IT NOW for under $325. So if they have them listed for more, they're not selling them are they?

Re:wrong much? (3, Insightful)

Waffle Iron (339739) | more than 6 years ago | (#21787558)

I just searched, there's at least 10 brand new consoles, perfectly functional with at least one controller on ebay BUY IT NOW for under $325.

My guess is that the going eBay price has just drastically dropped because right now chances slim that it's going to make it to your doorstep by Xmas morning.

Re:wrong much? (1)

ILuvRamen (1026668) | more than 6 years ago | (#21787698)

I checked a week or two ago and it was around $350 for similar packages guaranteed working. All the $500+ ones were with like 10 games and accessories and stuff. Btw I have to add, there's this hilarious one on right now for really cheap where this girl gave it to her boyfriend but they broke it up so she took it back and now she's selling it. Totally hilarious.
oh and I didn't mention this before but Nintendo is really dumb for not making enough. The absolute #1 stupidest thing a company can do is not be able to deliver a product when there's existing demand for it. That's just dead profits. And that beats out the #2 stupidest which is shoot a puppy in your commercial during the superbowl. Seriously, it makes economists cry all over their supply and demand charts.

Passing Wii Play off as 9 games (1)

tepples (727027) | more than 6 years ago | (#21787938)

All the $500+ ones were with like 10 games and accessories and stuff.
Wii console comes with 5 games, and the Wii Play bundle has one remote and 9 games. A lot of eBay sellers like to inflate the bundle values this way.

Re:wrong much? (1)

PitaBred (632671) | more than 6 years ago | (#21787988)

Dude, it's totally dumb that we can't fly, too. Stupidest thing you can do is to not fly.

Nintendo would love to have the consoles to sell, but it would cost too much to get another production line building the things for the projected sales. They've been running full-tilt in production for a long time.

Re:wrong much? (1)

cowscows (103644) | more than 6 years ago | (#21787578)

I'd guess that by now we're at the point where you can't safely buy something on Ebay and expect it to be delivered before christmas. Probably less buying happening as a result. That's just a thought though, I have done no research to prove/disprove that theory. But it maybe makes sense?

free market (2, Insightful)

fermion (181285) | more than 6 years ago | (#21787286)

So what? Any retailer is free to get the best price it can for the product. And there is no price fixing. That is when any manufacturer set price is the 'suggested retail price'.

The story here is that the Wii is worth so much money to some people. For that kind of money one could get a Playstation. But I have no idea how the world works. I still can't understand why some parent would spend $100+ to have their kids see some girl pretend to sing. At some pooint it seems that you tell the kids 'no', the market dries up, and the scalpers go away. But in reality there are enough compulsive people who will pay anything to be part of the in crowd so these scalpers will always have customers.

In the free world we have the right to make choices, and as well as a basic education is offered, then I say let the adults make the choices(although it has been clear that when cash is too easy to get, the system tends to break down, and more responsible people end up picking up the pieces for the less responsible).

Re:free market (2, Insightful)

Rakishi (759894) | more than 6 years ago | (#21787368)

But in a free world Nintendo is also free to never sell any more Wiis or games for them to stores which sell above it's "suggested price."

Re:free market (1)

Planesdragon (210349) | more than 6 years ago | (#21787632)

The story here is that the Wii is worth so much money to some people. For that kind of money one could get a Playstation.
Not really a good comparison. No person I know desires a Playstation 3 for playing games; the only person I do know who wants to get one is eyeing it as a Blue ray player.

Walmart bundle - $420 markup (1)

The Fun Guy (21791) | more than 6 years ago | (#21787292)

Need a Wii? Walmart has them [walmart.com] , but you have to buy a $677 bundle of console + a crappy accessory + six games. All of this, for shipping some time between December 27 and January 25.

Personally, I'm waiting for the Christmas rush to pass so I can get the console without a forced bundle.

Re:Walmart bundle - $420 markup (1)

rednip (186217) | more than 6 years ago | (#21787514)

Personally, I'm waiting for the Christmas rush to pass so I can get the console without a forced bundle.
That's what I said last year, and I've yet to see a stack of them, even in the middle of summer.

Re:Walmart bundle - $420 markup (1)

murdocj (543661) | more than 6 years ago | (#21787606)

I was in my local BestBuy a couple of months ago and saw a stack of Wii's. Not one, a stack of 10 or so. Maybe they had just taken delivery, but when I saw a full stack I assumed the Wii shortage was over.

Re:Walmart bundle - $420 markup (1)

MBGMorden (803437) | more than 6 years ago | (#21787792)

I thought the same about 3 months ago when I was browsing in Wal-mart and they had 3-4 of them in stock. Oh well. I'm not all that impressed with it myself anywas (I'll probably get one eventually, but I'm waiting for now).

Re:Walmart bundle - $420 markup (2, Insightful)

Prof.Phreak (584152) | more than 6 years ago | (#21788156)

Personally, I'm waiting for the Christmas rush to pass so I can get the console without a forced bundle.

Yes, you and about a million others!

Bundles (0, Flamebait)

Kenoli (934612) | more than 6 years ago | (#21787294)

I have to buy a console and games? Boo hoo!

Re:Bundles (1)

Dorceon (928997) | more than 6 years ago | (#21787492)

The key is that the games included in the bundles are ones you'd never buy if you had a choice, like that lame Ubisoft racer from launch.

Re:Bundles (1)

siriuskase (679431) | more than 6 years ago | (#21787608)

it really is a problem for those who want to overwrite the os with linux and play opensource webbased wii games

Re:Bundles (4, Insightful)

MobileTatsu-NJG (946591) | more than 6 years ago | (#21787708)

"I have to buy a console and games? Boo hoo!"

Wow. Way to miss the point. Okay, here's a metaphor to help you comprehend the idea: Let's say you want to purchase an HD-DVD player. They sell for $200, but demand is high, so you cannot find them. Suddenly, you find one but it's $400 and comes with Gigli, Eps. 1-3, TMNT 3, King Kong, White Noise, and Deuce Bigalow.

Boo hoo.

Re:Bundles (1)

truesaer (135079) | more than 6 years ago | (#21788034)

In fairness to walmart it looks like you can pick any 6 games you want. But I still agree with you...I wouldn't want to buy 6 games up front with the console. Hell, I have a friend that bought a Wii right when it came out and he mostly plays his 360 now so I could just borrow his games. I might buy 6 games, but I doubt I'd want 6 from the existing library.

Re:Bundles (0)

Anonymous Coward | more than 6 years ago | (#21788208)

No, consider this: You want to purchase an HD-DVD player which retails at $200, but demand is high, so some asshat (or in this case, a group of asshats) goes into a store (or stores) and purchases all their inventory just so they can turn around and sell them on Ebay for $400 each. Now you HAVE to pay the inflated price because the scalpers have purchased all the available stock at the lower retail price thus contributing to the product's scarcity.

Or if that's not good enough consider this: After a hurricane, gasoline is hard to find. So, being the good citizen I am, I buy all the gas I can find, store it in containers and then sell it for 3x the price.

Either way, the scalpers aren't doing you a favor.

Re:Bundles (0)

Anonymous Coward | more than 6 years ago | (#21788246)

Now you HAVE to pay the inflated price

or you could just not buy one. unlike your gasoline example further down, a dvd player or a game system are hardly essential requirements. what gets me are the folks (not you, necessarily, but some other folks i've read) who complain that, for example, toys-r-us are unfairly bundling the system with an extended warranty - a practice i think is despicable and should be illegal - but then go ahead and buy the system anyway, complaining that they *had* to pay $100 more than they were prepared to and giving the business in question precious little incentive to stop their unsavory practice of bundling.

Couple of quetions (2, Interesting)

bangzilla (534214) | more than 6 years ago | (#21787332)

Why even bother selling the Wii's on ebay (and paying ebay fees)? These things are in such great demand why not price them based on what the market will stand. They've proven that a market is there for Wii's at $399 - why not sell them for that in the store? Oh, and the reason that retailers only make $4 margin of each Wii is that they make it back in other ways (same way car dealers make money even when they sell cars for way under sticker price and will happily show you paperwork that they only make $100 over dealer invoice - facory incentives that are accounted for in many other ways). How - the margin on games is much deeper. Sell the console for cost and then make out like bandits on games (razor and razor blades; printers and cartridges etc)

Re:Couple of quetions (0)

Anonymous Coward | more than 6 years ago | (#21787378)

Working at a retail store shows you that the margin on games is not deeper. it's only 2% or so depending on how you purchase them

Re:Couple of questions (1)

bangzilla (534214) | more than 6 years ago | (#21787416)

Bulk baby, bulk. Higher volume == greater discounts. That's why the mega-chains eat the lunch of the smaller outfits (on price at least) they can negotiate volume discounts.

Re: Wiisellwiis.com (1)

NFN_NLN (633283) | more than 6 years ago | (#21787508)

"Why even bother selling the Wii's on ebay (and paying ebay fees)? These things are in such great demand why not price them based on what the market will stand."

You mean like this: www.wiisellwiis.com [wiisellwiis.com]

Re:Couple of quetions (3, Interesting)

jotok (728554) | more than 6 years ago | (#21787744)

I get the impression that the demand for the Wii is probably VERY flexible. That is to say, a huge part of the demand is that people think "PS3? $600. Wii? $250." People's perception of Nintendo is that they are the only manufacturer not trying to "gouge" their customers. If they raised the prices they would lose some very valuable street cred.

You are totally right...they should be making money off of the games and accessories, not the console itself. That just makes sense. Needles are cheap...heroin, on the other hand...

The bigger problem (2, Insightful)

sunking2 (521698) | more than 6 years ago | (#21787452)

I think much more frequent is the case where store employees are buying wiis before they ever reach the floor and selling them either on ebay or other places. I know of at least one person who does this. They buy them for their discounted value and then sell it for a $100 msrp markup. I really don't know why Games...errr...said company doesn't put a stop to it. They are losing a lot of money by letting them go at employee discount. I'm sure these places have rules to try to stop this, but they obviously aren't enforced or the people who have the ability to cover turn the other cheek are part of it (ie store managers don't stop it, and for whatever reason the regional/corporate isn't looking close enough at the numbers).

Selling them on eBay? (2, Funny)

johndierks (784521) | more than 6 years ago | (#21787474)

Why doesn't Nintendo set up a dummy company and sell them themselves on ebay?

Re:Selling them on eBay? (4, Interesting)

etymxris (121288) | more than 6 years ago | (#21787516)

Why set up a dummy company? I know creative labs, for instance, has their own ebay presence, and the account name is "creative-labs" or something, with thousands of feedback. Sometimes they sell for a fixed price, sometimes they take best offers, and sometimes they start the auction at 20% below MSRP and let it go to whatever.

Well done. (1)

jpellino (202698) | more than 6 years ago | (#21787476)

This may be the most ambitious thing ever done by anyone called "Slacker".

Re:Well done. (0)

Anonymous Coward | more than 6 years ago | (#21787612)

Slackers' is a good store and I have shopped at locations in Missouri in the past and I have always been pleased. That being said, we live in a capitalist society and an important characteristic of capitalism is supply and demand. Items that are highly in demand will cost more. I can't blame a company for trying to make a profit in a capitalist society. In addition, this isn't price scalping, price scalping is charging $1500+ for Hannah Montana tickets.

Business idea (1)

rice_burners_suck (243660) | more than 6 years ago | (#21787778)

Hmmm. I have a business idea. Buy a product that costs $100 and sell it to people who know it costs $100 for $500. Pocket the extra $400. Oh, wait, that's been done already.

Ok, let's try again. Sell people a cup of coffee, which everyone knows is worth about 5 cents, for 5 dollars instead. Oh, wait. That, too, has already been done.

Ok, ok, now I got it. Because everyone has faucets in their homes and businesses, why not open a storefront where people will drive to you and then pay a dollar per gallon to fill bottles of water from a faucet?

What?! That's been done already too?!?! Ok, I give up.

Independent stores do it too. (2, Insightful)

AbsoluteXyro (1048620) | more than 6 years ago | (#21787780)

I walked into a local independent game shop the other day, just as they unboxed 6 new Wii consoles that had arrived that day. I asked "Do you have any Wiis in stock?" and an employee stepped in front of the stack of Wiis and said "Nnnnnnooooo.... th..these aren't for sale. I mean they are, but we sell them online. No one wants to pay the $450 we are asking in the store." Frickin' jerkwads.

Re:Independent stores do it too. (1)

geminidomino (614729) | more than 6 years ago | (#21787826)

Slackers appears to be an "independant" store, seems like there's 11 stores owned by one guy.
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