6 ms·

I know this is an old article, but I think it's interesting in contrast to the admission by Sony in their annual report that they've lost $3 billion selling PS3

I know this is an old article, but I think it's interesting in contrast to the admission by Sony in their annual report that they've lost $3 billion selling PS3s. The Nintendo business model makes a lot more sense to me.

jonknee 18y ago
Except the part about (possibly artificially) not having enough supply for an absurd amount of time. You can only sell software to people with the hardware, it makes sense to get the hardware out there.
- axod 18y ago
  Scalability problems are not just for the web :)
  - jonknee 18y ago
    Correct, but with billions of dollars at stake it seems like they should have been able to figure it out. They made almost $5 billion in cash last year. This isn't a little startup trying to do something scrappy. If I was an exec I would be concerned why my company can't figure out how to make enough widgets 1.5 years after launch.
    - axod 18y ago
      When the competition (Sony and Microsoft), are losing a ton of money, I don't think Nintendo are that worried to be honest. They've clearly won the current game system wars, both with the wii, and the ds. Producing enough consoles to meet demand isn't an easy problem I'm sure. Bottom line is Nintendo won, make a ton of money, and people want their products.
    - sachinag 18y ago
      I submit that they're meeting demand precisely. They still are winning the sales wars, in all markets, every month. The idea of a "shortage" is a myth. Plus, they're being smart and shipping units to Europe instead of here, given that they make more yen on the forex.
      - jonknee 18y ago
        Every time I walk by the Wii shelf at Target it's empty. They sell for more than retail on eBay (and being bid on heavily). Demand isn't being met.
        Goronmon 18y ago
        But is meeting demand 100% always the best goal to have? An increase in production is an increase in cost. Spending $10 million to sell 1 million units over 2 months is better than spending $20 million to sell 1 million units one month and 500k units the next.
        brentr 18y ago
        The demand curve is the same as the marginal benefit curve and the supply curve is the same as the marginal cost curve. You produce at the equilibrium in this type of market since it produces the best result for both the company and society. This is introductory microeconomics.
        Goronmon 18y ago
        It's probably a bad thing that I know so little about economics that I can't say for sure if you are disagreeing or agreeing with me. I'm leaning towards disagreeing, but I'll have to remedy that knowledge gap sometime this weekend.
        jonknee 18y ago
        Without knowing the actual costs, it's impossible to answer. Usually consumer electronics get cheaper when you make more of them. I would have bought one if not two (for a gift) if they were available. Now I'm not buying any. They not only lose out on the unit sale, but all subsequent accessory and software sales. So even if making an extra 500k per month cost them marginally, they have 500k more possible sales for all their Wii software and accessories. I don't really care that much, it's just the first time I can remember this happening in CE. Companies usually wake up and fix supply issues. Nintendo of America is as confused as I am: http://www.joystiq.com/2008/04/24/nintendo-of-america-passionately-upset-about-wii-supply/ http://www.joystiq.com/2008/04/24/nintendo-of-america-passio...
  - run4yourlives 18y ago
    neither is marketing. :-)
- Goronmon 18y ago
  I think this comes back to Nintendo trying to avoid risk. Similar to how they don't want to sell the hardware at a loss, they want to make damn sure that the production facilities producing the hardware are worth the cost in the long term. They probably figure that the money lost due to not quite meeting demand is less than the risk to ramping up production to meet demand that may drop sharply over the course of a year or two. And it's not like starting up a production facility is a small task.
- biohacker42 18y ago
  Yes, but you can't ramp up manufacturing so easily. And the weakness of the us dollar drove all available Wiis to Europe. No puns were intended in writing the above. Damn Nintendo's Wii!
  - LPTS 18y ago
    I thought it was a ballsy move to name it "Wii"
- mattmaroon 18y ago
  Well, the problem is manufacturing facilities don't scale smoothly. They probably thought that building another one would give them way more production capability than they really needed, and end up costing them a fortune. They were clearly unprepared for having the top two systems at the same time.

jonknee 18y ago

Except the part about (possibly artificially) not having enough supply for an absurd amount of time. You can only sell software to people with the hardware, it makes sense to get the hardware out there.

axod 18y ago
Scalability problems are not just for the web :)
- jonknee 18y ago
  Correct, but with billions of dollars at stake it seems like they should have been able to figure it out. They made almost $5 billion in cash last year. This isn't a little startup trying to do something scrappy. If I was an exec I would be concerned why my company can't figure out how to make enough widgets 1.5 years after launch.
  - axod 18y ago
    When the competition (Sony and Microsoft), are losing a ton of money, I don't think Nintendo are that worried to be honest. They've clearly won the current game system wars, both with the wii, and the ds. Producing enough consoles to meet demand isn't an easy problem I'm sure. Bottom line is Nintendo won, make a ton of money, and people want their products.
  - sachinag 18y ago
    I submit that they're meeting demand precisely. They still are winning the sales wars, in all markets, every month. The idea of a "shortage" is a myth. Plus, they're being smart and shipping units to Europe instead of here, given that they make more yen on the forex.
    - jonknee 18y ago
      Every time I walk by the Wii shelf at Target it's empty. They sell for more than retail on eBay (and being bid on heavily). Demand isn't being met.
      - Goronmon 18y ago
        But is meeting demand 100% always the best goal to have? An increase in production is an increase in cost. Spending $10 million to sell 1 million units over 2 months is better than spending $20 million to sell 1 million units one month and 500k units the next.
        brentr 18y ago
        The demand curve is the same as the marginal benefit curve and the supply curve is the same as the marginal cost curve. You produce at the equilibrium in this type of market since it produces the best result for both the company and society. This is introductory microeconomics.
        Goronmon 18y ago
        It's probably a bad thing that I know so little about economics that I can't say for sure if you are disagreeing or agreeing with me. I'm leaning towards disagreeing, but I'll have to remedy that knowledge gap sometime this weekend.
        jonknee 18y ago
        Without knowing the actual costs, it's impossible to answer. Usually consumer electronics get cheaper when you make more of them. I would have bought one if not two (for a gift) if they were available. Now I'm not buying any. They not only lose out on the unit sale, but all subsequent accessory and software sales. So even if making an extra 500k per month cost them marginally, they have 500k more possible sales for all their Wii software and accessories. I don't really care that much, it's just the first time I can remember this happening in CE. Companies usually wake up and fix supply issues. Nintendo of America is as confused as I am: http://www.joystiq.com/2008/04/24/nintendo-of-america-passionately-upset-about-wii-supply/ http://www.joystiq.com/2008/04/24/nintendo-of-america-passio...
- run4yourlives 18y ago
  neither is marketing. :-)
Goronmon 18y ago
I think this comes back to Nintendo trying to avoid risk. Similar to how they don't want to sell the hardware at a loss, they want to make damn sure that the production facilities producing the hardware are worth the cost in the long term. They probably figure that the money lost due to not quite meeting demand is less than the risk to ramping up production to meet demand that may drop sharply over the course of a year or two. And it's not like starting up a production facility is a small task.
biohacker42 18y ago
Yes, but you can't ramp up manufacturing so easily. And the weakness of the us dollar drove all available Wiis to Europe. No puns were intended in writing the above. Damn Nintendo's Wii!
- LPTS 18y ago
  I thought it was a ballsy move to name it "Wii"
mattmaroon 18y ago
Well, the problem is manufacturing facilities don't scale smoothly. They probably thought that building another one would give them way more production capability than they really needed, and end up costing them a fortune. They were clearly unprepared for having the top two systems at the same time.