Wii shortages: Analysts unconcerned

October 16th, 2007, 19:49 Posted By: Shrygue

via Games Industry

That Nintendo may have trouble meeting hardware demand this Christmas is something that the company has publicly admitted, but in the eyes of analysts this won't deal too much damage to the Wii's dominant market position.

That's according to Screen Digest's Ed Barton and The simExchange's Jesse Divnich, who both spoke to GamesIndustry.biz on the subject.

"In material terms this won't affect Nintendo's market position this Christmas save for the possibility of a little unfulfilled potential - given sales rates in all major territories through 2007 it is natural to be bullish on Wii hardware this Christmas," commented Barton.

"Even with efforts to ramp up Wii manufacturing earlier in the year Nintendo is fostering the idea that there will be shortages this Christmas. If this is the case than demand will have outstripped Nintendo's most optimistic expectations and is a wonderful problem to have as a hardware manufacturer."

And Divnich added his voice to the argument, taking data from The simExchange's prediction market - a system based on fictional data from gamers and developers, rather than actual share prices or financial exchanges.

"The shortage will play a minimal role in hindering sales this season given empirical data coupled with the expected high sales figure. The Wii has been outselling its competitors by large margins all year despite these shortages."

There is also confidence that Nintendo's position won't be affected by rivals Sony and Microsoft, who have both decided to drop the prices of their flagship consoles in the past couple of months, and Barton believes that this is down to the different target demographics for the various machines.

"We've long maintained that the high definition consoles and Wii target distinct markets and I think there is some evidence of this coming through in the games and nature of third party support for the console."

"There are nearly forty casual titles scheduled for retail release on Wii in Q4 2007, compared with five each for Xbox 360 and PS3 (although non-core titles tend to be distributed online rather than via physical retail for Xbox 360 and PS3), and this reflects the belief of third party publishers that Wii is the platform for a more casual, less hardcore, console owner."

He was also sceptical on the question of Nintendo falsely withholding stock to maintain a public image of desirability.

"This Christmas will be one of the most competitive for years and it is very difficult to believe any of the manufacturers, least of all Nintendo with Wii, would seriously contemplate such a tactic."

In terms of whether or not a lack of Wii hardware units would cause Nintendo to suffer prolonged damage, both analysts were cautious.

"If any hardware manufacturer consistently misjudges demand levels and fails to adjust manufacturing volumes appropriately it will damage them in terms of consumer perception and potential backlash, in terms of failing to capitalise on consumer demand which may diminish and in failing to provide third party publishers with the largest possible installed base of hardware," said Barton.

"It is also damaging to overestimate demand given the level of investment required to bring new manufacturing capacity on stream and the expense of maintaining under-utilised production lines."

He added: "Given all three hardware manufacturers are very experienced in determining consumer demand and managing production volumes for their respective platforms I would be surprised if this were anything but a short term issue."

Divnich meanwhile speculated that Nintendo might adjust the manufacturing investment in the short term.

"Currently, Nintendo makes more profit per unit than its competitors. With those considerations, Nintendo might be willing to take a small hit on profit this season to assure that units are manufactured and shipped quicker to keep up with demand."

He concluded: "There is no doubt that supplies will fall short to demand this season, but the extent is probably being exaggerated."

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