A reader recently wrote,

Dong, Having stood in line at 7:30 a.m last Sunday for a wii I had to wonder if I was just being tooled with via Nintendo’s marketing department or whether or not there truly is a shortage.
-JC

I did JC one better and stood in line at 6 AM in the dead of winter. I’ve had the Wii for over a year now, and there are still shortages. Nintendo’s new “game”, Wii Fit is even harder to find. Recently, I was lucky enough to obtain Wii Fit despite the shortages. I didn’t get it through any effort of my own, but via a good friend who always has his finger on the pulse of the Internet. Circuit City online had the game in stock - for about ten minutes. It seems like all things Nintendo are hard to come by. It’s really quite amazing. The Nintendo ADRs haven’t been too shabby either.

Is the Shortage Real?

I think it is. Recent sales data consistently points to incredible sales of the console. However, that is not to say there isn’t anything going on. Nintendo has not increased production of the Wii as much as demand might warrant. Nintendo is intentionally playing it conservative. Some of this is related to how the company lost it’s mojo in the late 90s. Nintendo of course denies that it’s intentionally creating a shortage. Call me naive, but I believe that Nintendo did not set about creating a shortage when the launched the Wii nearly two years ago. This is not to say that I believe that Nintendo is not contributing to the shortage today. They may not be holding back on supply, but their conservative customer expectations are leading to the shortages. It’s in Nintendo’s interest to make sure as many consoles as possible are in the hand of consumers. Ultimately, Nintendo makes more money from game licenses than it does from hardware sales.

Wii Fit Shortage
Part of the reason for the shortages in the U.S. for Wii Fit, is the weak dollar. Nintendo has chosen to shop 4 times as many products to Europe instead of the U.S. The strong Euro makes it much more profitable to sale there than it does here. It’s still a profitable product in the U.S., and if Nintendo could it would be selling more here.

While shortages may drive demand in the short run by bestowing the “IT” factor on a product, in the long run shortages on a product that requires market penetration hurts console makers. Success breed success. You can have the best game system in the world, but if no one has it, no games will be made. Nintendo is not in this position as the Wii has sold better than the XBox 360 and Play Station 3, but there’s nothing such as excess market domination. The name of the game is to crush your enemies and hear the lamentations of their fanboys.