Nintendo Takes Sony to School (Economy 101)
Background Information: Sony and Nintendo
The PlayStation3 released on Friday, November 17 at an average price point of $600.00US. It was projected to be in short supply, due to a problem producing enough blue lasers for its Blu-ray technology that the console will introduce. Lately, the news has been worse than expected: PS3 supply will be even more scarce for the holiday season (they will release only 2 million units by year end). As a result, units posted on auction sites such as eBay are selling for $3000US and more. As if it wasn't bad enough for Sony, they expect to lose money for each console sold, which means they are relying on game sales to generate revenue.
The Wii released on Sunday, November 18 at a price point of $250.00US. The projected supply was and is about 4 million units for the holiday season. Auction sites are showing Wii consoles for sale at much more reasonable prices ($300 to $500), and have been trending downward since the launch date. Nintendo is making profits with every Wii they sell; not only on their games.
I'm a part-time EB employee, and I helped open the store on Sunday for the Wii launch. I wasn't around for the PS3 launch, but my manager was, and according to him our store has sold one game for the PS3 so far. On the other hand, we've sold at least 30 or 40 Wii games since the Sunday launch. Apparently not many shoppers want to play games for the PS3 (yet), and Sony obviously has eBay to thank for their sales reports.
Sony could analyze the high prices of the resells on eBay, and simply conclude that $600 is not too high a retail price to pay for a video game console. While they might be partially correct, they must also re-evaluate their decision to use scarce components and, in turn, suppress their supply.
If the Wii supply was suppressed similarly to the PS3, eBay would have comparable ($3000+) high bids for that console as well, even with the lower retail price. Nintendo has increased demand for the unit with a solid product and good old-fashioned marketing. They led a flawless marketing campaign, winning the hearts and minds of their fan and customer base (including my own). With this demand, they didn't need to rely on name recognition and short supply to move units. And they're selling games, something Sony has yet to do!
The mainstream media may be distracted by the long lines of Best Buy and Wal-Mart storefront campers a week ahead of Sony's PS3 launch, and call it a victory for Sony. Don't let the hype fool you. The consumer is winning, eBay is winning, retail stores are winning, and Nintendo is winning. So far, the only loser in this holiday launch debacle happens to be Sony, and it's nobody's fault but theirs.