Shortage hype conspiracy theories

This week’s Switched On takes Nintendo to task for the “Wii supply” of its popular game console, particularly given that the company has commended itself on the launch. I suspect that some will counter that Nintendo executed perfectly well and the “problem” that no company could anticipate is overwhelming demand. (This is in contrast to Sony, which encountered blue diode manufacturing issues. I also recall that Microsoft encountered some manufacturing issues at the launch of the Xbox 360, perhaps around heat dissipation, but that Peter Moore announced at CES 2006 that it had brought on a third manufacturing partner to finally resolve supply constraints. Now that’s transparency.) Either way, supply and demand are just two sides of the same shortage problem. Certainly the impact to the consumer is the same.

A close friend once asked me whether I thought that companies “manufacture” manufacturing shortages for PR hype. I don’t think so for a few reasons. First, shortage PR is, at best, two-sided. Second, it would be outweighed by the positive word-of-mouth from actual customers (assuming a product is genuinely good). Third, the value of such PR would be outweighed by PR resulting from higher adoption numbers. And finally, it’s hard to conceive of any PR outweighing the top-line value of incremental sales. This advantage is magnified when the product is in an extremely competitive segment and especially so when that segment is a new platform vying for developer support.

One could argue that Microsoft and Sony have some interest in selling consoles later in the cycle when they can reduce costs and subsidization, but Nintendo makes money on its hardware.

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