As you've probably heard, the Nintendo Wii is once again going to be very difficult to find this holiday season. Anxious shoppers are camped outside stores right now, chasing rumors of fresh Wii shipments. The handful that are available on E-Bay are going for 50% markups. And it seems that every other day a mainstream media outlet is telling the story of another frantic parent, desperate to obtain a Wii to replace the soiled Tickle-Me Elmo doll that no longer captures their children's imaginations.
At first glance, this isn't a terribly interesting story - nothing more than a byproduct of the ever-growing consumerization of Christmas, another reminder that the world we live in grows nastier and meaner every day. Typical holiday cheer stuff really.
But if you venture into some of the damper video game forums around the Internet, you can find a few people suggesting that Nintendo has deliberately kept supplies of the Wii tight in order to artificially generate free publicity and buzz for their machine. They reason that since the Wii has been in short supply for 12 straight months, this can represent nothing more than black-hearted malice on the part of Nintendo – the sort of anti-consumer malice normally associated with sinister American companies, like Microsoft or Frito-Lay.
"Not so," counter Nintendo supporters, speaking from the carpeted floor in their parents rec rooms, "for to deliberately keep Wii's in short supply, Nintendo would be losing money in sales. No amount of free publicity could make up for that," they add, straightening their stained Yoshi t-shirt.
Another answer remains largely unspoken, given that it doesn't fall neatly into the "NINTENDO IZ EVIL / NOES THEY ARE GOD FTW" cadence of modern online discourse: Nintendo may simply be incompetent. The short supply of Wii's is due to Nintendo trying to make as many Wii's as possible, and failing, possibly via some sort of I Love Lucy style conveyor belt shenanigans.
As usual, the answer is likely a mixture of all the above. Here's what I think. The Wii shortfall is intentional. Though only partly. Nintendo has deliberately erred on the conservative side when ramping up their production. That's not to say that they weren't right to do so. Supply chain experts generally agree, it's better to be undersupplied than oversupplied. Although undersupply may cost an unknown amount in lost revenue, oversupply guarantees extra costs for inventory storage, buy-backs from vendors, etc… There's an added, now-obvious bonus: a desirable product that's always out of stock can inspire idiots to camp outside of a store waiting for it, prompting "Hey, check out this idiot sleeping outside in December" news stories that inadvertently provide free publicity for your product.
However, just because Nintendo's conservative production plans were intentional, doesn't mean they don't regret it. They are undoubtedly not making as much money this Christmas as they could be, and if there's one thing enormous companies love doing, it's making money.
Actually, that's kind of the only thing they love doing.
Let's also consider whether Nintendo may simply have been incompetent in their production ramp-up. It's important to realize that modern video game consoles aren't built in some enormous factory somewhere, where the raw ingredients (silicon, children's laughter) are poured in one end, and Wii's come cascading out the other end. In real life, there's a factory in Taiwan that makes a chip that gets sent to another factory in Taiwan that combines a bunch of chips into a widget, and sends that widget to another factory in Korea, where it gets combined with some more chips and the necessary blue LED's and then sent on to another factory and so on. Any hiccup, slowdown, or break in the chain can cause delays. Supply chain management is a complex and erotic beast. Mistakes happen.
Although, if anyone should be good at it, it's a company that has been in the business of making complicated video game consoles for 20 straight years.
Final thought: Here's a chart (courtesy vgchartz.com) that shows the worldwide sales rates (since launch) of the Wii and GameCube alongside the current reigning sales champ, the PS2.
So after making one of the most disappointing video game consoles of all time, the biggest error Nintendo made is failing to anticipate that they'd create the fastest selling video game system (over 1 year) of all time. That kind of mistake is a pretty good one to make, and may not even be a mistake at all. It's sort of like hiring a bunch of strippers for a bachelor party that end up getting too naked.
The more interesting question (to me at least) is when will Nintendo catch up with its Wii production? If you look at the graph, you see that the PS2 actually started selling faster after it had been out 2 years or so. Given the success of the Wii so far and it's strong word-of-mouth advertising potential, it seems possible that demand for the Wii will keep growing. Even if Nintendo keeps ramping up their production, might they still not catch up with demand? Will we see another holiday season of Wii shortages? Unprecedented, sure. But so was two holiday seasons in a row.