Sunday, November 19, 2006

Nintendo to take advantage of Sony's limited supply?

The week before the Playstation 3 even launched, over 3,000 PS3 units (pre-orders) sold for prices near $2,000 on auction site eBay. Each 60 GB PS3 nets Sony a profit of $-240. That must suck, but Sony's not the first manufacturer to produce at a loss to gain marketshare. The only problem is that most of the people buying the PS3s have no interest in keeping them: Their only intention is to auction them off on eBay for twice the MSRP. The PS3 has experienced so much hype simply because there aren't a lot of them. Real PS3 fans either have to buy now or wait a month or two. They face a large reduction in their buying power or a very frustrating wait.

I know what you're thinking: Next I am about to tell you why Nintendo will muscle in with the Wii and steal customers from Sony. I'm not going to do that. The suggestion is unreasonable.

There's a fundamental reason that Nintendo will not pick up PS3 fans with the Wii. The two target markets are much, much different. The PS3 boasts gorgeous graphics, a new wireless controller, the possibility for huge games stored on Blu-Ray disks, and a legion of developers who know that the target audience is a group of enthusiastic adults who appreciate good action.

What about the Wii? Take a look at this Wii commercial produced by Nintendo. Notice how the actors using the Wii look like ordinary people who are really getting into the game and having a great time. The Wii is about being accessible to every body. Everybody can use their arms to produce the movements previously choreographed by button pushes. These aren't people with high definition televisions or expensive sound setups; these are people have a good time. While Sony introduced motion sensing as an added capability, Nintendo has made it so much more.

Nintendo has a big advantage over Sony in inventory. Most Target stores, for instance, received 30 to 50 apiece. Nintendo not only shipped more units than Sony to each store on their respective launch dates, but they also shipped to more stores than Sony. Nintendo will also restock stores faster than Sony. Nintendo already is shipping more Wii units for sale on Monday, November 20, only one day after launch. Nintendo clearly has more inventory to move. Nintendo could easily pick up the fans that Sony dropped. The question is whether or not that will happen, since the goals of each system are completely different.

Nintendo is about simplicity; Sony is about possibilities. Both routes have their advantages and disadvantages; for Nintendo, it's the lack of crisp graphics; for Sony, it's the price tag. The customers of each console have specific need in mind. Some people are buying both consoles, because neither system has everything. While Nintendo is striking out in an entirely new direction, Sony is continuing down the same path and improving on an already established formula; the only change in Sony's formula is the amount of money being demanded from consumers.

So, no. Nintendo isn't taking advantage of Sony's limited supply. Very few PS3 fans will be so discouraged by their situation that they will just bail on Sony. While I expect that a PS3 fans might just buy the Wii and play until retailers can carry the new Playstations for more than an a few minutes without selling out completely. The fanbase is too distinct and too established to simply jump ship.

What is still questionable to me is what will happen to the people who buy PS3s on eBay. What percentage is the buyers who have incomes that aren't impacted harshly by the amount they're spending on one console? What percentage is comprised of average guys? As the news changes, I'm left wondering more and more what the outcome of Sony's gamble will be.

1 comment:

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