Nintendo vs. Sony: Will Wii Shortages be PS3's Gain?

Nov. 20, 2007 — -- As the holiday shopping season heats up this week, the hopes of many video-game-greedy kids may be dashed as shortages of Nintendo's Wii force parents to turn to other gaming consoles, such as the PlayStation 3 or the Xbox 360, to fill the gap, analysts say.

Sony CEO Howard Stringer is counting on impatient consumers who won't be able to wait for their gaming fix.

Along with the chronic shortage of its competitors' stock, the PlayStation 3's recent $100 price cut has made Sony's console more competitive with the Wii, Stringer told The Associated Press last week.

Shortages of the Wii, Nintendo's latest video game juggernaut and currently the best-selling console in the nation, are nothing new. When the game debuted in 2006, many early adopters of the console were greeted with empty store shelves. This year, leadership at Nintendo, including Nintendo of America President Reggie Fils-Aime, has told reporters repeatedly that once again it's unlikely the company will be able to meet demand for the Wii this shopping season.

The company has ramped up production to try to stem the shortfall, according to Perrin Kaplan, vice president of marketing and corporate affairs at Nintendo of America.

"Since [Fils-Aime] made that statement, we have raised our production yet again," Kaplan told ABCNEWS.com in a recent interview. "I've been at Nintendo a long time, and I have never seen us ramp our numbers up so many times, nor have we ever produced so much of any console. … But the demand has just so far exceeded our expectations. It's fabulous. We want consumers to know that we're completely aware, love them for it."

Kaplan urged customers to to wait for extra consoles to hit the retail shelves.

"Those who haven't been able to find it -- just hang in there. We're moving stuff into retail as fast as we can."

Most Will Decide to Buy Something

Although analysts didn't predict what consumers would buy, they did say that parents who want to put a gaming console under the tree this holiday season will do so, whether it's a Wii, an Xbox 360 or a PS3.

"On one hand shortages create a certain amount of demand in and of itself. People are always wanting things that they can't get," said Michael Gartenberg, vice president and research director of Jupiter Research. "On the other hand, shortages create consumer frustration. The real question is how much will we see the Wii in demand. Will it be spot shortages? Ultimately, if you look hard enough, will you be able to find it? Or is it the type of shortage that will increase customer frustration?"

According to Gartenberg, this holiday season is an extremely important one for console sales. It's no longer the early adopters who are waiting all night in line for the Wii, the PS3 or the Xbox 360. The reviews are in, and now the regular consumers -- families, teens, kids -- will determine gaming companies' success or failure.

"The real question is what is the main consumer going to vote [for] with their wallet?" he said. "[But] Nintendo has won a lot of hearts and minds with what it has done with the Wii."

Price Cuts and Sales Swings

With or without the Wii shortage, Sony's price cut will probably mean sales boost for the PS3 this season, said Anita Frasier, a research analyst who works in video games at the NPD Group.

"Our purchase intent studies do show that there are quite a number of consumers that are indeed price sensitive, and indicated they would wait for a price cut to make a purchase," Frasier said. "The combination of the price cut and entering the all-important holiday season should result in a substantial increase in sales of PS3 hardware."

Although unconfirmed reports are circulating today that the PS3 has managed for the first time to outsell the Wii in Japan, NPD's most recent sales figures paint a picture of a strong position for a Nintendo that is still on top. About 121,000 PS3s were sold in the United States in October, according to NPD. Nintendo sold more than four times that with 519,000.

But could the tide turn for Sony?

Rob Enderle, the principal analyst at the Silicon Valley-based Enderle Group, said he believes Nintendo is missing out big by not having enough stock this holiday season.

"The fallover is on the product you can pick up. The reality is by not having enough product they're missing out on market share. … If you don't have enough product, it benefits somebody else," Enderle said. "This is not a market that's particularly patient."

The shortages are especially problematic for the Wii during the holidays, Enderle said, because the console is marketed to families, and families are so often gathered together during the week between Christmas and New Year's Day.

"Sales drop off on consoles after the end of the year. Wii plays more to family purchase," he said. "But by buying it during January, people won't be able to go in the 'way back' machine" and bond over games of Wii Tennis.

But for people determined to get their hands on a Wii, there is hope. Consumers just need to act fast, meaning before this Friday, he said. Shoppers may also have luck with existing stock at gaming stores in shopping malls.

"It's worth when you're out and around [to check] some of these places that have these games, but don't get the gamers in," he said. "But after Black Friday that's pretty much all going to go bye-bye."