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Here's why 'deliberate Switch shortages' is a ridiculous notion

Nintendo has regularly said it's ramping up production, so why are people so worried the platform holder is holding out on us?

Headlines have emerged this morning, assuring both the industry and consumers that Nintendo is not purposefully keeping retailers waiting for new Switch stock.

Almost all stem from a single interview on Ars Technica, in which the platform holder's senior director of corporate communications Charlie Scibetta said: "It's definitely not intentional in terms of shorting the market. We're making it as fast as we can."

His words may offer relief to some, but it fuels the unnecessary notion that the Nintendo Switch shortages were ever deliberate - a premise that, at this stage, is somewhat laughable. Perhaps the question ought not to be whether Nintendo is holding back, but why it ever would?

The Switch is perhaps the most crucial console in Nintendo's history. While the company was not haemorrhaging money the way some outlets would have you believe, losses and slashed forecasts have been a regular theme in the platform holder's financial reports over the past few years.

This time last year, Nintendo posted its biggest Q1 loss since 2011 - unwelcome news after the firm's full-year income fell by 60%, as was revealed just a few months prior. The reason was clear: the struggling Wii U was beyond any hope of recovery, and Nintendo was in dire need of the new NX hardware it had been teasing. Moreover, it needed this mysterious console to perform strongly if it were to reverse its financial woes.

No-one was sure whether Switch would be a successful, but it turned out to be the fastest-selling Nintendo console of all time at launch

No-one was sure whether Switch would be a successful, but it turned out to be the fastest-selling Nintendo console of all time at launch

Given the pressure, Nintendo was remarkably restrained when it came to unveiling the Switch. The console was completely absent from E3 2016, with only a three-minute teaser in October before its full reveal in January - less than two months before the game launched worldwide.

Opinion was divided, particularly after that initial teaser, and the run-up to launch felt oddly muted - even a week before. Analysts struggled to agree on how well the Switch would perform, with estimates ranging from between shipments of 10m to just 4.4m for its first full-year. As Rob Fahey put it on the day of launch, Switch was launching into a storm of confused expectations.

Given this ambiguous industry response and the lingering disappointment of the Wii U, perhaps Nintendo deliberately avoided manufacturing too many Switches for launch. It's understandable - the new device was undeniably a risk, if only because both of Sony's past attempts to marry the worlds of console and handhelds with PSP and Vita had famously struggled. You could forgive Nintendo for being worried.

And then it arrived.

Instantly, Switch was a hit with consumers, critics and retailers and within a week it was firmly established as the fastest-selling Nintendo console of all time (in terms of opening weekend sales). By the end of its first month, there were more than 2.74m units in consumers' hands with 5.46m games sold (half of which were Zelda: Breath of the Wild).

Perhaps it's worth noting at this point that Switch is actually selling slower than the Wii U at the moment. Wii U had sold 3.06m consoles within the first month, and 11.69m games - but it's not hard to imagine Switch besting this if stock hadn't dried up almost immediately after launch.

Throughout March, retailers began offering updates on when they were expecting new shipments, with Nintendo responding rapidly - and it's here that the misconception of deliberate shortages should be addressed.

The tablet-esque nature of the Switch means Nintendo has found itself competing with smartphone manufacturers for components

The tablet-esque nature of the Switch means Nintendo has found itself competing with smartphone manufacturers for components

Just two weeks after the Switch launched, Nintendo reported it was doubling the console's production in order to meet demand, hoping to deliver 16m units into the channel by the end of the financial year (with expectations to sell 10m of them).

As recently as May, the platform holder revealed it was significantly upping production again, now reportedly aiming for 18m units by March 2018. These efforts, however, might have been hindered by reported competition with mobile manufacturers such as Apple as Nintendo fights to get hold of the required components - further evidence that any shortages will be far from deliberate.

It's interesting to note that 18m units is higher than the 14m units planned for the Wii's first fiscal year, lending credence to claims that Switch could match or surpass the previous console in terms of sales. The 14m estimate followed a similar increase in production, and even back then Nintendo faced claims of intentionally slowing down supply.

There's even the suggestion that Nintendo discontinued the NES Classic in order to free up manufacturing operations to help produce more Switch consoles - although there is little to no evidence to prove this has had a genuine impact on the platform holder's output.

Super Mario Odyssey is just one of the first-party titles Nintendo has launching every month from now until 2018 - a line-up designed to sell systems

Super Mario Odyssey is just one of the first-party titles Nintendo has launching every month from now until 2018 - a line-up designed to sell systems

Deliberately holding back the supply of Switch units serves no purpose for Nintendo. There are some that will argue it helps to artificially boost demand - but the demand is already there.

First-party titles such as Zelda and Mario Kart have received rave reviews from critics, with the former declared a much-needed reinvention for a series that seemed to be losing some of its prestige. Early previews of Splatoon and Arms read well, with coverage generated by multiplayer beta tests creating further hype. Even the upcoming Mario + Rabbids Kingdom Battle - widely scoffed at when leaked a month ago - has turned heads with a well-received E3 showing.

In fact, Nintendo has a significant first-party release coming to Switch every month between now and January - not least of which is Super Mario Odyssey, which attained multiple Game of the Show awards last week and stands to be a promising system seller.

Granted, Nintendo may prefer that the bulk of units are on shelves in time for Mario, Q4 and Switch's all-important first Christmas, but what's the sense in releasing regular first-party titles - more than it did for the launch years of Wii U and 3DS - if it only intends to sell them to the established early adopters? At this crucial stage of a console's life, every release is intended to sell the device to some extent, even if it's only to a few more consumers.

Having increased production twice, engaged in a components battle with giants like Apple, and readied the most impressive first-year line-up a Nintendo console has seen in several generations, it's safe to say the platform holder has no reason to strategically stifle supply. If anything, the company is paying the price for exercising some (admittedly, then-needed) caution when its latest phenomenon was preparing for launch.

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Latest comments (9)

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.2 years ago
What people really need to realize is that software and peripherals play a bigger role in profits than does hardware. Therefore deliberately limited the sales of your hardware to generate demand (which is already exceeding supply by a large margin) hampers your software and peripheral sales. In other words, it doesn't make sense to use scarce production tactics when you have this kind of sales environment.

If the device were not tethered to related products, a single toy for instance, then you can use artificial scarcity to drum up demand. But even then once demand has been created, you flood the market. Demand for Switch is already there.
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Christopher Dring Publisher, GamesIndustry.biz2 years ago
Although all these stats are true, and the sentiment is true, the lack of stock has had a positive impact upon Nintendo in terms of media narrative.

There's still no evidence, because of the lack of stock, that Switch is going to perform wildly better than Wii U, let alone match the Wii (bar the insistence of Nintendo and retailers who have vested interest in the product's success). It may be that Nintendo will have sold 13m Switch consoles by the end of March next year (almost eclipsing Wii U's entire lifespan of console sales in 12 months), but based on the data before me, I can't say that with any level of certainty.

However, because stock levels are low, because the games are good, and because of the success of Pokemon Go and NES Mini, the storyline has become that Nintendo is back. The story is that Switch is going to save the retailers, and transform Nintendo back to the top of the console pile.

The lack of stock has done that.
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Bob Johnson Studying graphics design, Northern Arizona University2 years ago
Too much inventory can sink companies. Therefore they are careful with hardware especially coming off the 3ds and Wii U. 3ds needed an emergency price drop to jolt sales. Wii U stalled out very quickly and there was lots of expensive hardware on shelves/warehouses that wasn't moving.

I think the plan all along was to ramp up slowly into its first holiday quarter. I don't think they deliberately try to understock. DEmand is difficult to predict especially when you make a unique product. But they definitely don't try and put out as much hardware as they could at any cost.
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Christopher Dring Publisher, GamesIndustry.biz2 years ago
uDraw is a great example of how too much inventory can end up killing a business
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Richard Browne Head of External Projects, Digital Extremes2 years ago
Not really, uDraw HD was an example of a product that never had any demand,. no market, and pretty much everybody internally at THQ knew that. There are reasons it came to market and potential success wasn't it. Which isn't to knock the original UDraw which was a great success aimed at the core demographic.

Nintendo leeching out units between the beginning of the year and September is smart. The demand remains, the marketing "must have" aura remains and they're production lines will be closer to satisfying the Christmas rush. People forget Nintendo build toys, that's their core market, always has been, always will be. The demand this Christmas with Mario launching will be enormous, steadily building toward that and reserving units to supply that demand is smart. They're selling lots of software and lots of peripherals to core buyers right now they don't need to flood the market with hardware nor does it being everywhere do them any good.
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Aleksi Ranta Category Management Project Manager 2 years ago
Apple controls the inventory in the distribution/retail channel very very tightly, so it is not beyond reason that Nintendo at least could and probably has done so in the past.
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James Batchelor UK Editor, GamesIndustry.biz2 years ago
@Aleksi Ranta: Apple certainly seems to be the bigger threat, and one console manufacturers haven't had to face (at least not in this way). Because Switch is essentially a tablet, reports that Nintendo is scrapping with mobile firms for components seem plenty feasible, and with Apple building up to the tenth anniversary iPhone, I imagine its demands on the channel are even higher than usual.
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Christopher Dring Publisher, GamesIndustry.biz2 years ago
@Richard Browne: uDraw's overstocks followed its initial Wii success. Had a lovely chat with Jason about it just as THQ tumbled over.

As for Nintendo deliberately drip feeding stock, there's a balance to strike. Because a critical mass of positive word of mouth will have more benefit than a critical mass of people whinging they can't find stock.
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Richard Browne Head of External Projects, Digital Extremes2 years ago
@Christopher Dring - I was there throughout the HD development, before Jason ever arrived, actually it not being canned was one of the reasons I left. There was no support for the product (HD) whatsoever within the Company or outside for that matter - and no market for it. The Wii version sold extremely well and inventory management was very tightly looked after, it made THQ a lot of money.

Agree there is a balance with Switch, but they will sell a lot more software and a lot more peripherals in the Christmas market. So drip feeding hardware while the hardcore market laps it up and leaving a ton of it for the mass market at Christmas makes absolute perfect sense. Nintendo are past masters of it.

Edited 1 times. Last edit by Richard Browne on 28th June 2017 2:08am

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