Topic: The NES Classic and the Company that Misunderstood Basic Economics

[NWR_DrewMG]

Remember that time Nintendo launched a popular product and then immediately ceased production?

http://www.nintendoworldreport.com/editorial/44492/the-nes-classic-and-the-company-that-misunderstood-basic-economics

Nintendo has ceased production of the incredibly hard to find NES Classic, and I can't stop laughing.  I should be mad at a company that made it very difficult to find a product that I absolutely wanted, but instead I'm so beyond incredulous that I can't be mad.  Nintendo has made possibly the most Nintendo-like move of all time in ceasing production of probably its best-received product since the original Wii.

There are any number of reasons they could have done this.  Perhaps they came across production issues they just couldn't easily overcome, and figured the better answer rather than start over would be to just scratch the product and try again later.  Maybe there was a licensing deal with Tecmo, Konami, Square Enix, or another third-party partner that was a major roadblock for producing the NES Classic.  Quite frankly, there is no answer which makes the news any easier to swallow. For a company that has been selling products for over a hundred years, they have a shocking inability to measure supply and demand.

Looking back to 2006, at the original Wii console, we probably shouldn't be surprised. Critics shouted loudly that Nintendo was creating false scarcity by holding back production of the Wii to keep the thing hard to find.  This is a strategy that makes a lot of sense for two months.  Maybe even six, if it's a product you intend to sell for a long time.  At a certain point, however, you have to let the consumers who want to give you money for your product actually do so.  Two years was far too long for any sort of false scarcity argument to hold any water, and that's about how long the Wii was almost impossible to find without tracking retail inventory and waiting in line hours before opening.

Some might look at the struggles of Wii U and amiibo and think that Nintendo was overly conservative with NES Classic production as a result, but these are fundamentally different economic problems, and Nintendo knows that.  With amiibo, they had to balance production of dozens of different models, hoping that they wouldn't overproduce Mario figurines and underproduce Zero Suit Samus.  It's understandably a very tough challenge to meet, and in the end Nintendo has learned a lot of lessons, but done well.  With Wii U, they were clearly overconfident, but Wii U is a platform.  NES Classic is not; it's a toy that doesn't need to sell accessories or worry about attach rates for games.

From the very beginning, people knew NES Classic was going to be a hit.  It made mainstream news, and people who don't even buy video games in 2017 were interested in this product.  We knew it was going to be hard to find, but I don't think anyone thought that in April 2017, six months after release, the NES Classic would be a ghost.  It's simply flabbergasting.

At this point, we're stuck wondering a few things.

1) Does anyone at Nintendo earn a paycheck by estimating supply and demand?  If so, how long have they had their job?  They should be fired.

2) Will Nintendo relaunch NES Classic?  It seems to me that if licensing fees were part of the downfall, maybe they should just drop the third party games and relaunch the system with first party exclusives.  It might not be as appealing, but it's better than nothing.

3) How is Nintendo going to market their back catalog if not through Switch Virtual Console or NES Classic?  Nintendo is basically doing nothing with their archive library right now, and although Switch VC has been promised, no one has any idea what form it's going to take.

In the end, Nintendo will do what it wants to do, and no armchair marketing advice from me will change that.  But this type of baffling decision making is part of the reason I don't own a Switch yet.  I have a really hard time trusting Nintendo right now, and it may seem silly to tie this NES Classic gaffe to something as major as the new Nintendo console, but I'm past the point in my life where I feel compelled to buy Nintendo hardware just because it's Nintendo hardware.  They have to try a little harder than that, and when they make baffling decisions like discontinuing a sure thing like NES Classic, they're not doing a very good job of building that trust.

[Evan_B]

But, the NES Classic is Nintendo Hardware and software that you wanted just because it's Nintendo hardware and software.

I don't get it, honestly. I really don't. I have only heard of one other person even speak about getting an NES Classic, and I personally considered it for a fleeting moment before I realized that half of the games on it aren't very good. At all. It's a nostalgia grab and offers little more than what a number of Nintendo's other systems already offer. I see the NES Classic for what it was meant to be- a product to put on shelves for the holiday that ended up having higher demand than they thought. They also have another console that is selling quite well which offers much better returns for them. That's probably why they aren't continuing production.

 Maybe they'll consider other bulk emulators in the future with more care and consideration, who knows? I really don't think it's something worth fretting over.

[NWR_DrewMG]

But, the NES Classic is Nintendo Hardware and software that you wanted just because it's Nintendo hardware and software.

No, NES Classic is a product I wanted because I grew up playing NES Games, and this is by far the best treatment Nintendo has given it's 8-bit back catalog to date.  And even if it was just me buying a Nintendo product because that's what I do, $60 is a far easier impulse buy than Switch at $300.

I don't get it, honestly. I really don't. I have only heard of one other person even speak about getting an NES Classic, and I personally considered it for a fleeting moment before I realized that half of the games on it aren't very good. At all.

To you, maybe.  I was 6 years old when the NES launched.  These are my seminal gaming experiences.  I was 13 by the time I got another console (the Genesis, first, the SNES, later).  I played the NES incessantly in my grade school days.  These aren't just some old games to me, these are *THE* old games.  This is the origin of my gaming hobby.  It's worth $60.

[Soren]

They also have another console that is selling quite well which offers much better returns for them. That's probably why they aren't continuing production.

The idea that Nintendo can't support 3 distinct pieces of hardware is laughable, specially one that's as cheap to produce as the NES Classic. Also, in an ideal world the Switch and NES Classic are marketed towards two different audiences but who the hell knows what NoA marketing is doing.

[Evan_B]

So this is an opinion article, based on your feelings as a niche buyer. That's fine. But I think that your opinion is clouded by your inability to purchase a NES Classic and your sense of nostalgia. Unless I receive numerous responses telling me I'm crazy, is say we're on two completely opposite sides of the spectrum in regards to this subject. Neither my ambivalence towards the product not your disappointment justify the claim that Nintendo doesn't understand basic economics.

I personally think the NES Classic hurts Nintendo's image more than it helps it. Feel free to disagree.

[UncleBob]

From the very beginning, people knew NES Classic was going to be a hit.

The Classic got a lot of flack for being an overpriced money grab when everyone and their mother has twenty different devices with emulators that can run all these games for free.

I didn't agree with this - but let's not pretend that the entire internet was rushing to worship the classic.

[Soren]

From the very beginning, people knew NES Classic was going to be a hit.

I didn't agree with this - but let's not pretend that the entire internet was rushing to worship the classic.



I don't anyone would argue that. But those on the other side were a pretty small minority.

[Sarail]

Can we be honest and say that the real reason Nintendo are discontinuing the NES Classic is because of piracy? Because that's the real reason.

People are learning they're able to mod this console easily and add, basically, the entire NES library. Nintendo do not like this, obviously. So what do they do? Discontinue it.

[Stratos]

I've cooled off a bit since I first found this out, and it made me rethink a lot of what I really what to buy, own, and put effort into. This and the fact there will not be a Fierce Deity amiibo have shifted my thoughts in a curious way.


Why am I a slave to this company? Why to I chase every little plastic piece of merch they put out like it is the most important release of the year? I have plenty of amiibo, perhaps too many. I have an old NES that just needs a power cord to work right. I have technical know-how and a clever brain.


I'm thinking it is time for me to stop chasing after all of these physical objects. I want to learn RFID hacking and spoofing. I'm interested in building my own Raspberry Pi, loading it up with old ROMs of games I already own and enjoying what I have, all the while feeling the satisfaction of having built something from scratch with my own two hands.


Nintendo has lost a die-hard customer today. I'll still be a fan, and still buy some things, but I'm not chasing after every new game pre-order, buying every indie game on a Nintendo platform, re-buying Minecraft of Switch, or filling yet another shelf with plastic figures I have to drag down if I want to take advantage of them in a game that already has the content I paid for in the code. And I'm not buying old games of virtual console when I have the game physically on it's original system.

[ThePerm]

So, the Ouya appeals to the same size crowd as an NES classic. I had no problem getting an Ouya. I don't like the idea of something dangled over your head that you can't buy.

And anyone who thinks that Nintendo thinks to get rid of the NES classic because of piracy is a little off. I mean yes Nintendo might do this for that stupid reason, but NES roms have been available since the 90s. There was a time when you could easily download them from tons of websites. They showed up on mass one day and were easily attainable. Those files still float around. Most files were probably ripped in 1996. Pretty much any android device has an nes emulator.

The only real appeal to the NES classic is its form factor and convenience. The games were already widely available. I would prefer to play on an NES classic. But I could just play them on an Ouya or a Raspberry pi. I'm not endorsing piracy though. I feel that ship sailed. I would rather play games on my video game systems. The biggest reason is convenience. I bought all the Mario nes games on Wii U despite not needing to.

Piracy was not an issue on day one. I went to the store fully expecting to just waltz in and buy one. Nope they sold out at midnight, and you're never going to see one. Every time a new shipment came in they sold out withing 10 minutes for 6 months.

What I really think is Nintendo sees the device as too good of a deal. If those games cost $7.99 each on the VC on Switch than that means they cost $240 all together. We still have no word about VC on Switch. I'm pretty sure Nintendo wants to sell you those games all over again. They know so many will box their Wii Us up and cave and buy the games due to convenience.

This is essentially you upgrading your computer and then having to buy all your games over again on Steam.

What have I recently done to solve some of my problems with gaming? I bought a PS4. I still have the mindset of a Nintendo fanboy, but man am I being seduced into the Dark side. I just bought and beat 4 Uncharted games since March 25th. I'm getting more out of this system than I have Wii and Wii U. I feel stupid for not jumping ship sooner. Nintendo better bring it at e3 or I'm this close to dismissing them entirely.

[Soren]

Can we be honest and say that the real reason Nintendo are discontinuing the NES Classic is because of piracy? Because that's the real reason.

People are learning they're able to mod this console easily and add, basically, the entire NES library. Nintendo do not like this, obviously. So what do they do? Discontinue it.

So is the Switch getting discontinued after this year? Because regardless of whatever bounty programs Nintendo are offering the system will be opened up pretty easily if I would have to bet. Nintendo as a company are still miles behind Sony or Microsoft in this regard.

EDIT: NES emulation has existed for decades now. It is now more easy than ever to play NES games, legally or illegally. And even with that, new stock of NES Classics only lasted minutes before selling out.

The piracy argument makes about as much sense as the Virtual Console argument. Not much.

[Evan_B]

WELL MAYBE NINTENDO JUST HATES YOU GUYS, DID YOU EVER THINK OF THAT?!

[Bman87301]

NWR and the writers who blindly believe everything a company that's managed to stay around since 1889 says publicly to the point that they question its understanding of economics, and failing to recognize the suspicious fact the same company also said the exact same thing about other sell-out products of theirs (Super Mario All-Stars for Wii, certain first wave SSB amiibo) only to start making them again anyway.

Maybe it's just me, but it seems to me their history might suggest this is just the kind of thing they say publicly to gauge public reaction, and has very little reason to be taken seriously.

If by any chance they ARE really discontinuing it, then I'm guessing it's likely just that particular SKU, and more models will be coming with different game lineups.

In fact, I'm actually fairly confident that, seeing how successful the NES Classic clearly was, Nintendo will keep launching more "classic" consoles (SNES, N64, etc.) over the next few years, and if they continue the same success, will be their primary way of selling their legacy titles for this gen, instead of on the Switch eShop.

Also, are you 100% sure Nintendo promised VC for Switch? I could be mistaken, but the last I was aware they were still silent about that... which I found especially strange considering how Neo Geo are present on the Switch eShop, and lack the "Virtual Console" label.

Granted, I do recall them mentioning "classic games" (interestingly, not "Virtual Console games") being given away via their online service and that subscribers would not be keeping them permanently. If that's what you interpreted as a promise of Virtual Console, then I think you might be jumping the gun.

[NWR_DrewMG]

It seems to me that if licensing fees were part of the downfall, maybe they should just drop the third party games and relaunch the system with first party exclusives.  It might not be as appealing, but it's better than nothing.

[ThePerm]

NWR and the writers who blindly believe everything a company that's managed to stay around since 1889 says publicly to the point that they question its understanding of economics, and failing to recognize the suspicious fact the same company also said the exact same thing about other sell-out products of theirs (Super Mario All-Stars for Wii, certain first wave SSB amiibo) only to start making them again anyway. The Atari, Coleco, and Genesis Throwback systems have been out for a while.

Maybe it's just me, but it seems to me their history might suggest this is just the kind of thing they say publicly to gauge public reaction, and has very little reason to be taken seriously.

If by any chance they ARE really discontinuing it, then I'm guessing it's likely just that particular SKU, and more models will be coming with different game lineups.

In fact, I'm actually fairly confident that, seeing how successful the NES Classic clearly was, Nintendo will keep launching more "classic" consoles (SNES, N64, etc.) over the next few years, and if they continue the same success, will be their primary way of selling their legacy titles for this gen, instead of on the Switch eShop.

Also, are you 100% sure Nintendo promised VC for Switch? I could be mistaken, but the last I was aware they were still silent about that... which I found especially strange considering how Neo Geo are present on the Switch eShop, and lack the "Virtual Console" label.

Granted, I do recall them mentioning "classic games" (interestingly, not "Virtual Console games") being given away via their online service and that subscribers would not be keeping them permanently. If that's what you interpreted as a promise of Virtual Console, then I think you might be jumping the gun.

Don't count on it coming back soon. part of Nintendo's mindset comes from the fact that they are still a card company. They make things rare just like Wizards of the Coast. It's fair to say they planned this thing to be a collectors item, and didn't understand or had their heads too far up their asses to realize this could be an alternate revenue stream.  Part of the  reason for the appeal of the NES classic is Nintendo does not regularly offer this sort of product.

Disney does the same thing. Ever here of the Disney Vault. Disney discontinues certain products so that you long for them. When they bring them back everyone cheers.

SNES classic might comes out. I would be in line for that one for sure, because I never owned an SNES. I wanted the box for the NES classic because I threw my NES box away when I was 6.

N64 classic? Well, I don't need an n64 classic. I own a ton of n64 games. I still have the box(not the foam inserts though)I'm slowly catching up to Mop_it_up.

[Soren]

which I found especially strange considering how Neo Geo are present on the Switch eShop, and lack the "Virtual Console" label.

Because third parties now understand they don't need the Virtual Console branding. They can just bundle the games they own with their own moniker and they don't have to charge the pre-determined price Nintendo establishes just to be called Virtual Console.

[Bman87301]

which I found especially strange considering how Neo Geo are present on the Switch eShop, and lack the "Virtual Console" label.

Because third parties now understand they don't need the Virtual Console branding. They can just bundle the games they own with their own moniker and they don't have to charge the pre-determined price Nintendo establishes just to be called Virtual Console.

You seem to be missing the point. Up until now Nintendo had an official policy that games using emulation receive the "Virtual Console" label... it wasn't optional, so the fact that something changed proves something is up.

[ThePerm]

It is possible to outsmart Nintendo and get a game on their platform.

My theory is that they may actually be implementing a universal account system, but are too stupid to announce it right now, and instead are waiting until e3. This is why you don't see games like axiom verge on Switch, because they don't want people buying the same game twice.

This is Nintendo turning something that should be a basic standard feature into a big announcement. It's tricky false cheers. They manipulate consumers like this pretty regularly. There will be a hoorah, but it's empty for me considering years of disappointment.

[Soren]

My theory is that they may actually be implementing a universal account system, but are too stupid to announce it right now, and instead are waiting until e3. This is why you don't see games like axiom verge on Switch, because they don't want people buying the same game twice.

Dan Adelman has been pretty open about why Axiom Verge hasn't been announced for the Switch, and it has nothing to do with an account system. Also, a handful of Wii U indies are already available for purchase on the Switch.

[roykoopa64]

I don't get it, honestly. I really don't. I have only heard of one other person even speak about getting an NES Classic, and I personally considered it for a fleeting moment before I realized that half of the games on it aren't very good. At all.

To you, maybe.  I was 6 years old when the NES launched.  These are my seminal gaming experiences.  I was 13 by the time I got another console (the Genesis, first, the SNES, later).  I played the NES incessantly in my grade school days.  These aren't just some old games to me, these are *THE* old games.  This is the origin of my gaming hobby.  It's worth $60.

You and I must be around the same age, as I was 5 when NES launched, which I finally owned when I was 7. Of course the NES and its games have a special place in my gaming life.


But the NES Classic doesn't appeal to me because I have already purchased and played a bunch of these games multiple times on the Virtual Console systems going back to the Wii. I suppose it might be nice to have the plastic console on display to remember the original NES, but ... I don't think it's that important.


But anyway, I know this article was more about what is Nintendo thinking on ceasing production on a popular product. Yeah, I don't have an answer on that.

[Bman87301]

Don't count on it coming back soon. part of Nintendo's mindset comes from the fact that they are still a card company. They make things rare just like Wizards of the Coast. It's fair to say they planned this thing to be a collectors item, and didn't understand or had their heads too far up their asses to realize this could be an alternate revenue stream.  Part of the  reason for the appeal of the NES classic is Nintendo does not regularly offer this sort of product.

Disney does the same thing. Ever here of the Disney Vault. Disney discontinues certain products so that you long for them. When they bring them back everyone cheers.

It's my understanding that Disney has a pre-established public schedule of when things are "going in/out of the vault", and they stick to it. In their case there's precedent to believing that the supply truly will be limited, there's also the known fact it will eventually return.

Nintendo on the other hand, introduces a product with an announced limited supply, which they can always extend it if sells well. Sure, they're exploiting the same appeal by announcing a limited supply, but not doing the same practice because there's no tradition of follow-through.

To my knowledge, Nintendo has never had a product sell this well and actually stuck to keeping it limited-- it's always consistently been the opposite. Based on logic guided by experience, it's more reasonable to conclude that we CAN count it to be back soon, especially since they made the unusual move of not only directly announcing its discontinuation rather than the typical move of doing it silently, but also doing so while confirming the next shipments-- it means they want to see the public's response. They've apparently increased production to the point that they suspect they might not instantly disappear from shelves anymore, if they do, they'll keep it going.

There's very little doubt in my mind this whole thing has been to be a test over whether or not they should continue the VC model on the Switch, or use plug and play systems to distribute their legacy titles instead. They never ruled out this staying permanent and likely still haven't.

[Stratos]

The only reason sales could possibly be dwindling is because folks like me were content to sit back and stop hunting, thinking it would eventually meet the demand and I could buy one then.

[ThePerm]

My theory is that they may actually be implementing a universal account system, but are too stupid to announce it right now, and instead are waiting until e3. This is why you don't see games like axiom verge on Switch, because they don't want people buying the same game twice.

Dan Adelman has been pretty open about why Axiom Verge hasn't been announced for the Switch, and it has nothing to do with an account system. Also, a handful of Wii U indies are already available for purchase on the Switch.

Sure, those guys are trying to get the game on the Switch, but Nintendo internally is preventing indie games from the Wii U onto the Switch.  Things like Shovel Knight show up, but those are sequels. I don't see any other reason why Axiom Verge would be waiting on a green light.  The game is fantastic.

"Many fans have asked us to bring Axiom Verge to the Switch. I have reached out to my old co-workers at Nintendo of America many times, but so far we haven’t been approved for the platform yet. As soon as we get the green light, we’ll drop everything and get right to work on the Switch version."

So, the game is a game on Wii U. It features exclusive wii u version differences(which complicates things further). Nintendo might be elaborating on a universal account system, but are waiting for e3. They don't need to tell third parties. Sometimes third parties find out when the rest of us do.

The only thing Tom Happ can do is make another version that differs and it might get the green light.

Don't count on it coming back soon. part of Nintendo's mindset comes from the fact that they are still a card company. They make things rare just like Wizards of the Coast. It's fair to say they planned this thing to be a collectors item, and didn't understand or had their heads too far up their asses to realize this could be an alternate revenue stream.  Part of the  reason for the appeal of the NES classic is Nintendo does not regularly offer this sort of product.

Disney does the same thing. Ever here of the Disney Vault. Disney discontinues certain products so that you long for them. When they bring them back everyone cheers.

It's my understanding that Disney has a pre-established public schedule of when things are "going in/out of the vault", and they stick to it. In their case there's precedent to believing that the supply truly will be limited, there's also the known fact it will eventually return.

Nintendo on the other hand, introduces a product with an announced limited supply, which they can always extend it if sells well. Sure, they're exploiting the same appeal by announcing a limited supply, but not doing the same practice because there's no tradition of follow-through.

To my knowledge, Nintendo has never had a product sell this well and actually stuck to keeping it limited-- it's always consistently been the opposite. Based on logic guided by experience, it's more reasonable to conclude that we CAN count it to be back soon, especially since they made the unusual move of not only directly announcing its discontinuation rather than the typical move of doing it silently, but also doing so while confirming the next shipments-- it means they want to see the public's response. They've apparently increased production to the point that they suspect they might not instantly disappear from shelves anymore, if they do, they'll keep it going.

There's very little doubt in my mind this whole thing has been to be a test over whether or not they should continue the VC model on the Switch, or use plug and play systems to distribute their legacy titles instead. They never ruled out this staying permanent and likely still haven't.

Do you think Nintendo wants people to pay 59.99 for 30 games or $240? Disney has the vault because they've been doing this stuff since the 1920s. 50 years elapsed before there were VCRs for which they could sell people Movies. Before that movies showed up to the public for what seemed pretty damn randomly. This was either showing up on one of 3 tv channels, or at the theaters.

[lolmonade]

I understand NWR is a Nintendo enthusiast website which will amplify people's frustration with this decision (including the author of this article), but as someone mired in the general business world and understanding of supply chains/logistics/etc....I know completely why Nintendo would shut the valve on a product like the NES classic at this time.  In fact, I could write at length about it....anyone at NWR interested in a guest column? 




That said, I understand people's frustration as a consumer.  You just want the product, the business implications isn't your problem, it's Nintendo's problem, and most people just see them cancelling the product while there's still a fever pitch for it as them missing out on a big win that looks like such low hanging fruit for them.  Hell, I picked one up, and was just as frustrated at how I had to settle for a 3rd party controller, although at least that one has a wireless connection.  Everyone I knew in my age range was either interested in getting one for themselves, or like me, for my brother who isn't into gaming anymore but grew up on NES and Sega Genesis games.

[ejamer]

Still slightly frustrated to have never actually seen one of these systems. Sure, there are some selling on second-hand websites and the prices had been slowly dropping... but the lowest it got to was $200 CAD, and that was prior to the recent announcement that production was ending. Now they are marked up to $300+ again.


Funny thing about the business of Nintendo: I don't care how good their reasons are when making things difficult to get, I only care that it's both frustrating and expensive if I want to buy things from them. The chase just isn't worthwhile any longer.