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Nintendo’s NES Classic strategy threatens to hurt the rest of its business

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Why, Nintendo, why?

Samit Sarkar/Polygon

Nintendo has a history of making ill-advised, confounding decisions, but the way the company is apparently handling its “Classic Edition” consoles might just take the cake.

Last fall, Nintendo released the NES Classic Edition, a miniaturized replica of the three-decade-old console packed with 30 games. It seems that Nintendo vastly underestimated the demand for the mother of all stocking stuffers, because it was nearly impossible to buy the NES Classic from its birth in mid-November until its death earlier this month, when Nintendo announced it was ending production of the system.

That decision was mind-blowing enough, and we struggled to come up with reasons why Nintendo would do such a thing. One that seemed likely but still silly was the chance that the company was readying a Classic Edition of the SNES, and last week Eurogamer reported that that’s indeed the case.

If all of that leaves you scratching your head, you’re not alone.

This is bad for consumers

The NES Classic and the reportedly upcoming SNES Classic represent a great idea: a relatively cheap device packed with a lot of beloved old-school games, along with an HDMI output so you can hook it up to any modern display. At $59.99 for 30 games, the NES Classic was guaranteed to be a hot-ticket item for the holiday season.

“We wanted to give fans of all ages the opportunity to revisit Nintendo’s original system and rediscover why they fell in love with Nintendo in the first place,” said Reggie Fils-Aime, president and chief operating officer of Nintendo of America, in a news release announcing the NES Classic.

But Nintendo produced so few units that “fans of all ages” never got that opportunity. On Nov. 11, the NES Classic’s launch date in North America and Europe, the console sold out immediately. Retail employees, inundated with calls asking if the system was in stock, answered the phone with a greeting that mentioned the store was sold out. Resellers were making a killing on eBay, where the console was fetching prices as high as $500.

A certain level of that frenzy is expected for the debut of a highly anticipated product. On launch day, Nintendo promised that it would deliver “a steady flow of additional systems through the holiday shopping season and into the new year.” However, that flow never truly materialized; subsequent waves of shipments continued to sell out. Nintendo managed to sell 196,000 units of the console during the month of November, but everything suggested that sales could’ve been much higher had there been enough supply to meet the intense demand.

Customers might be willing to put up with a modicum of stock issues, but at some point, they’re bound to get annoyed. Every notice of a restocking ends up angering the people who miss out, because the retailer sells through its limited supply so quickly that it remains hard to snag a system. People want to give Nintendo money for this thing, but they can’t. That’s when they begin to wonder about whether Nintendo is intentionally limiting production in an effort to maintain the perception of the NES Classic as a hard-to-find item.

In the end, the company either seems underhanded or incompetent, which just makes customers even madder. Nintendo is a multibillion-dollar global corporation that has been making video game hardware and software for more than three decades. If the company can’t accurately gauge the demand for something like the NES Classic, it’s embarrassing. And if Nintendo artificially kept supply low, it’s a malicious anti-consumer practice.

This is why so many people are angry with Nintendo about the NES Classic. It’s rare for a company to pull this kind of item completely before demand tapers off; supply usually meets demand before interest wanes.

But most people never had a real chance to buy an NES Classic, and Nintendo’s communication to customers during the life of the system was abysmal. It was nearly impossible to find the damn thing, and it feels as if Nintendo never made a good-faith effort to sell it at all.

This is bad for Nintendo

Nintendo is a publicly traded company, which means that it exists to make money for its stockholders. It’s likely that Nintendo could’ve made more money from the NES Classic if it hadn’t so badly mismanaged the production of the system.

In a statement to IGN saying that it was discontinuing the NES Classic, Nintendo said the system “wasn’t intended to be an ongoing, long-term product” and that the company “did add extra shipments to [its] original plans” because of the high demand.

For one thing, Nintendo hadn’t said that before — the company had never given any indication that it had only planned for a limited production run of the NES Classic. Secondly, that doesn’t make any sense.

NES Classic front view Samit Sarkar/Polygon

Let’s say Nintendo’s plan from the start was to produce the NES Classic for a few months and then discontinue it, before introducing an SNES Classic in fall 2017. Perhaps the company hedged its bets because it wasn’t sure if the NES Classic would really catch on, or if it would have staying power in the market beyond the 2016 holiday shopping season.

That’s somewhat understandable, even if the buzz around the product should’ve given Nintendo a clue. But why wouldn’t the company have altered its plans as soon as the NES Classic launched, when it immediately became clear that the fierce demand greatly outstripped the supply — and when that continued to be the case well into the new year?

News stories about the console being sold out are helpful at launch, when you want to maintain positive buzz. But if that continues, it takes over the narrative: If you ask the average person about the NES Classic now, they’ll tell you that it’s that thing they wanted to buy for Christmas but couldn’t find anywhere. People aren’t discussing the NES Classic as a great retro console; they’re sad and angry that they couldn’t get one before it disappeared permanently.

That kind of consumer frustration can have long-term consequences, especially for the more casual customers that Nintendo may have been hoping to reach. If you’re a nongaming parent who wanted to buy an NES Classic for your kid, or a lapsed gamer looking to relive childhood memories, searching for the system would have been your first interaction with Nintendo in many years. And now you’ll remember the company with a “damn you, Nintendo,” shaking your fist in the air.

Fool me once ...

This leaves Nintendo in a precarious position, especially if the company truly intends to launch an SNES Classic this year. The NES Classic fiasco has sown enough ill will that some potential customers may greet the SNES Classic with an “oh shit, not this again” sentiment, rather than the enthusiasm that surrounded the NES Classic. They may not want to put themselves through the same exhausting, frustrating process of trying to buy a hot-ticket item; scarcity is beneficial, but only up to a point.

What’s more, fans looking for Nintendo’s newest console, the Switch, might start to think the company is stringing them along instead of trying to sell them a system. After all, the perception of artificial scarcity dogged the Wii for years early in that console’s life. Nintendo’s actions with the NES Classic begin to suggest something close to retail cruelty, which has the potential to turn off customers in a big way.

Of course, there are plenty of Nintendo fans who would be interested enough in an SNES Classic — assuming it had the right slate of games — to forgive the company’s past transgressions. But just because you can walk with a bullet in your foot doesn’t mean you should try it, and Nintendo has only itself to blame here.

Either way, it would be in Nintendo’s best interests to manufacture as many SNES Classics as possible. In this case, the company would be better off flooding the channel with the retro consoles than dealing once again with the consequences of selling a hard-to-find item to people whose patience is running out.