Darjeelink - Alexis Perrier

If only Nitendo had used prediction markets you’d have had your Wii for Christmas

According to the Herald Tribune, Nintendo is losing over a billion dollar due to bad sale forecasts!

As many parents in the States and Europe, I have struggled with my co-parent-competitors to find this year’s Xmas tree holy grail, the soooo popular Nintendo WII. I’ve got 2 kids that are just starting to play with video games. The Older one who’s nearly 7 loves a PC Simpsons game, driving Omer’s car around town and smashing buildings and people. I guess it’s a bit early to start with video games but you can’t say they’re not great fun to play with.

The problem comes with the little brother (3 and a half) who loves this Simpsons game. Playing this kind of games at the age of three is definitely not good. I can see right away that the kid becomes totally stressed after mere minutes of play. Since I don’t want to enforce some strict rule of “No Video Game” until you get your drivers license / pass your exams / get a girlfriend, in ten to fifteen years time, the Wii seems like a good temporary solution. They get to play together, I get to play to, the mother is not too stressed about it and the games seem less violent or stressing. They also move a bit while playing and you can also use the internal Opera browser to access the web.

So last week I got started on my search the Wii quest. The Fnac in les Halles was sold out. Some other big shop on the grands boulevards also out of Wii and finally I got the last one in display near Opera. I just read this morning in the Herald Tribune that Nintendo was running out of Wiis for the second year in a row. Many people are not able to buy the Wii for their Xmas present. A paragraph got my attention. George Harrison (different guy) who’s senior Vice president for marketing at Nintendo of America admitted that there was a shortage of Wiis because the company planed its production schedule fives months ahead and projecting future demand was difficult. He blamed a shortage of disk drive worldwide that had hurt Nintendo and other devices.

Nintendo should have implemented an internal prediction market open to selected personnel with an understanding of the market. People from marketing, sales, top management, young interns, procurement department,… in order to forecast this Xmas volume of sales. Coupling the markets with content aggregation and information spreading tools such as RSS feeds and blogs may have been a way to come up with better sales projections and a stronger risk assessment. The hard drive shortage may have come up as a major risk and the company would have been alerted in time of the discrepancy between forecasted sales and production volume and constraints.

I do not know how things work at Nintendo in term of sales forecast and risk assessment. I’m sure they have great people working on these key issues but can’t help the feeling that this is an exemplary case where prediction markets would have been efficient.