Latest / Pricing Power Podcast with Fexingo: How Businesses Set Prices, Raise Margins, and Win Customers / How Nintendo Uses Scarcity Pricing for Games and Consoles
Transcript
- Lucas: You can walk into a GameStop right now, May 2026, and find a copy of 'The Legend of Zelda: Breath of the Wild' for fifty-nine ninety-nine. Used. That game came out in 2017, nine years ago. And it's still essentially full price. Luna: Right. That's the 'Nintendo tax' — it's almost a meme. But there's real strategy underneath that. Lucas: Exactly. And it's not just software. When the Switch launched in 2017, Nintendo deliberately shipped fewer units than they knew they could sell. They created a shortage that lasted over a year. Some analysts estimated they left two to three million units of revenue on the table in year one. Luna: Why would you do that? I mean, the Wii U was a flop — you'd think they'd want to sell as many Switches as possible. Lucas: That's exactly what makes this interesting. Nintendo had learned from the Wii era. The Wii sold over a hundred million units, but by year three, games were being heavily discounted, third-party developers had abandoned the platform, and the price drops had cheapened the brand. They ended that generation with a lot of inventory to clear. Luna: So they overcorrected? Lucas: Deliberately. With the Switch, they held supply tight. In 2018, the Switch was still hard to find on store shelves. That created a perception of high demand and kept the console from ever needing a price cut. The Switch has never had an official price drop — it's still two hundred ninety-nine dollars in 2026. Luna: Meanwhile, Sony dropped the PS5 by fifty dollars last year. Microsoft has had multiple sales on the Series X. Lucas: Right. And that's the scarcity pricing play. For Nintendo, scarcity isn't just about managing inventory — it's a tool to maintain price integrity. Every time you see a Nintendo product at full price years after launch, that's a deliberate choice. They'd rather undersupply than discount. Luna: But doesn't that risk ceding market share? I mean, PlayStation outsells Switch in many regions now. Lucas: It does, but Nintendo is playing a different game. They're not trying to win the unit war. They're maximizing profit per user. Their operating margin in 2025 was around 29 percent. Sony's gaming division? Around 12. Nintendo makes more money per console sold, and their software margins are astronomical because they almost never cut prices. Luna: Let's talk about that software pricing specifically. 'Mario Kart 8 Deluxe' — originally a Wii U game from 2014, then ported to Switch in 2017. It's still fifty-nine ninety-nine. And it's sold over sixty million copies. That's insane. Lucas: That's the killer example. Most publishers would have dropped that to twenty dollars by year three. Nintendo sees it differently — they treat their top IP like luxury goods. The high price signals quality, and the scarcity of discounts means there's no incentive to wait. You buy now or you pay the same price later. Luna: There's a behavioral economics angle there too. If you know a game will never be on sale, you don't delay the purchase. It eliminates the waiting game. Lucas: Exactly. Compare that to, say, Ubisoft. Assassin's Creed games drop in price within months. Fans have learned to wait. Nintendo fans have learned the opposite. That's a powerful pricing dynamic — it trains your customers. Luna: But it's not just about never discounting. They also do limited physical print runs. I remember trying to find a physical copy of 'Xenoblade Chronicles 2' a year after launch — it was already going for over eighty dollars on eBay. Lucas: That's the artificial scarcity layer. Nintendo often prints a single batch of a game — especially for niche titles — and when it's gone, it's gone. That drives up secondary market prices, but it also creates a sense of urgency around new releases. Fans pre-order because they're afraid they'll miss out. Luna: And that pre-order culture is huge. 'The Legend of Zelda: Tears of the Kingdom' had over ten million pre-orders before launch. That's billions in revenue before a single review. Lucas: Right. And they didn't have to spend any marketing money to convince people — the scarcity of the previous game did the work. Now, the question is: does this strategy hold up in an increasingly digital world? Luna: Digital storefronts don't have scarcity. Nintendo can sell infinite copies of 'Breath of the Wild' on the eShop. So how do they maintain the high price there? Lucas: They just refuse to lower it. Nintendo has never run a broad sale on its major first-party titles on the eShop. They've done occasional sales on older third-party games, but Mario, Zelda, Pokemon — always full price. That's pure pricing discipline. Luna: But doesn't that feel a little anti-consumer? I mean, charging sixty dollars for a game from 2017 — there's some backlash. Lucas: There is. You see it on Reddit and Twitter. But the market has spoken — they keep buying. And Nintendo has this unique position where their games have extremely long tails. 'Mario Kart 8 Deluxe' sold over a million copies in 2025, eight years after launch. Most games peak in month one and then fall off a cliff. Luna: So the pricing strategy actually aligns with the product lifecycle. If your game sells for years, you don't want to train customers to wait for a discount. Lucas: Exactly. And now let's talk about the hardware side. Nintendo's next console — the Switch 2, which launched in early 2025 — started at four hundred dollars. And guess what? It's still four hundred dollars. No price cut. And it's already had supply constraints in some regions. Luna: Deja vu. Lucas: Literally. They shipped twelve million units in the first year, but demand was probably closer to fifteen. That's intentional. By keeping supply tight, they avoid the need to discount, and they keep the brand premium. Luna: Is there any risk that this stops working? I mean, inflation is real. Sixty dollars in 2026 is worth less than sixty in 2017. At some point, doesn't the real price have to go up? Lucas: That's a great point. Nintendo actually raised the price of 'Tears of the Kingdom' to sixty-nine ninety-nine in some regions, but in the US they've held the line at sixty. They're essentially taking a lower real price to keep the psychological barrier low. But they make up for it in volume. Luna: And they also have the subscription revenue now. Nintendo Switch Online plus the expansion pack. That's another twenty to fifty dollars per user per year. Lucas: Right, and that gives them recurring revenue without having to touch the core pricing model. So they've layered a subscription on top of the scarcity-driven hardware and software sales. It's a three-tier revenue model. Luna: What about the mobile games? Like 'Mario Run' was a one-time purchase, and it didn't do well. 'Fire Emblem Heroes' is free-to-play with gacha mechanics. That seems like a completely different pricing philosophy. Lucas: It is. And it shows Nintendo is pragmatic. They use scarcity pricing where they have leverage — in their core business — but in mobile, they adopt the industry standard because they have to. The mobile market doesn't reward scarcity; it rewards engagement and whale hunting. Luna: So the scarcity pricing is a Nintendo-specific moat. It only works because they have the IP. Sony couldn't do this with 'God of War' because it doesn't have the same evergreen demand. Lucas: That's the key insight. Scarcity pricing requires a product that people will be upset about missing. Not every company has that. Nintendo has a vault of characters and franchises that span generations. That's real pricing power. Luna: It's also a bet on nostalgia. They're selling the same Mario game to parents who grew up with Mario. That emotional connection makes the scarcity work — people are willing to pay a premium for something that feels precious. Lucas: And that's a lesson for any business. If you can build genuine emotional attachment to your product, you can price with scarcity. But if your product is easily substituted, scarcity just pisses people off. Luna: Yeah, a good example is how Nintendo handled the 'Zelda: Breath of the Wild' release. They announced a limited 'Master Edition' with a statue — it sold out in minutes, then showed up on eBay for five hundred dollars. That's textbook scarcity. Lucas: And they didn't even try to reprint it. They left that demand on the table. That's a deliberate choice — it signals that if you want it, you have to be there on day one. It builds urgency for the next release. Luna: But they also caught some heat for that. Fans were angry they couldn't get the special edition. Does that damage the brand? Lucas: Short-term anger, maybe. But long-term, it reinforces the scarcity narrative. And Nintendo has weathered those storms. The brand is still beloved. They have a tolerance for controversy that most companies don't. Luna: I think what's interesting is how this compares to the luxury goods market. A Hermès Birkin bag is deliberately scarce, but the price goes up over time. Nintendo's prices stay flat. They're using scarcity to keep prices stable, not to raise them. Lucas: Right. It's defensive scarcity rather than aspirational. They're not trying to push the price higher — they're trying to prevent it from falling. That's a different goal, and it's arguably more sustainable because it doesn't rely on constant price increases. Luna: So what's the takeaway for a business listening to this? You can't just create scarcity out of nothing. What are the prerequisites? Lucas: First, you need a product that people want to talk about. Scarcity amplifies demand, but it can't create it. Second, you need distribution control — if a retailer can discount your product, your strategy fails. Nintendo has tight control over its own eShop and its physical retail relationships. Third, you need patience. Scarcity means leaving money on the table in the short term to earn more in the long term. Luna: That's a tough sell in a quarterly-earnings world. Nintendo is one of the few public companies that seems to ignore Wall Street pressure to sell more now. Lucas: Interestingly, a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that kind of listener-funded model gives us the freedom to talk about strategies that require a long view, without any ad pressure to make it sound more exciting than it is. Luna: Totally. It's the same idea — when you're not chasing short-term revenue, you can make better long-term decisions. Lucas: Exactly. So back to Nintendo — the question going forward is whether digital distribution and subscription services eventually erode their scarcity advantage. If everything becomes a subscription, the concept of 'missing out' on a game disappears. Luna: But I think Nintendo will resist that. They've been slow to embrace full catalogs on subscription. Even their own service only offers older games. They want to keep selling each game individually at full price. Lucas: That's the tension. The market is moving toward all-you-can-eat models, but Nintendo's pricing power comes from scarcity. If they go all-in on a Game Pass competitor, they risk undermining their entire strategy. It'll be fascinating to watch how they navigate that tension over the next five years. Luna: And that is a perfect note to end on. Thanks, Lucas. Lucas: Thanks, Luna. And thanks to everyone listening — if you found this useful, you know where to find us.