3DS Sales Lower Than We Thought

"C'mon, Luigi, we gotta get outa here before sales collapse-a completely!"

Nintendo finally announced 3DS sales in the US for its March opening... 400,000 units, which was less than the low end of analyst estimates (which were 500,000 to 750,000). This means the 3DS saw a grand total of just over 1.5 million units in sales from launch in Japan to the end of March (which then included US and European sales), against their forecast of 4 million units. They hit about 40% of their forecast numbers, in other words. You can argue about sell-in predictions versus sell-thru numbers, but the truth is Nintendo would rather have had empty store shelves at the end of the weekend with customers hungrily demanding more. Product shortages make a great PR tool.

Nintendo could have easily not shipped quite so many units to retailers in order to create an artificial scarcity; this has happened many times in the history of game hardware. But retailers want to have lots of units on hand to make sure they can maximize their sales, as they don't want sales going to some other retailer. Both the retailers and Nintendo were convinced there was plenty of demand, so Nintendo supplied the channel with as many 3DS units as they could. This time, though, the strategy has backfired. Sales slowed down dramatically in Japan after the opening week, and similar slowdowns have been reported in US retail channels.

The Nintendo DS family outsold the 3DS, with 460,000 units sold in March. Ouch. Certainly price point had a lot to do with this.

I'm already noticing more 3DS ads on TV, as Nintendo is probably ramping up to try and rescue the launch as much as they can.  Look for more PR about upcoming titles for the 3DS, and they may stage some events in May to go along with the eShop release, the Netflix functionality, and the free AT&T hotspots showing up. I expect Nintendo is pulling out all the stops it can so that E3 will be a success, not a disaster.

There are two E3 scenarios Nintendo must be looking at right now:

1) Everyone at E3 is wondering if Nintendo will be able to stop the hemorrhaging, as sales of the Wii and DS lines continue to drop and the 3DS continues to underperform. No big announcements at E3 have people wondering if Nintendo can ever recover.

2) Nintendo clearly wins E3, riding high on a resurgence of 3DS sales, the newly invigorated Wii sales after the May price cut, and an enthusiastic response to the announcement of new console hardware for 2012. Microsoft and Sony look old and busted as they plan to stick with their consoles for years to come, while Nintendo outstrips them with powerful new hardware and a slew of must-have product announcements.

I think Nintendo is gearing up for Scenario #2, after recent events have shown that Scenario #1 was looking more and more likely absent some dramatic moves on Nintendo's part. I think Nintendo would be wise to use everything in its arsenal right now: Price cuts on the Wii, more marketing efforts, key software announcements, and new console hardware on the way. If they really want to rule, try shipping the new hardware by Christmas 2011 instead of sometime in 2012 (though it would be difficult to get any third-party software for it on a short time-frame, unless it's been worked on for months already, which I doubt).