Nintendo Admits 3DS Sales Disappointing

Not an actual Nintendo ad from TechCrunch. But it should be.

Nintendo has finally admitted what has been obvious to industry observers for some time: 3DS sales have been disappointing. Or rather, they've pretty much slowed to a crawl since the initial launch got all the fanboys to buy one. Now less enthusiastic fans are looking at the hardware, and the price, and the games, and apparently managing to restrain their enthusiasm.

At least Nintendo has figured this out and deigned to admit it. Of course, Iwata-san deflects the blame onto the users, who for some reason just haven't grasped the wonderfulness of the device. At least he's figured out the answer: A marketing campaign to explain the benefits. One wonders why they didn't think of this before. I suspect Nintendo had actually believed all of the enthusiasm expressed by industry types and the press at the last E3, and figured that the 3DS was going to sell itself without the need for spending money on marketing.

Nintendo miscalculated, and badly. Where did they go wrong? I think this is a result of the smartphone/iPod effect that Nintendo has been trying to say has no effect on their business. Quite the opposite is true; smartphones are having a devastating effect on their business. When you can get an iPhone 4 or an iPod Touch for less than the cost of a 3DS, and then have a much more versatile piece of hardware with thousands of low-cost or free games, that's got to affect your sales. Charging $40 for lackluster launch titles hasn't helped, either.

Yes, there are really not too many excellent iPhone games out of the thousands available... but how many 3DS games are there? How many good iPhone games can you get for the price of one 3DS game? About a dozen. Sure, it may look a little different when Nintendo gets some better games out, and the eShop appears... but not significantly. Nintendo still doesn't grasp that they would have to drastically open up their development model, encourage non-gaming applications, and significantly improve the price/performance of their hardware to compete.

Nintendo thought that 3D without glasses was all they needed. Turns out it's more of a gimmick, and not one that's selling hardware for them. They still have to come up with some strategy to sell the 3DS; let's see what they have to say at E3. Although they may be spending most of their time pushing their new console (The Stream? The Wii 2?), which ultimately may meet the same fate as the 3DS. Lots of enthusiasm among the industry execs who hope it will save their fading business models, but when it finally arrives the high price will not be appealing to people playing games on their Google TV and Apple TV. I think we are witnessing the extinction events of the console era.

Nintendo is introducing new models of dinosaur ("Look! Improved scales, bigger teeth, more sheer tonnage!") while newly evolved little mammals are running around eating their eggs and occupying their ecological niches. "Those mammals are so small and scrawny! They'll never amount to anything! How can they possibly threaten us?" To misquote a popular game meme: They're in your base, killing your profits.

Marketing may help delay your extinction, but nothing less than a fundamental shift in your business models will save you, Nintendo.