Signs Of the Apocalypse For Nintendo

We gotta get out of here and look for customers!

I can't really say that I'm surprised that the Nintendo 3DS is continuing to not sell well. I thought, back before the launch, that it would have a good launch month and then sales would be mediocre at best. Here's what I said back in January:

The 3DS and PSP2 appear to good initial sales that quickly decline to disappointing levels. Partly because the price points will be so high initially. Once the fanboys have gotten their units, less fanatical customers will look at the prices and think about buying a smartphone instead. Many will. Developers in particular will be annoyed, because developing for these new handhelds will be significantly more expensive than the old handhelds, yet software sales will be worse. This will lead to a quick fall-off of third-party support.


Hmm, looks pretty much like what's been happening. I figured Nintendo would have to respond by cutting the price, but knowing how reluctant they are to do that I figured they would wait until just before the PS Vita release (say in November), then drop the 3DS to $199. But today the shoe has dropped, and it's a damn big shoe: Nintendo has dropped the price of the 3DS to $169, effective August 12.

Just so sales won't fall off a cliff between now and August 12th, Nintendo has also announced that current 3DS owners and those who purchase a 3DS between now and August 12th will get 20 free downloadable games between now and the end of the year. (Not that you get to choose which ones you get... Nintendo chooses them for you. They are old GBA and NES titles... good games, but I don't think it's enough to make anyone spend an extra $80 in the next couple of weeks to buy a 3DS.)

This is a stunning announcement from Nintendo that 3DS sales have not just been disappointing; they have been really, really bad. Nintendo usually resists price reductions with all their might; they refused to drop the price on the Wii despite months of falling sales, only caving when they went ahead and announced the Wii U. And they still only dropped it $50, to $149.

Here's the key info from IndustryGamers:

Nintendo has sold 4.32 million 3DS units since launch earlier this year, along with 13.96 million pieces of 3DS software. In the first quarter ended June 30, Nintendo sold 710,000 3DS units and 4.53 million Nintendo 3DS games.The new 3D handheld, however, has not met Nintendo's expectations. In fact, Nintendo largely blamed the 3DS for its poor first-quarter performance in which the company saw a net loss of ¥25.5 billion ($324 million) and sales drop over 50% to ¥93.9 billion ($1.19 billion) from ¥188.6 billion ($2.40 billion) a year earlier.

I guess losing $324 million in a quarter is enough to make even Nintendo sit up and take notice. Check out those sales figures; 710,000 units in three months, worldwide. That's not even 250,000 a month; and Nintendo still expects to sell a total of 16 million units this fiscal year, when so far they've only sold a little over 4 million? Let's see, that would mean sales would have to quintuple the current level immediately. OK, the price drop will certainly boost sales, but there's no way it'll be a 5x increase. I don't see Christmas sales making up the difference, either. Maybe Nintendo can sell a couple of million over Christmas, maybe even 4 or 5 million... but not 10 million.

Nintendo had been hoping that the arrival of the eShop and some software featuring key Nintendo franchises would boost sales. Clearly, those hopes have been thoroughly dashed. Worse news for Nintendo is that 3DS games are being cancelled (Mega Man Legends 3) or delayed (Metal Gear Solid: Snake Eater 3D). If the third-party publishers are already starting to vote with their development dollars, this platform could be in big trouble.

While Nintendo attempts to goose 3DS sales up into the 1 million a month category (which looks like a huge stretch goal), iPhones are selling at the rate of 7 million per month, and Android phones are selling at the rate of 15 million per month.

This does not bode well for the Wii U, either. Nintendo's got to make some more fundamental changes to their business model than just a price cut here and there, if they want to succeed in a fast-moving market.