Questions Linger After Nintendo Slashes 3DS Price to $169.99

Many consumers who are aware of the impending price cut will likely hold off on buying the 3DS until Aug. 12. Because the DSi and larger-screened DSi XL are similar to the 3DS but without glasses-free 3D and with weaker online functionality, it’s not clear why consumers would buy either of those older systems. It wasn’t clear if NOA planned to cut their prices or phase them out, and the company declined to comment.

The price change will take effect less than five months after the 3DS’s March 27 launch -- a far shorter time for a game system’s first price change than usual. NOA said the “primary reason” for the price drop is “because we want to be poised for the holidays.” But the relatively weak sales performance of the 3DS in Nintendo’s Q1 likely played a role in its decision.

NOA said the price cut was coming “as new games based on some of the world’s most beloved video game franchises head to the system,” referring to the coming releases of Nintendo’s Star Fox 64 3D Sept. 9, Super Mario 3D Land in November, Mario Kart 7 in December and Kid Icarus: Uprising this holiday season. The 3DS will have “the strongest software lineup of any video game system this holiday season,” it said. The new price “makes an outstanding value even better and sets up a strong holiday season for the system,” it said. “For anyone who was on the fence about buying” one, the new price provides “a huge motivation to buy now,” said Nintendo of America President Reggie Fils-Aime.

M2 Research analyst Billy Pidgeon told us he had been expecting the 3DS price to be cut to $199.99. The price change proved to be “deeper but should help increase penetration in combination with upcoming anticipated titles,” he said. “It is a bit odd to announce a cut weeks in advance, but the news may have eased the shareholders’ concerns,” he said. He also guessed the cut may have been “timed to parts price reductions and production run efficiency.” The 3DS carried a bill of materials of $100.71 at its U.S. launch, based on “a preliminary physical dissection of the product,” IHS iSuppli said in March (CED March 29 p3). Pidgeon also said Nintendo “should tie the cut to a specific anticipated [game] release if possible -- they need to ramp up penetration and increase attach rate on 3DS far more quickly."

More than 830,000 U.S. consumers have bought a 3DS, NOA said. Those 3DS owners “represent some of Nintendo’s most loyal customers, and Nintendo is rewarding them for getting in on the action early with 20 free downloadable games” via the Nintendo eShop, it said. The free games will be available to any 3DS owner who uses a wireless broadband Internet signal to connect to the eShop at least once before 11:59 p.m. Eastern time Aug. 11, NOA said.

It was hard to gauge how much the free games will offset the extra $80 that those consumers will have paid for the 3DS. The 10 NES Virtual Console games being offered “will be priced in the Nintendo eShop,” but the 10 Game Boy Advance (GBA) games to be offered “are exclusive to this offer, and therefore are priceless,” NOA said. The 10 NES games will be made available to all other consumers at a later date, at pricing to be announced later, it said. The 3DS users who qualify for the free games will automatically be registered in a new Nintendo 3DS Ambassador program, NOA said. Starting Sept. 1, 3DS Ambassadors will be able to download the 10 NES games, which will include Super Mario Bros., Donkey Kong Jr., Balloon Fight, Ice Climber and The Legend of Zelda, NOA said. After the paid versions of the games are posted to the eShop later this year, the updated versions will be made available to Ambassadors for download at no cost, it said. By the end of 2011, Nintendo will provide Ambassadors with the 10 free GBA games, which will include Yoshi’s Island: Super Mario Advance 3, Mario Kart: Super Circuit, Metroid Fusion, WarioWare, Inc.: Mega Microgame$ and Mario vs. Donkey Kong, NOA said. More details about the Ambassadors program will be announced later, it said.

Nintendo’s Q1 loss widened to 25.5 billion yen ($316.3 million) from 25.2 billion yen in Q1 last year as revenue tumbled 50.2 percent to 93.9 billion yen ($1.2 billion). It blamed the sales decline on “the slow start” for the 3DS system and “few hit titles for” the Wii and DS systems. Price cuts on the Wii in markets outside Japan and on the DS Lite in the U.S., as well as “the impact of the scheduled Nintendo 3DS hardware markdown, also contributed to the decline,” it said. Earnings were hurt by a boost in marketing expenditure for the 3DS and R&D costs for new products, including the coming Wii U console, it said.

Global 3DS hardware shipments grew to 4.32 million units life-to-date after 710,000 were shipped in Q1, Nintendo said. Of the 4.32 million shipped, 1.27 million were in Japan, 1.43 million in the Americas and 1.63 million in other markets. The bulk of the other markets was likely Europe. Of the 710,000 shipped in Q1, 210,000 were in Japan, 110,000 were in the Americas and the rest were in other markets. Nintendo maintained its 16 million global 3DS hardware shipment forecast for this fiscal year.

Global shipments of 3DS software grew to 13.96 million copies after 4.53 million units were shipped in Q1. Nintendo’s 3DS game The Legend of Zelda: Ocarina of Time 3D was “favorably received” in Q1, but the system had “few other hit titles,” Nintendo said. The company raised its global 3DS software shipment forecast to 70 million from 62 million for this year.

Global DS hardware shipments grew to 147.86 million life-to-date after about 1.44 million were shipped in Q1, Nintendo said. Of the 147.86 million shipped cumulatively, 32.87 million were in Japan, 55.69 million the Americas and 59.3 million other markets. Of the 1.44 million shipped in Q1, 110,000 were in Japan, 550,000 the Americas and 780,000 other markets. Global Q1 DS shipments were down from the 3.15 million shipped a year ago.

Nintendo lowered its global DS hardware shipment forecast for this year to 9 million from 11 million. That was a “more reasonable” projection, but “it'll be difficult to attain even those levels at current pricing” of the DSi and DSi XL, said Pidgeon. “I think Nintendo should slash prices on” those systems “sooner rather than later” because “consumers are understandably price-sensitive, and DS pricing is now too high” in light of the new 3DS price, he said.

Global shipments of DS software grew to 851.62 million copies after 12.13 million units were sold in Q1, Nintendo said. The company lowered its global DS software shipment forecast to 65 million from 67 million for the year.

Global Wii hardware shipments grew to 87.57 million life-to-date after 1.56 million were shipped in Q1, Nintendo said. Of the 87.57 million shipped, 11.71 million were in Japan, 41.71 million the Americas and 34.16 million other markets. Of the units shipped in Q1, 110,000 were in Japan, 530,000 the Americas and 920,000 other markets. Global Wii shipments were down from the 3.04 million shipped in Q1 last year. Nintendo reduced its global Wii hardware shipment forecast to 12 million from 13 million this year. Global shipments of Wii software grew to 729.53 million copies after 13.44 million were shipped in Q1. Nintendo reduced its global Wii software shipment forecast to 110 million from 120 million.

Nintendo slashed its results forecast for this fiscal year due to “stronger-than-expected yen appreciation and sales performance,” the 3DS price reduction and “the sales outlook for the holiday season,” it said. It now expects to report a 20 billion yen profit, down from its prior estimate of 110 billion yen, and revenue of 900 billion yen, down from 1.1 trillion yen, it said.

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Majesco Entertainment is “of course” concerned about weak 3DS system sales, but Chief Marketing Officer Christina Glorioso told Consumer Electronics Daily she was confident that sales will pick up this year. Majesco’s “strategy” is to be a major “player” on the 3DS, and plans to release six of its own titles for the system by year-end, along with two more via distribution deals with other game makers, she said. Sales of the system should improve once a stronger slate of titles ships for it, she said, pointing to her company’s initial 3DS games and the coming strong lineup of Nintendo 3DS titles. Her comments were made during Majesco’s first “Holiday in July” game showcase for investors, analysts and reporters in New York Wednesday. Majesco has a long history of success with games for Nintendo systems, including the hit Cooking Mama series, and the third-party publisher believes “if anyone can” turn around 3DS sales and find success with the system “it’s Nintendo,” Glorioso said. Majesco, meanwhile, has development hardware for Nintendo’s coming Wii U console and Sony’s coming PlayStation Vita handheld game system “in house” and is “evaluating both” devices for Majesco games, Glorioso said. The publisher spotlighted four key coming holiday console releases at the New York event: Alvin and the Chipmunks: Chipwrecked for the DS, Wii and Kinect for Xbox 360, Hulk Hogan’s Main Event and Take Shape on Kinect, and Zumba Fitness 2 for the Wii and one other unspecified motion-sensing control system. It held the event for the first time because it expects this holiday season will be Majesco’s strongest one to date, Glorioso said. The latest Alvin and Zumba games were demonstrated Wednesday, after neither of them were ready for demos at E3 last month, said Liz Buckley, vice president of marketing. The Kinect version of the Alvin music game will allow players to “Alvinize” their voices -- transform their voices to sound like the title character -- while they're singing along to music featured in the title, she said. The game will ship Nov. 18, “right before Black Friday” and shortly before the latest Alvin movie is released theatrically, she said. The game will be supported with TV ads at launch, she said. Majesco has sold more than 2 million copies of the first Zumba Fitness game and will run a “multi-million dollar” marketing campaign to back the release of the second one, she said. The campaign will include TV, radio, social media and inserts with other Zumba merchandise, she said. The social media campaign will kick off next month, ahead of the Wii version’s November release and the release of the other game SKU in February, she said. An unspecified “brand announcement” will soon be made for Take Shape, possibly next week, she also said.