Yesterday Nintendo announced a couple of major developments meant to bolster their sagging console business. The first is a price drop on the Wii U system to $299 to compete with the upcoming Sony & Microsoft consoles. They also launched the 2DS, a non-3D system that will play all DS and 3DS games for just $129.99.
Mike S did a great job running down the details of the announcements and also the game line-ups for Fall release for Wii U and 3DS systems. So what I wanted to do was run down some thoughts on the Wii U price cut and the annoucement of the 2DS.
Wii U Price Cut:
The price cut is clearly meant to deal with the continued lousy sales of the Wii U and the upcoming launch of the PS4 and XBOX One. How does this work?
Sony and Nintendo are releasing new platforms, so all of the attention is on them this year. Nintendo has struggled since the Wii peaked a few years ago, and the launch of the Wii U has not helped. According to Nintendo ‘price is not the issue’ because the Deluxe version was outselling the base version. But I alwasy thought it was more about the value – there are enough extras in the Deluxe pack to justify the added $50.
Apparently Nintendo agrees, as the cut comes to the Deluxe version, essentially killing off the base model. This positions Nintendo to be price competitive with Sony & Microsoft while also packing in extras to make their system more attractive … well, as attractive as possible.
Price cuts pretty much always lead to increased sales for consoles. The real question is how much of a bump … and how long will it last. For the 3DS the price drop had a huge impact, but it remains to be seen how the Wii U will fare. After all, for the ‘hardcore’ graphics-centric gamer, the Wii U isn’t even on the radar.
My final concern is about profitability. Nintendo is reportedly losing money on the Wii U, but they need to maintain mind share and relevance at pretty much any cost right now. The theory is that the first-party game sales will be high enough to make up for the lost console profits. Will it work? No clue – but with the line-up they of games they are launching it is their last, best shot!
I have two sets of thoughts about the Nintendo 2DS as well – regarding the 3DS and regarding the 2DS itself.
The 3DS has actually been doing pretty well, capturing >85% of the dedicated handheld console market – which is a better share than the DS compared to the PSP. It started off rough, with the $249 system not gaining any traction and resulting in many editorials calling the 3DS ‘dead on arrival’ and prompting a quick price cut to $169.99 – and from there the system has sold more than 33 million units and dominate the dedicated handheld space. But due to the quick price cut it is pretty clear that the profit margin (if any) is very low. I share the opinion of others that one reason for the 2DS to be launched and priced at $129.99 is because it offers higher profit margins.
The Nintendo 2DS was a surprise to me in appearance more than anything else, looking like a wedge that would be playable sitting on a small lap or table as well as carried around like a virtual pacifier at the mall. There seems to be a clear marketing attempt to draw in the younger demographic – because they have killed the 3D screen (concern for younger eyes), made it non-folding (broken hinges are apparently a big deal), and dropped the price.
Nintendo is losing the ‘under 7’ market slowly to smartphones as more and younger kids are using an iPod Touch or something similar. They used to get kids hooked with a GameBoy and work up to having a console and handheld. The changes they made are very attractive to parents who are choosing something other than a V-Tech or Leap Pad for their kids in preschool or before. And let’s be clear – Nintendo doesn’t care whether I like it or YOU like it or a 3DS owner likes it … they are aiming for a different customer.
Of course there is a side-effect that I am sure Nintendo considered – 3D is now optional. The big reason for the 3DS was 3D gaming, and there have been some pretty solid releases. Now there is little reason to pursue the effect with all of the associated costs. I’m sure we’ll see plenty of 3D games through the holidays, but if the 2DS is a hit we have seen the end of 3D gaming for a while.
My final thought on the 2DS is that $99.99 is ‘impulse’ pricing for this sort of system … but $129.99 comes close. I would be very surprised if the 2DS didn’t outsell the 3DS this season – and since Nintendo makes more on the 2DS, they would be just fine if that happened.
Nintendo is in trouble right now – not desperate but struggling. Their sales across the board are down and their console presence has continuously diminished since the peak of the Wii craze. The price cut will move systems, but the impact will be short-lived. As for whether the 2DS will have the desired impact … I just don’t know. It is cheap enough that it even has me contemplating one, and I have seen parents of young kids raving about it in gaming forums. I see it doing much better than the Vita this winter, but will it be enough?
What are your thoughts on Nintendo and these announcements?