In two days, Nintendo will officially lower the price of the Nintendo 3DS to $169.99, down from $249.99 at launch. Satoru Iwata, the President and CEO of Nintendo, recently released a letter, addressed to early adopters of the 3DS, explaining why the company felt it necessary to bring about a price drop so soon after launch. "This unprecedented timing for a price cut is because the situation has changed greatly since we originally launched the 3DS," Iwata wrote. "We decided it was necessary to take this drastic step in order to ensure that large numbers of users will continue to enjoy the 3DS in the future."
There's little doubt that the 3DS launch did not go as planned for Nintendo. Yesterday, just days before the price drop, I spoke with Reggie Fils-Aime, the President and COO of Nintendo of America, about what exactly went wrong and why those lofty post-DS expectations were not met.
According to Nintendo's sales data, pre-sale numbers for the 3DS were nearly double the numbers for the Wii. The day-one sales for the 3DS were also higher than any other handheld in Nintendo's history. "Candidly, based on the strong pre-sales and based on the strong first day, our expectations were extremely high," said Fils-Aime.
Since then, however, sales have not been nearly as strong. According to Nintendo's financial results, the handheld sold just over 700,000 units worldwide in the months of April, May and June. In contrast, the DS and Wii sales numbers for that period were more than double, with 1.44M and 1.56M, respectively.
Fils-Aime said there were two important factors which caused these slower-than-expected sales, factors that he says they're addressing:
"What were are doing in order to rectify this is, first, making sure we have great games. Because, in the end, a platform is driven by the quality and quantity of content to be enjoyed on the platform. And we think, really, with the launch of 'Zelda: Ocarina of Time' for the platform, we are now in a steady pace of having very good content coming on the platform with 'Starfox,' with the two 'Mario' titles ['Mario Kart 7' and 'Super Mario 3D Land'], with 'Pokemon' and obviously 'Kid Icarus'…[we have] very strong content coming."
Fils-Aime mentioned the second factor, saying the 3DS lacked a "robust digital environment" at launch. "With the launch of the eShop and now with the launch of Nintendo Video and the launch of Netflix, we believe we've addressed that issue as well."
Interestingly, he didn't mention the price as being one of the possible factors for the slow sales. I asked him whether he thought the initial $249.99 price tag was too high for consumers. "Based on the pre-sales and based on the strong day-one sales, at that point we certainly felt that the value equation was appropriate. What I will say is that this is a momentum business. We know we have to have strong momentum going into the holiday timeframe. In order to address that, we've taken this dramatic step of reducing the price, doing it fairly early in the platform's life, to address the value equation and to reset that value equation beginning this Friday."
With all this in mind, I asked Fils-Aime just how the underwhelming 3DS launch will affect the launch of new Nintendo consoles moving forward, specifically the launch of the Wii U in 2012.
"Every platform we launch, every title we launch, we do a deep dive of understanding what worked, what didn't work. How do we take the learning and apply it to future intitiaves. Certainly we will take learning from 3DS, both positive and opportunities and apply all of those to the launch next year of Wii U. Things like the importance of digital. Certainly the importance of strong first-party support right at the launch. Those are things that we will look to strongly reapply as we prepare for Wii U."
As for those looking warily at the prospect of 3DS redesign following this price drop, Fils-Aime confirmed that it's much too soon to ask about a 3DS Lite. "The form factor, we believe, is quite strong and quite positive. We have nothing else to add at this point in terms of other form factor changes or other color changes beyond the Flame Red that we're announcing today."