Nintendo 3DS: Holding Steady
The Nintendo 3DS is, by far, the brightest part of Nintendo's business right now. After that awkward first few months, and the subsequent price drop, the company has done reasonably well with its current handheld system.
I argued last year that Nintendo's global handheld business was stable, shipping around 17 – 19 million systems every 12 months. Since that time, the annual rate of handheld system shipments has dropped to 16.3 million, the lowest rate for Nintendo in a decade. The last time the company's handheld business fell that low was September 2004, right before the introduction of the original Nintendo DS.
Out of the 16.3 million systems sold last year, 14 million were Nintendo 3DS systems. For the current fiscal year, ending in March 2014, Nintendo has set a goal of 18 million systems, an increase of 29 percent.
The U.S. market presents a significant challenge to reaching that 18 million unit goal. So far this year, Nintendo 3DS sales are actually down 20 percent in the U.S. In Japan, it appears that 3DS hardware sales are also down, but not nearly as far as in the U.S. (I'm not aware of a reliable source of hardware sales for Europe.)
While a strong slate of software can help turn hardware around, it's hard to say how far Nintendo can go. At the very least, Nintendo has some good news in the 3DS software department. In the U.S., my figures indicate that 2013 retail software revenue on the Nintendo 3DS is up about 6 percent, and that doesn't include all the digital revenue from Fire Emblem Awakening, which has seen extremely robust sales through Nintendo's eShop. On the other hand, my figures indicate that 3DS software sales in the UK so far in 2013 are down about 20 - 30 percent in terms of both units and revenue. It's possible that some of that loss is due to eShop sales, but I don't think that you can say that's all of it.
To reach its hardware goal for the year, I think that Nintendo will have to do more than just offer a great lineup of software titles. More than that, it will have to show some movement on hardware pricing.
At a comparable point in its lifetime, the Nintendo DS hardware line got its first revision, the immensely popular Nintendo DS Lite. Lifetime shipments of the Nintendo DS are about to well exceed the current 3DS shipments. As the graph below shows, the Nintendo 3DS is now even behind the Game Boy Advance at a comparable point in its lifetime, and will remain there even if Nintendo reaches its 3DS goal for this fiscal year.
I've made it clear previously that I favor adopting annual hardware revisions to push out older models and keep the system looking fresh against the nonstop rise in mobile hardware improvements. For example, a $130 price for the original Nintendo 3DS, then $170 for the Nintendo 3DS XL, and finally a newer model at $200.
That would provide a straightforward way to increase the user base without sacrificing too much of Nintendo's hardware margins, since any margin loss when dropping the price of the low-end models could be mitigated by a top model's inflated price.
There are other possibilities, like a great software bundle that attracts new consumers, but I think lowering the price of entry is the most direct way to stimulate consumer demand.
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So if Iwata fails to reach his goal that's the guy that will replace him. Either that or he was actually demoted. ;)
Nintendo isn't going to take off into the Wii/DS stratosphere without a big massive gaming hit, but they can still have a nice business.
I'm loaded up on Nintendo stock now. They are fiscally conservative. Have lots of cash in the bank. Have valuable franchises. They make great games. I don't see much downside at this point.
3DS is going into a perfect storm of software after having had some great titles to start off the year. It may be the best console for games this year and will undoubtedly sell many units this Christmas between Pokemon and Zelda. I think 18 million hardware units is too few, but on the flipside, I think the software units may be too high as people are buying the key titles, but not the AA titles.
WiiU has a serious software problem that is poisoning the well. Pikmin 3, doesn't come close to solving it. E3 will be very key to see this year. Will they have a new Open world Mario and Mario Kart by the end of the year? I think they must! Yet even with that I think the first 8 months of this year will put the WiiU in a terrible hole in the minds of consumers, and it will be hard to get out of that.
(still, I love my system, Panorama View, had a great 'Wow' moment, and the Rayman daily Challenges are wonderful)
Nintendo will come out with one of those Mario titles most likely. That plus Zelda WW HD and Pikmin in August means 3 great games to play in back half. Doesn't sound like a lot to those that buy that many games in a week. But for most that is alot of gaming in 6 months and $180 in games.
And the back catalog by the 2nd half will have Game and WArio plus NSMB plus NintendoLand plus Lego City.
For any family buying during xmas season I don't think lack of software is going to be a problem. They won't be buying all the good games (and/or potential good games) as it is unless you think famiies are buying a console plus 6 $50-$60 games at once.
There is a pretty good chance the family that is longtime Nintendo customers still has the Gamecube and the original Z:WW game. The HD remakes are a nice thing to enhance a platform's value (as has been effective on the PS3) but I wouldn't count on them to sustain a company in a revenue pinch.
The big problem isn't how much a shopper looking at buying a Wii U will be offered at Xmas. It's how many of the existing installed base will enter the second-hand market as the owners decide not to sit out the software drought.
Not understanding the logic there.
First the GC had its day 7-12 years ago. Your 8 yr old in 2000 is now 21 and knocking back pints of beer at the dive bar just off campus. Today's families are different families. Second the GC wasn't a big seller. WW is a great game that wasn't played by a ton of people even back then.
It should do well on the Wii U for these reasons. And because Nintendo will make it over and add a few things.
IT is just another attractive title to play. No one was arguing that it is a massive system seller or anything.
Also not seeing the logic behind why "current owners going to the used games market because they don't want to sit out the software drought" is a problem. It seems contradictory for one thing. OH there are no games to play so I am going to buy used Wii U games to play instead of doing nothing. Doesn't that mean there isn't a software drought? ;)
What's the connection here otherwise? That you will make current Wii U owners used game customers for the rest of their ownership or that they will suddenly blow all their money on used games that they didn't want to buy new in the first place and then have no money for upcoming great new games?
I get it that some current owners want a new game now. Nintendo has no new games right now. Thus Nintendo doesn't make a sale. But I also get that Nintendo is going to make x games that I want to play for the Wii U over its lifetime and that they aren't always going to line up nicely with the Gregorian calendar. As much as some consumers seem to want it, Nintendo isn't going to put out product on the shelf just to have product on the shelf. It's a self-defeating strategy as pretty soon you are just releasing stuff because the calendar says to and expecting consumers to buy it which leads to you making games like one would make any commodity product. Your product then loses value. It is like every other product.
This is what won't sustain them in the long run.
Oh ok. Decent observation. I am sure they will lose some folks. But not enough to have any large effect on the 9 million Wii U sales figure they hope to reach.
I have to question the idea of adding a new high-end model along with annual price cuts. What would a new 3DS model have to qualify its existence that wouldn't require developers to treat it as a separate platform? A larger SD card bundled? More software at a discounted price? What would be of any use that they aren't already doing?
Just getting the price down should suffice. When the base model is down to the magic $99 price, then will be the time for a new unit that requires separate software to be fully utilized. Although one approach that might work depends on the vendor for the screens. If they can double the resolution on each axis (quadrupling the pixel count) and beef up the processing to match, along with stronger GPU FX capability, then you'd have a 3DS that could run existing games by just doubling the rendered image on each axis and support a new generation of flashier games. At the same time, a lot of existing games could be easily modified to get a graphical boost. (Some polygon oriented titles might not need any modification, as seen with many original Xbox games running on the Xbox 360.)
That strikes me as the easiest way to grow the 3DS without starting a new platform from scratch. The reolution on such a unit might be good enough to make it worth while to have a mini-HDMI port to drive a 3D HDTV at 720p, duplicating the upper screen. Another value add, much as TV output was added to later PSP models.
I believe Nintendo failed to remember what made the Wii appealing in its day. Along with the motion controllers it was substantially cheaper than the other new platforms. This made it appealing to a lot of consumers outside the typical video game demographic. Not so for the Wii U. Those intrigued by tablets are likely to already own one or desire the real thing rather than Nintendo's sort of tablet.
I strongly believe making the GamePad part of the base system was a dire mistake. If the price for the GamePad as a separate item in Japan is any indicator, the Wii U could have been offered without it for $200 without losing money per unit. That unit would instead include a Wiimote, nunchuk, and a low cost version of the Pro Controller that plugged into the Wiimote for its wireless functionality. (A plug-in module that gave the Pro Controller its own battery and transmitter could be offered as an accessory.)
Call it the Wii HD and sell the GamePad as a separate item for $100. The fact is that very few games have made it essential rather than a gimmick. The best potential appears to be in asymmetric multi-player, as seen in Rayman Legends.
I think Nintendo would be far better off if they had pitched a low priced HD Wii and didn't tie the platform's fate to whether the GamePad ever makes good on its promise for a majority of players.
As they said in the Q&A:
" It is natural that there will be more things that battery-run devices can do thanks to technological advances and game consoles will become more powerful. However, if we try to linearly pursue this direction, software development will become so complicated that we will eventually face a situation where cost recovery becomes a serious issue. Therefore we feel that we are nearing a saturation point in terms of simply improving performance or enhancing graphics.
What is far more important for the future of video games is whether we can make new propositions in other aspects and create games out of something that people never expected to see in the form of a game."
Personally I think they should do what Sega did and get out of the hardware business. Nintendo is great at making really interesting and fun games but most gamers don't want to buy hardware that's out-dated at launch for an inflated price to play Nintendo's games when they can easily buy a decent "Squenix" game on Android or iOS for considerably less.
In addition, Android and iOS offers built in legacy as your purchases remain in your account even when you hop devices. Nintendo charges extra to run their older games under emulation. It's a good thing they're sitting on a mountain of cash because without it I'd wager the release of the PS4 and Xbox (720 / Infinity) would put them out of business.
Outside of that I see Iwata stepping down.
Meanwhile, they are almost certainly going to be cheaper, maybe significantly so, than either of the other new consoles. If they also drop their price even just $50 the disparity will be even bigger. Last holiday they were the most expensive hardware and most of their software was ports that were already available on the other machines. Is it any wonder that only the Nintendo faithful bought one? But this holiday they will be one of the cheapest system and they will have a string of high quality exclusives.
The last variable is this: how will they communicate the value of the game pad to the uninitiated? I have a Wii-U and I think the Game Pad is fantastic. It's super cool, but it's hard to articulate why. People just need to play with it. So I think they may gain moment there as they sell more units. It will slowly become more and more likely that you or your kids have a friend with a Wii-U and that will be how you learn you want this thing. I'm not sure an ad campaign can do it.
Its more like the DS/3DS than anyone would like to remember. The early launch, low sales, confusion, slow software releases, and tempid support are all more like those two launches than anything else. Gamecude launched late and had much less of a chance to turn things around. Would love to see Nintendo turn the Wii U around like it did the 3DS.
"We rooted Wii U encryption and file system, says hacker group. Nintendo says it has "no reports" of unauthorized game playing."
http://arstechnica.com/gaming/2013/05/we-rooted-wii-u-encryption-and-file-system
-says-hacker-group/
What is Ninty going to do?
- The philosophy of two-screen play that worked on a handheld doesn't translate as well to a TV & tablet, and it is a hard sell to consumers.
- Nintendo has failed to create more development teams to create new IPs or even create more games from ist old IPs. Since 3rd part development has collapsed they have too few games and always will unless they started spending monye now to create more development muscle.
- The system is just expensive to produce. It is two consoles one screenlessand one screeend, but they share one brain. Its just full of expensive parts, sensors, and gew-gaws so redcing teh costs will be hard.
Here are some thoughts on why sales are not happening:
- I know this has been discussed to death but I think the population that embraced the Wii most likely will not be coming onboard for the Wii U. I say that because the phenomenon that Nintendo created with the Wii for bringing all types of gamers onboard has dissipated in favour of the new medium of smart phones and tablets. Consumption model has changed.
- 3DS sales are exceptionally good which means I can still get Nintendo goodness without a Wii U. Why buy a Wii U?
- It didn't help that Rayman Legends and Pikmin 3 was shifted to a different date. Its sad but I believe Nintendo knew damn well both of these titles were not going to hit the launch window. Rule 1 never believe any company again about launch windows. If its not launching Day 1 its not a consideration for purchase. I think this has mislead a lot of folks who may have thought about buying a Wii U. This also stalls sales if you do not deliver on your promises.
- Just Dance (which sold in the millions) which is used by most girl gamers is still happening on the Wii. We don't know if Just Dance will get the proper coverage on Wii U nor do this generation of girl gamers even won't that anymore. Gamepad is only used for song selection I believe on the Wii U version for Just Dance 4. This adds even more confusion to a purchasing client. No value for Dad to buy his daughters a new system.
- Of course you have diehard Nintendo follows who need a proper Nintendo title. SMB is a stop gap for the bigger picture of Metroid etc. N64 was so successful because Mario 64 shipped day one. If the Wii U shipped with a similar Mario title Nintendo wouldn't be in this position today.
- Lastly, the big spectre of PS4 and Xbox 720 on the horizon. Money is not in abundance and I suspect if a core gamer is strapped for cash he /she will be waiting till E3 to make their mind up on what will be the next system purchase. Nintendo dropping their major event at E3 will just add fuel to the fire (IMO dumb move by the way).
All these "things" and events are just stalling sales.
I agree that alot of casual Wii users won't get back on board with the Wii U. I am sure the smartphones and tablets have something to do with it, but I think the bigger cause is that the Wii U just doesn't have that WiiSports type of mainstream hit. WiiSports really resonated with casual types because it showed the consumer off the couch and moving around. And it was new and fresh. Nintendoland is fun, but it wasn't the homerun that WiiSports was.
Nintendo has put out handhelds alongside its consoles for a long time now so the notion you can get a Nintendo handheld and not the console has always applied. I don't think this is a factor here any more than it was before.
Yes not getting games out on time doesn't help sales. But delivering bad games is even worse. In the end Nintendo delivers x amount of games over the lifecycle of each their consoles. They are consistent if you look at the bigger picture. The short term of whether a game comes out in March or August, for example, doesn't matter over the long term.
As far as just Just Dance goes the more hits that appeal to consumers the better. If that software doesn't appeal to consumers then it doesn't help console sales.
NSMB was much more popular than Super Mario Galaxy - 26 million sold to 10 million. So I don't think a 3d Mario is sure system seller. What is a system seller is something really new that shows off the system. That's what Super Mario 64 did. That's what WiiSports did. NSMB isn't that title. NintendoLand is supposed to be that title. And it is fun and shows off a few interesting uses of the Gamepad. But it isn't that big homerun that those other two system sellers were.
When I add up everything you said it all adds up to lack of killer software. YOu throw that in there with the $350 price point and fuzzy customer awareness and it is off to a really slow start. They admit they are behind with the software and that that ball won't get really rolling until Pikmin 3 launches. But it is going to look much better in a year than it does today. The price is only going to drop. The game will only slowly pile up.