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Analysis: How the 3DS XL update could boost Nintendo handheld sales
Analysis: How the 3DS XL update could boost Nintendo handheld sales Exclusive
June 25, 2012 | By Matt Matthews

June 25, 2012 | By Matt Matthews
More: Console/PC, Business/Marketing, Exclusive

The new Nintendo 3DS XL is the latest in what has become an annual Nintendo tradition of revising its handheld hardware line. Starting with the Nintendo DSi in late 2008 and early 2009, Nintendo has steadily improved its hardware each year, moving from the primitive, 2006-era Nintendo DS Lite to systems with better networking, added on-board storage, larger 2D screens, and – with the launch of the 3DS last year– a new 3D screen technology.

The new 3DS XL is a natural next step in this line of annual updates, and conveniently gives Nintendo an opportunity to attract new consumers who are just now becoming aware of the imminent launch of the Nintendo Wii U console later this year.

The initial reaction to the Nintendo 3DS XL appears to be positive, at least in my experience, and I think that it stands a chance of helping the system shed the stigma of last year's dreadful summer sales drought and the stunning 32 percent price cut delivered in early August.

I went back and pulled all shipment data from Nintendo's earnings releases, since the launch of the Nintendo DS, and it was a helpful refresher in several ways. First, it brought into focus just how patient (or complacent) Nintendo had been with the Nintendo DS line in the first place.

The original Nintendo DS arrived during Christmas 2004 and the successor revision, the DS Lite, did not arrive until about 15 months later, in March 2006 in Japan. Then the Nintendo DS Lite was then the standard system for over 30 months, until November 2008 when the Nintendo DSi was released in Japan. In the U.S., the timeframes were slightly longer: 18 months from launch to the DS Lite and well over 30 months from the DS Lite to the DSi.

In over four years on the market, Nintendo's dual screen handheld only got two hardware redesigns. With the advent of the DSi, however, that has all changed. From my perspective here in the U.S. market, it looks like Nintendo has released a new handheld or new redesign in every calendar year since 2009.

The second point I got from reviewing Nintendo's shipment data is the relative importance of each hardware redesign to Nintendo's hardware fortunes. The Nintendo DS Lite revision in mid-2006 certainly played a crucial role in turning Nintendo's handheld business around dramatically, but no revision since then has been as successful.

Just looking at the four models of the Nintendo DS for the moment, the global picture for shipments looks like the figure below. As I've done previously, I'm showing trailing 12-month (TTM) data which helps smooth out some of the irregularities like seasonal sales differences and temporal differentials between supply and demand. Remember: The height of the graph at any given time represents total shipments in the prior 12-month period.

The original Nintendo DS peaked at around 11.4 million systems per year, and it took the introduction of the Nintendo DS Lite redesign to push sales to just above the 30 million system per year level.

The launch of the Nintendo DSi, at the crest of the Nintendo DS Lite wave of sales, helped push the sales rate a million units per year higher. At the peak of the system's sales in 2008, Nintendo was shipping its Nintendo DS handhelds out at a rate of 31 million systems per year.

The larger-screen Nintendo DSi XL helped smooth out the decline of Nintendo DS sales, and helped the system remain above the 20 million system per year level until late 2010. As of its last earnings release, Nintendo was reporting shipments of a mere 5 million systems per year.

Another interesting feature that this graph reveals is that for a significant time the Nintendo DSi XL – the model with the larger screen – was more popular globally than the smaller Nintendo DSi. In calendar year 2010, Nintendo shipped 8.7 million units of the larger DSi XL while only shipping 7.1 million units of the plain DSi. The DSi XL continued to outship the plain DSi for most of 2011.

However, the DSi XL was introduced late in the DS lifetime and the successor Nintendo 3DS was shown publicly only four months after the DSi XL came to market.

That is important context here, since the difference in timing means that the Nintendo 3DS XL will likely be received differently by the market.

Let's take that graph I showed above and add on the TTM shipment data for the Nintendo 3DS. Viewed as a whole like this, the reports of a collapsing Nintendo handheld market are somewhat less dire.

It's clear that consumers began substituting the Nintendo 3DS for the Nintendo DS immediately after launch of the former, since shipments of the two systems together have remained roughly constant at around 20-21 million systems per year.

However, close inspection of the figure above shows that the 3DS price cut in August of last year precipitated a huge drop in Nintendo DS shipments while maintaining that roughly constant overall sales rate of 20 million units per year across all of Nintendo's handhelds.

The real problem for Nintendo now is that it saw its overall handheld shipment figure drop to 18.6 million systems per year by the end of March of this year, and it is likely that that rate will drop again with the announcement of its first quarter results late next month.

Relative to the decrease in sales, that makes the July-August 2012 launch of the 3DS XL analogous to the release of the Nintendo DS Lite back in 2006. That is, a revision is arriving just past a crest in sales of the existing model.

Moreover, the strong consumer demand for the larger-screen Nintendo DSi XL during 2010 (even at a price premium) suggests that consumers are interested in a handheld with a spacious screen. If consumers find the price acceptable (and $200 is only a $30 premium over the current pricing of the 3DS), then we could see Nintendo's handheld fortunes headed significantly higher in the next few quarters.

At a time when many industry observers see Nintendo as a company besieged by competition from tablets and mobile phones, the 3DS XL provides Nintendo with an opportunity keep itself relevant. It will soon be selling a handheld that not only has the very newest Mario games available, but also has a spacious 3D screen and immediate compatibility with Nintendo DS software. It will even have access to select classic titles from previous Nintendo systems as modestly priced downloads.

Nintendo's bugbear, Apple, continues to roll out annual hardware revisions to its iPhone and iPad devices each year and successive devices have immediate access to an App Store stuffed with software developed for previous hardware models.

Nintendo appears to have taken a page from Apple's book, and is now doing annual hardware revisions of its own, all while maintaining compatibility with a vast library of software and gradually building the means to sell that software direct to consumers through an online store. This isn't a knock against Nintendo: if the market responds positively to something that a company can reasonably do, it would be foolish for them not to pursue it.

If nothing else, perhaps a good sense of its own historical weaknesses is helping Nintendo to incorporate some of the strengths of its competitors while retaining its own identity as a video game hardware and software company. That, in itself, should be immensely interesting to watch in the coming months and years.

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Harlan Sumgui
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It would be fascinating to see some yearly age/sex breakdowns of the actual users of the handhelds.

Yearly Japan/Euro/NA sales breakdowns would also elucidate.

Daniel Bashur
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Why Nintendo didn't add a second analog stick on this model baffles me. This model is a no-brainer to produce, simply staying pace with the smaller/larger version trend the DSi XL ushered in, but not including the extra analog when there was clearly room to map it to the larger unit is foolish. Because of this, I can see core gamers continuing to hold out and stick with the Vita until Nintendo addresses the issue. The 3DS Circle Pad Pro is not only an abomination and gaudy add-on, but is also nothing more than an admission of guilt that it should have been there in the first place. Why not just include it within the new hardware revision? It makes absolutely no sense at all! I do feel that some impressive games will be on the way for the 3DS platform regardless and surely there will be some innovative uses of the 3DS combined with the Wii U, but come on Nintendo - move forward!

Also, why is multimedia never a priority with Nintendo? Indeed - gaming is the primary function of a handheld gaming console, but look at the almost 7 year old PSP... You can control and utilize a media server from your PSP via Remote Play and a PS3. You can watch and control your cable/satellite TV and a couple other devices anywhere in the world over WiFi courtesy of (now discontinued) LocationFree Base Stations with the PSP. You can play UMD games/movies of course and have immediate access to a large library of PSN video purchases and rentals in addition to more digital PSN games. The online gameplay is even quite good. The Vita makes that overall experience even better while also adding new unprecedented dimensions to handheld gaming with rear touch controls and dual analog controls.

Yes, the 3DS is 3D which is what sets it apart and there are many AAA first party IPs and some quality 3rd party offerings in the pipeline to ensure the success of Nintendo hardware, but the complacency and lack of forward thinking just irks me. I apologize to rant a bit since the only major issue I have with the 3DS XL is the lack of a second analog, but it's just one more thing on a list of many items that Nintendo has yet to address to make their new hardware more attractive. I'm willing to bet that Sony already has a 3D Vita in the works. When that arrives, where is Nintendo's point of difference on the 3DS (at least from a technological standpoint)?

I bought an original silver DS at launch and was very happy with the backwards compatibility with Game Boy Advance carts. I wasn't upset that there wasn't even a single analog controller, but that was 2004! There were also several great 2D Castlevania entries which for me was a huge draw. The Resident Evil franchise has seemingly made a similar large splash on the 3DS and right now Revelations is a game I would love to play with undoubtedly more on the way due to its reception. I'll probably break down and buy a 3DS XL nonetheless at some point, but will likely acquire a Vita first since it just seems to offer more utility and in its own right some very impressive gaming to boot. I hope that Nintendo starts doing some things to put its 3DS hardware in a class above the Vita to start winning over more Core Gamers.

My final verdict - The 3DS XL is a nice option (the larger screen is quite nice), but other than a larger screen has nothing new to offer. 6.5/10

Joseph Anthony B. A. Tanimowo-Reyes
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Admission of guilt? They've pretty much been driving in that the add-on is optional and only exists to satisfy people who refuse to use the more creatively designed camera control of games like Kid Icarus: Uprising.

The reasons for not having it in the revision are two-fold. First off, it drives in that it's an OPTIONAL add-on, and secondly that that they don't want to split their users between those who have a second pad and those who do.

Merc Hoffner
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Brilliant. You've pioneered the way in the awkward business of reviewing before the fact. I feel the weight of the world lifted and feel no shame anymore in reviewing the PS4 a 5.0/10. The power is nice and the move towards the cloud is appreciated but depending on the same controller for 20+ years is old hat. Better luck next time Sony.

Michael Wenk
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I don't think comparing the DS to the PSP/PS Vita is going to win you many points... Both Sony systems have done terribly compared to the DS.

The DS line is not going to get numbers to compete with iOS or Android by adding a second analog stick, or multimedia capabilities. Neither of these have helped Sony much, have they?

In reality, if Nintendo wants the DS to compete with Apple/Google, they need to compete on price. Obviously features aren't working or the 3DS and the Vita would be kicking ass, and they are not. So I fail to see how any feature being added will help much. Even software likely won't help that much as both iOs and Android have plenty of cheap/free software that while it may not be as much fun as a AAA title, its good enough to keep people entertained to the point where they aren't buying the other devices.

I honestly think tablets are going to do the same to consoles as the mobile devices have done to handheld consoles. The Wii U may mitigate it, but the software cost will be a big downer.

Jose Morelos
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Nintendo revising a handheld goes beyond just the DS. The gameboy had the Gameboy Pocket, Light and Color. The Gameboy Advance had the SP and Micro.
This is something thats been happening long before Apple's iphone or ipod.

wes bogdan
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Of course they're already planing the successor to 3ds which we may never see depending on moble gaming and i doubt the next handheld would be as powerful as vita....but to the 3ds xl sure i want to grab one the question is when's the next zelda sp ed 3ds coming so it would be a 3ds xl zelda gold sp ed or something.

I expect another zelda or at least majora's mask 3d but also hope an all original zelda arrives though short term a mario ed with nsmb2 is more likely.

wes bogdan
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Does anyone know if the current circle pad pro will be adaptable to the xl or is that another $20 waste factor making a 3ds xl over $230 with tax and xl cpp.

Either nintendo already had this waiting when they released 3ds hence the absence of the 2 nd stick or they are coming back next year with a smash 3ds xl pro just to get more money from us.

As a side note ,myself i can't play dual analog games in default but require a full southpaw mode where when the sticks are in southpaw the face buttons get mapped to the d-pad which is essencial with vita and wii u.

I have a vita but can't play: uncharted,unit 13,gravity rush even smash tv style games on psn lack southpaw like pixeljunk shooter 1 and 2,tank battle and blast factor.

For myself and others this should have been fixed long agao my full southpaw is simply a mirror of default.

Here's something i don't get why is zoom scope on the walk side whereas halo has zoom on the freelook stick even if on a trigger it should remain on the freelook side as you look around with freelook just press l in southpaw and r in default.

People want invert aim and it's in all games today so why is something simple like keeping face buttons with freelook and zoom with freelook so hard?!!

I can play god of war,single analog games all fine even escape plan and deviants are no trouble but games i'd love to own like uncharted :ga and cod vita remain unplayable and with a 5+" gap both vita and wii u will require my full southpaw because without it southpaw will get as much use as legacy-none at all. This also goes for 3ds circle pad pro games as well.