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Nintendo will make 3DS profitable again soon

Nintendo will make 3DS profitable again soon

January 27, 2012 | By Eric Caoili

Nintendo intends to begin making a profit on each 3DS system sold again sometime between April and September 2012, and the company revealed plans to improve the portable's online connectivity rate with users.

Unlike its rivals, Nintendo typically prices its hardware high enough to make a profit, even at launch. But lacking 3DS sales in the handheld's early months compelled the company to slash the price by a third -- from $249 to $169 in the U.S., an unprecedented markdown -- globally in August 2011.

Nintendo president and CEO Satoru Iwata explained that "drastic measures" needed to be taken in order for the company to ensure 3DS had a large enough install base to "maximize the effect" of big holiday releases, and to instill confidence in software publishers and retailers.

Discussing the 3DS' performance at an investors meeting on Thursday, Iwata said, "[The holiday results were] a pleasant surprise to the video game industry and changed the thoughts of third-party software developers for the better. We are now expecting a strong software lineup for the platform."

He noted, however, that selling the handheld at a loss "affected [its] profit the most for the current fiscal year." Yesterday Nintendo reported a ¥48.4 billion loss ($623 million) for the April to December 2011 period, and projected a ¥65 billion loss ($837 million) for the full fiscal year ending March 2012.

Nintendo expects that it will be able to sell the system at a profit in the near future, possibly through reduced manufacturing costs for 3DS. "In the first half of the next fiscal term, we are now anticipating to get out of the situation that we sell the hardware below cost," said the executive.

During the same investment meeting, Iwata also commented on the company's plans for its new "Nintendo Network" online platform for 3DS and Wii U, as it looks to "significantly expand [its] digital business to adapt to the changes in the business conditions and to create new business opportunities."

"The internet-connection ratio of the Nintendo 3DS is approximately 60 percent both in Japan and the U.S., which is the highest among our handheld video game systems," he pointed out. "The rate of the consumers who repeatedly access the Nintendo eShop is also, by far, the highest among them."

Iwata added, "We are still in the first stage, but we are building the foundation little by little to expand our digital business."

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