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Iwata explains the reasons of 3DS's price cut; gives it 4 months to resurrect

Cygnus X-1

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Mar 7, 2007
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http://www.nintendo.co.jp/ir/en/library/events/110729/index.html

Iwata said:
Good morning. Before accepting questions, there is one thing that I would like to address here.

Since the first fiscal quarter has limited importance within the annual business of game companies, it does not make much sense for me to make a detailed presentation on the business in that quarter, so I have not made such preparations for today. On the other hand, a number of people must have such doubts as, "Why does the company have to make such a drastic markdown now?" Please let me talk about that before the Q&A session.

First of all, we have made the decision to markdown the Nintendo 3DS because we recognize that the current situation surrounding the system is different from that before the launch and immediately after the launch.

Having strong momentum is very important for game platform businesses. Once momentum is lost, great power is needed to change that trend.

As we announced at the E3 show, which was held in Los Angeles this past June, we have a strong software lineup for Nintendo 3DS toward the end of this calendar year, with which we were thinking that we would be able to boost the hardware sales, but in terms of the current situation, for us to be able to help Nintendo 3DS to become a sound successor to Nintendo DS, and to get it back on track to its originally-anticipated sales pace for its wide expansion, we concluded that we needed to take drastic measures, and we decided to make the markdown.

Since we will carry out this markdown in a period when Nintendo 3DS does not have such anticipated titles as in the year-end sales season, some seem to have interpreted it as a hasty move.

It is true that a great portion of our sales and profits are generated during the year-end sales season. If we just focused on maximizing the impact of the markdown, it might make more sense for us to do so when a number of anticipated titles are to be launched. In fact, thinking in that way must be the norm, and a number of people must have anticipated that we would make the markdown during the year-end sales season or in fall this year. However, there are some specific reasons why we have decided to make the markdown at this time.

First, since the launch of Nintendo 3DS, one of the things we have learned is that it has taken longer than we had originally expected in order for the appeal of this product to widely spread. We feel that those who have experienced the system appreciate its attraction, but this appreciation has not necessarily been expanding at the speed which we had expected. For us to maximize the effect of the anticipated titles of this year end, it is necessary to greatly expand the installed base (before the launches of the anticipated titles) so that the appeal of the new software will be able to spread to consumers in a short period of time. Without creating such a circumstance, we would not be able to realize explosive sales in the year-end sales season. This is one reason for the markdown.

Another reason is, we thought that eliminating the concerns of future hardware expansion early on would make a great difference to how retailers and software publishers will allocate their energies. The retailers worldwide decide the allocations of store shelves and which products to focus on for the year-end sales season by looking at the results of the summer sales. Software publishers are currently reviewing which development teams will work on which projects, and the results of which shall be launched next year and beyond. Removing their concerns on the sales of Nintendo 3DS hardware will be very critical for us to be able to enrich the applicable software in the years to come. In fact, immediately after our announcement yesterday, Nintendo employees started to receive feedback from retailers and software publishers around the world, and this feedback is, in general, rather positive.

In short, we have concluded that, for Nintendo 3DS to expand enough to become the successor of Nintendo DS, we have to take a drastic approach.


>>>>>>Accordingly, we hope you will look at the long-term effect of the markdown, rather than the short-term one. More specifically, I hope you will at least try to see how it will play out over the next four months, until the end of the year-end sales season, before making any judgments.



On the other hand, a drastic markdown like this, before the mass-production effect can take place for the hardware, will naturally generate red ink on the hardware sales. As a result, a significant minus effect is expected on the profitability of the current fiscal year. Even though we understand this, for us to elevate Nintendo 3DS to be the platform that can sustain our business, we have concluded that we need to take the best possible measure we can take now, even at the cost of short-term profitability.

From Nintendo, "SUPER MARIO 3DLAND," to be launched in November, and "MARIO KART 7" in December are going to be two main titles for the year-end sales season. These software titles can appeal to a wide variety of audiences and have the potential to be purchased by a number of people. Also, the software lineup from the third-party software publishers will be enriched before the year-end sales season.

It is quite unusual for us to change the price in less than half a year from a product’s launch. I am aware that realizing both the short-term and the mid-to-long term profits is one of my responsibilities as part of the management. I feel greatly accountable for having to make the markdown shortly after the launch, for having damaged our consumers' trust, for having made a significant impact upon the financial forecasts, for the annual dividend now being expected to be significantly less than originally expected and for now forecasting that there will be no interim dividend.

We would like to fulfill our responsibilities by getting Nintendo 3DS back on its originally-expected sales track, to make it the successor to Nintendo DS and to recover the sales and profits in the next fiscal year and beyond.

However, for the management to show its accountability for the level of the operating loss of this time and the prospect of no interim dividend, we decided at the directors' meeting yesterday that we would reduce the compensation we will receive as the directors of the company. The directors’ compensation of the company constitutes a fixed portion and a variable portion which is decided by the actual results of the business performance. The decreased profit of the company is reflected as the decreased compensation in the variable portion or, more specifically, the bonus to be given at the end of this fiscal year. However, we understand that the management responsibility this time is heavier than usual, and we have decided to reduce the fixed compensation as well, by reducing it by 50% for the president, or me, a 30% reduction for the representative directors and a 20% reduction for the other directors.

Needless to say, the deduction of the fixed compensation is what we volunteered to do in order to show our sincere attitude and to fulfill our responsibility. We really must recover our financial performance and take Nintendo back into the position in the marketplace where it is well appreciated.

This is all that I wanted to tell you. Thank you.
4 months (till the end of the year) or bomba! Will Iwata's gamble work or not?
 

neptunes

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Let me get this straight, Iwata is hoping people will buy the 3DS purely on the new pricepoint and not because of the software?

If the software was there the price wouldn't have been an issue.
 

MikeE21286

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Jun 15, 2007
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Very interesting read.

I mean what else can you say, the guy's basically eating some crow here.

Class act all the way Iwata
 

Hero

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Jun 6, 2004
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Wise words and confirmation of the big wigs taking a cut from their own paycheck. Commendable stuff.
 

evilromero

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Jun 15, 2004
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It's funny. Despite the generous markdown I'm still not likely to pick the system up until Mario Land 3D. I would've paid $250 for the system if it had the right games.
 

[Nintex]

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neptunes said:
Let me get this straight, Iwata is hoping people will buy the 3DS purely on the new pricepoint and not because of the software?
Yep he hopes that this price drop followed by Mario Kart 7 and Mario 3D Land in the 4th quarter will do the trick but nothing short of a miracle can save his position now. If he tells them to look at the next 4 months of performance well... Mario and Mario Kart won't even be out by then.
 

Cygnus X-1

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BurntPork said:
Four months isn't enough, sadly. This will probably go down as the Virtual Boy 2.
I think personally that the first half is done. Now he has to bring more games for the end of the year. Possibly third party games. A service like Steam would be nice as well.
 

Auto_aim1

MeisaMcCaffrey
Jul 7, 2010
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I agree building momentum is important, but they need to give 3DS a strong identity. Atm, looks like consumers are confused.
 

Averon

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What a difference a year makes. Remember when the 3DS was first revealed at E3 2010? The difference between then and now is stark.
 

M.D

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I probably missed it, but what happens if after that period of time the 3DS is still doing poorly?
 

Wrestlemania

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Oct 7, 2005
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BurntPork said:
Four months isn't enough, sadly. This will probably go down as the Virtual Boy 2. In fact, the only reason it hasn't been killed yet is because the market is larger than it was when VB was introduced. 3DS will be discontinued very soon.
In four months (or so) it'll have a new Mario Kart and a new Mario platformer. It's going to have a good Christmas.
 
neptunes said:
Let me get this straight, Iwata is hoping people will buy the 3DS purely on the new pricepoint and not because of the software?

If the software was there the price wouldn't have been an issue.
I think he's hoping that the price cut combined with Mario Kart/Mario Land will cause a giant sales explosion, thus causing the system to self sustain, because if it doesn't, third parties/retailers might divert resources/shelf space elsewhere.

The question becomes how high does it need to go to secure that support.
 

Tallshortman

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neptunes said:
Let me get this straight, Iwata is hoping people will buy the 3DS purely on the new pricepoint and not because of the software?

If the software was there the price wouldn't have been an issue.
It would definitely still be an issue, just not the 800 lb. gorilla in the room if the software was mid life DS level.
 

Diablos54

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Feb 12, 2007
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BurntPork said:
Four months isn't enough, sadly. This will probably go down as the Virtual Boy 2. In fact, the only reason it hasn't been killed yet is because the market is larger than it was when VB was introduced. 3DS will be discontinued very soon.
Not serious, right? I'm never too good at figuring this kinda stuff out...
 

Elios83

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By the end of the year it will be clear if the product has a chance to be a "successor to the DS" like Iwata says.
Right now the biggest problem is that even with the price cut there aren't compelling games, so people could decide to wait and the product wouldn't gain the mindshare Nintendo is looking for.
 

Emitan

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ronniehehehaha said:
I thought Smash was announced for 3ds and wii u at e3.
If its more like Brawl than Melee I'm not interested. Brawl isn't very fun to me and the 3DS one is supposed to be single player focused :/
 

Gravijah

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BurntPork said:
Not if they kill it in four months. That timeline is suicide. In four months, their stock will be non-existent, and the only way they'll regain the trust of investors is by going third-party. Giving a timeline like this was the dumbest thing Iwata could have done.
I don't foresee them killing it in four months, I took that quote as him saying give it four months before judging the system.

I mean, if they kill the 3DS, they have no systems. The Wii is all but dead, the DS is dying (especially now with Nintendo looking to destroy it) and the Wii U would still be half a year away.
 

eXistor

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BurntPork said:
Four months isn't enough, sadly. This will probably go down as the Virtual Boy 2.
Not likely. I think the problem is indeed identity. People think it's a DS with 3d, not a new system.
 

Stumpokapow

listen to the mad man
May 21, 2006
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BurntPork said:
Four months isn't enough, sadly. This will probably go down as the Virtual Boy 2. In fact, the only reason it hasn't been killed yet is because the market is larger than it was when VB was introduced. 3DS will be discontinued very soon.
You're getting a reputation. That's not a good thing.
 

Cygnus X-1

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Mr_Brit said:
If it doesn't revive by the end of the year, does that mean we'll get a new Gameboy?
A new Gameboy would be sure successful only because of the name. Even with tables and Smartphones, everyone still knows what a GameBoy is. But after 150 millions DS this would be really ironic. DS would become the largest, yet short-lived brand every created.
 

Plinko

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Jul 31, 2007
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I'm sorry, but I think those in here thinking it won't help are absolutely out of their mind.

1. They're not lowering DSi prices, which will kill off the DS.
2. Price, which was the #1 factor in poor sales according to surveys, is fixed.
3. A new Mario Kart and a new Super Mario game (both HUGE system sellers) are releasing before the holiday season.
4. It will be priced $80 lower than the Vita.

The holiday season will be HUGE for the 3DS and it will have a large userbase before the Vita is released. That's what they need.
 

Mr_Brit

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Sep 23, 2009
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BurntPork said:
Not if they kill it in four months. That timeline is suicide. In four months, their stock will be non-existent, and the only way they'll regain the trust of investors is by going third-party. Giving a timeline like this was the dumbest thing Iwata could have done.
Although BurntPork deals in absolutes and hyperbole of the highest order, in this sense he is kind of right. Wii is dead, DS is at the end of its life and will be dead by the end of the year which is a perfectly healthy lifecycle and 3DS was supposed to be the next torchbearer. With 3DS currently floundering what will happen if it doesn't pick up again? Wii U is still 12 months out, how will Nintendo not have their stock collapse if all they have to rely on between now and then is a floundering 3DS and a dead Wii? If 3DS doesn't pick up it could mean Nintendo will have a very rough next 12 months until Wii U comes out.
 

The Technomancer

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Jun 18, 2009
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Shikamaru Ninja said:
The first-party line up for the rest of the year is solid. Star Fox 64 3D, Pokemon Rumble 3D, Kid Icarus, Super Mario 3D Land, and Mario Kart 7.

But third party line up... well..
Actually...yeah...put like that the first year lineup for the 3DS is pretty damn good. A sure sight better then the first party lineup for the first year of the Wii or the DS. It still has more third party support then those platforms, it just doesn't have enough
 

Dartastic

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I love the Japanese. It's incredible that Iwata and the other members of the management staff also lowered their salaries. You'd never see that in America.

Plinko said:
I'm sorry, but I think those in here thinking it won't help are absolutely out of their mind.

1. They're not lowering DSi prices, which will kill off the DS.
2. Price, which was the #1 factor in poor sales according to surveys, is fixed.
3. A new Mario Kart and a new Super Mario games (both HUGE system sellers) are releasing before the holiday season.
4. It will be priced $80 lower than the Vita.

The holiday season will be HUGE for the 3DS and it will have a large userbase before the Vita is released. That's what they need.
.
 

Spiegel

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Ballsy move. I apreciate that and hope it pays off for Nintendo and third parties.

I want the two handhelds to be very successful.
 

morningbus

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Sep 16, 2007
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Not sure what to make of this. Is Nintendo still making money off this severely reduced price point?

The only thing I know for sure is that I am now kind of interested in a 3DS. And I wasn't thinking about getting one for years.
 

BGBW

Maturity, bitches.
Jan 19, 2007
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BurntPork said:
Four months isn't enough, sadly. This will probably go down as the Virtual Boy 2. In fact, the only reason it hasn't been killed yet is because the market is larger than it was when VB was introduced. 3DS will be discontinued very soon.
So we can expect the best Wario Land soon then.

BurntPork said:
Not if they kill it in four months. That timeline is suicide. In four months, their stock will be non-existent, and the only way they'll regain the trust of investors is by going third-party. Giving a timeline like this was the dumbest thing Iwata could have done.
Wait, we've gone from VB2 to Nintendo going third party? Oh Porkybuns.
 

Emitan

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Mr_Brit said:
Although BurntPork deals in absolutes and hyperbole of the highest order, in this sense he is kind of right. Wii is dead, DS is at the end of its life and will be dead by the end of the year which is a perfectly healthy lifecycle and 3DS was supposed to be the next torchbearer. With 3DS currently floundering what will happen if it doesn't pick up again? Wii U is still 12 months out, how will Nintendo not have their stock collapse if all they have to rely on between now and then is a floundering 3DS and a dead Wii? If 3DS doesn't pick up it could mean Nintendo will have a very rough next 12 months until Wii U comes out.
Not to mention the wavering support of their hardcore fans who would be there day one and the fact that its playing catch up with this year's holiday games as launch titles.
 

Furoba

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Cygnus X-1 said:
A new Gameboy would be sure successful only because of the name. Even with tables and Smartphones, everyone still knows what a GameBoy is. But after 150 millions DS this would be really ironic. DS would become the largest, yet short-lived brand every created.
GameBoy will be reserved for a smart phone tie-up in the next decade. Maybe.
 

Cygnus X-1

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Let me add an interesting bit to the discussion: would have been better for Nintendo to NOT develop Nintendo 3DS at all, but instead still supporting DS with lot of games for more years? The decline of DS was mainly caused by the lack of first party games after 2009-2010. Was the idea to replace the system wrong to begin with?
 
Aug 10, 2008
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BurntPork said:
Not if they kill it in four months. That timeline is suicide. In four months, their stock will be non-existent, and the only way they'll regain the trust of investors is by going third-party. Giving a timeline like this was the dumbest thing Iwata could have done.
Lol. Oh you.
 

Galvanise_

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Billychu said:
I hope this doesn't scare western devs away from the Vita.
I think Vita will be fine. It has a much stronger launch line up, and the pool of 'core' launch buyers who are not adverse to $250/£230 hardware. Additionally, Vita provides a lot more revenue streams for developers. DLC, Subscriptions, PlayStation Suite etc.

The real question about Vita is the 3rd party support. We already know that it has COD on the way, a Bioshock game, Disgaea, Monster Hunter, MGS HD collection, ZOE Collection etc. The real question will be whether it gets GTA, Kingdom Hearts, Final Fantasy, Assassins Creed, Batman etc in addition to games that the PSP didn't see such as Brain Training, Professor Layton etc.
 

evangd007

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Why do people still doubt the 3DS at $170? It's at the same price as a DSiXL and only $20 more than a DSi now, and those two are still selling well in the Americas for no apparent reason.
 

darkside31337

Tomodachi wa Mahou
May 31, 2011
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Plinko said:
I'm sorry, but I think those in here thinking it won't help are absolutely out of their mind.

1. They're not lowering DSi prices, which will kill off the DS.
2. Price, which was the #1 factor in poor sales according to surveys, is fixed.
3. A new Mario Kart and a new Super Mario games (both HUGE system sellers) are releasing before the holiday season.

The holiday season will be HUGE for the 3DS and it will have a large userbase before the Vita is released. That's what they need.
I know it sounds crazy but what if it doesn't kill off the DS?

Plenty of people may still buy a DSi/XL instead of a 3DS even if they are the same exact price. Nintendo has been that woefully ineffective at marketing the 3DS. A lot of people aren't interested in the 3D effect, have no idea how it works exactly, have no idea that you have the option of turning it off, and most importantly have no idea that it's actually the newest system and not just a new iteration of the DS.

It would not shock me that even with the DSi/XL and 3DS being nearly the same price the sales difference isn't that drastic and far from kills the legacy DS line.

Nintendo desperately needs to relaunch the system with new marketing that actually drills the point home, that the 3DS is not just a new version of the DS but an entirely new system in itself.