Yesterday wasn’t the happiest days for Nintendo as they announced two major news items that affect the industry’s outlook on the company. First, Nintendo’s profits have fallen significantly in their first quarter versus last year’s results in the same time period and they’ve reduced their year-end profit forecast by a whopping 82%. Secondly, they announced an alarmingly quick price drop for the 3DS, knocking it down $80 to $169.99 just a few months after release.
So, Nintendo’s profits are falling, their latest hardware is suffering in both unit sales and game releases, and they’ve sent a press release to fans, apologizing for losing their trust. Now we can top that off with Nintendo President Satoru Iwata announcing that he and other Nintendo executives are taking pay cuts.
Iwata took part in a shareholders meeting yesterday to address the 3DS price drop and situation, and in an attempt to take responsibility for the 3DS falling below expectations, he revealed reductions in salaries for Nintendo’s higher-ups.
“For cuts in fixed salaries, I’m taking a fifty percent cut, other representative directors are taking a 30 percent cut, and other execs are taking a 20 percent cut.”
Other questions that were raised and answered, were that Nintendo will be focusing on the digital side to sell games, and they confirmed that there is no intention of selling Nintendo games on competitor platforms. They aim to continue strengthening third party support to ensure more game releases.
Yesterday, we wrote about Nintendo losing profits and trust, but some of the responses jumped in defense of Nintendo and the profitability of the 3DS unit, ignoring the facts. So let’s clarify: The Nintendo 3DS will now be sold at a loss. It’s new, lowered price point does not make each unit sold profitable. If output on production picks up however, then they can reduce those costs. The goal here is to help out developers and retailers, especially for the holiday season and increase both hardware and software sales.
And yes, it’s a very bad situation for Nintendo. Back in April, we reported on Nintendo stock falling 17% since February and yesterday alone, former Nintendo Co. President Hiroshi Yamauchi lost over $300 million yesterday along as a result of Nintendo stock prices plummeting. $300 million, in one day.
But, do these actions by Nintendo to save the 3DS address the real issues?
Interested DS players my pick up a 3DS now, but reducing the retail price of the 3DS doesn’t address the main issues the platform faces: Competition with smartphone app stores, overly expensive game prices and a lack of a variety of original games. Nintendo 3DS games are far too expensive for what you’re getting. When you compare many of the 3DS titles and their prices against what players can purchase on PSN, XBLA, Steam, the Android Market and Apple’s App Store, gamers can justifiably argue that they’re not getting good value.
Nintendo needs to hit another home run with the Wii U and on the handheld side, it’s up to Sony to see how their Vita can compete with the 3DS’ far lower prices. Can the Vita’s dual-sticks, better graphics and multiplayer bring in hordes of mobile gamers, or are it and the 3DS simply outmatched by the mobile game-capable devices people carry with them everywhere anyway?
Do you think the 3DS can turn it around? And will the Wii U dominate the home console market when it hits?
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