Nintendo announced last week that the company will drop the price of their 3DS handheld console from $249.99 to $169.99 MSRP beginning August 12.
The company believes that the price cut will allow those consumers who could not afford the 3DS at the previous price point to jump onboard in time for the holiday season, which is traditionally the strongest financial quarter of the year for the video game industry.
“For anyone who was on the fence about buying a Nintendo 3DS, this is a huge motivation to buy one now,” announced Nintendo of America president Reggie Fils-Aime. “We are giving shoppers every incentive to pick up a Nintendo 3DS, from an amazing new price to a rapid-fire succession of great games.”
The system had an underwhelming launch in the United States earlier this year, falling short of Nintendo’s projections for sales in the launch window, reaching only 3.61 million out of the projected 4 million.
Sales have not picked up for the handheld since its launch in the United States in March because of numerous complaints over lack of quality titles, eye-strain from the glasses-free 3D screen and the high price point holding sales back.
“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,” stated Nintendo CEO Satoru Iwata in a briefing with investors.
With newfound competition from the explosion of games on smart phones and the pending launch of Sony’s Playstation Vita, Nintendo is looking to stay competitive through a lower price point.
The company is also learning from the mistakes it has made in the past, specifically those that the company made with its Gamecube system.
Iwata expressed the feeling among top management within the company that only by lowering the price point for the 3DS could the company properly financially capitalize on the system, pointing to the company’s large cash reserve as insurance against such a risky business maneuver.
When addressing concerns over why the price drop was being made in August as opposed to being made during the holiday season, Iwata delivered Nintendo’s business strategy for the timing of the move.
“For us to maximize the effect of the anticipated titles of this year end, it is necessary to greatly expand the installed base so that the appeal of the new software will be able to spread to consumers in a short period of time,” Iwata told investors. “Without creating such a circumstance, we would not be able to realize explosive sales in the year-end sales season.”
This motivation is a reversal of sorts for a company that largely shifted its focus from software to technological innovation, such as the Wii’s motion sensing capabilities or the 3DS’s glasses-free 3D feature.
This newfound focus is not the only reversal within the company, as Iwata stated during the briefing that at the lowered price point, Nintendo will lose money on each console manufactured for a short time—a stark reversal of company policy.
The company has built a strong reputation in the last decade with investors through its unwillingness to lose money on console sales and the ability to manufacture, market and sell units at affordable price points seen as one of its major strengths, especially with the unprecedented success of the Nintento Wii.
The success of this gamble by the company now rests in the hands of consumers, who will prove the newfound strategy right or wrong with their purchases in the coming months.
