It’s software, not price, behind the 3DS’ failure

Posted by Chris Leggett on Aug 4, 2011 in Gaming | 2 comments

The sudden and drastic discount on Nintendo’s very recently released 3DS handheld (from $479 down to $343 here in New Zealand) has been the talk of the gaming industry for the past week or more. We even discussed it at length on the latest Well Played podcast.

Many people posit that the price reduction also equates to an admission that Nintendo got the price point very wrong with the 3DS. But if industry speculation is to be believed, this new price point actually now brings the 3DS’ RRP to less than the cost of manufacture. Nintendo is about to sell the machine at a loss in a desperate bid to widen its install base. It’s difficult to say the company got the price wrong when a 33% discount constitutes a loss per unit.

If the iconic Nintendo franchises had been there at launch, would the 3DS' install base be much larger?

After much consideration and re-listening to the aforementioned podcast, I’m convinced that the lacklustre launch software line-up (which remains to this day, to a degree) is indeed the chief reason for the device’s commercial failure thus far. I fervently believe that if the right, system-shifting titles were available at launch, many consumers wouldn’t have had too much of a problem forking out for the handheld at its original asking price. Here’s why:

The 3DS’ capabilities are comparable to a fully fledged console.
Now, hear me out. When people think handhelds, they typically think kids, and an argument has surfaced that the NZ$479 asking price for the 3DS is too much for a kids’ device. They’d have a point if the 3DS was exclusively a gaming machine for children, which is far from the case.

Perhaps this stigma is due to the fact that, historically, handhelds have been watered-down machines that play watered-down games. I’ve mentioned before that I’d like to see the lines between handheld and console blurred, and the 3DS seems to be a definite step in the right direction. Super Street Fighter IV was perhaps the first big surprise on the system, which delivered an experience that wasn’t too far removed from what we know and love on our consoles. The Legend of Zelda: Ocarina of Time 3D authoritatively cemented the 3DS’ capabilities of handling action/adventure experiences every bit as compelling and immersive as anything on console. In fact, for weeks after Ocarina 3D’s release I found myself wanting to play the 3DS more than anything on my Xbox 360. Already, the 3DS has probably seen more love than the years-old Wii in my living room.

At launch, we paid in the region of $700 for our Xbox 360s and even more for our PS3s. The reality is that the handheld 3DS is far more versatile than these dedicated living-room consoles, and it’s already showing signs of delivering comparable experiences. Sure, it’s not as technically capable, but from laptops to mobile phones, consumers have always paid a premium to bring power to portable devices; bearing in mind the sheer amount of tech in this thing, perhaps the 3DS had the value proposition about right. That said, it’s still a very capable machine, perhaps more so than many seem to realise. And with the right software, the 3DS could easily become a gaming staple for many, even beating out the fully fledged consoles for our attention from time to time.

Its biggest market was struck by disaster shortly after launch
There’s one thing that people tend to overlook when discussing the failure of the 3DS:alongside the lacklustre software library and a price that caused many to hum and hah, Tokyo was struck by a freaking devastating earthquake and tsunami in the early weeks of the 3DS’ commercial launch.

If you look at this sales chart, you’ll notice that Japan made up the lion’s share of sales in the early years of the original DS’ lifetime. But in times of crisis, priorities change; a new handheld console is perhaps not as important when you, your friends and relatives have lost their homes and/or livelihoods. The impact of the earthquake in arguably the device’s largest market simply cannot be discounted as part of the reason for the 3DS’ poor performance.

The New Zealand launch RRP was already grossly inflated by international standards.
Despite my previous arguments, I’ll concede that just under $500 is an unprecedented asking price for a handheld console. But you’ve got to understand that the price Kiwi early adopters paid for their 3DS units is comparatively much higher than what early adopters in other markets (even Australia!) paid for theirs. For instance, the US launch price of US$249.99 works out to (with current, favourable conversion rates, mind) approximately NZ$290. Once the US discounted price of $170 kicks in, that works out to about NZ$200! It makes our discounted price of NZ$343 seem, frankly, quite ridiculous.

When I reviewed the 3DS, I suggested that there was no reason for anyone to rush out and buy it at launch, owing largely to the lack of system-shifting titles. However, I would not have hesitated to recommend the 3DS to anyone whatsoever if our pricing structure was more in line with the US pricing.

So sure, Kiwis got gibbed; but I doubt that our tiny market is exclusively behind the 3DS’ failure. Subsequently, I think the New Zealand launch RRP is not a fair basis for comparison. Even then, I still don’t think it’s too outlandish for what you get in this package.

Software aside, was the 3DS' original asking price too high?

The Ambassador Programme constitutes exceptional value
OK, so this one wasn’t a selling point for the console initially, and has been introduced to make good for any inconvenience or ill will caused by this sudden price drop. But it’s still worth discussing: Those who purchased their 3DS before the discounted price takes effect on August 12th – the loyal early adopters likely to feel just a little burned by Nintendo’s new strategy to get the device into more hands – will receive no less than 22 Virtual Console NES and Game Boy Advance titles free of charge. Not only will 10 of these be exclusively available to these early adopters, many of the games on offer are all-time classics such as the Game Boy Advance version of Yoshi’s Island, the original Legend of Zelda for the NES and many more. Admirably, Nintendo has offered early adopters at least as much value as they might have saved by picking up the 3DS at its newly discounted price. Compare that to Sony’s catch-all strategy for the PSN ‘Welcome Back’ package a few months back: where inconvenienced PSN users were offered two free games from a list of titles most self-respecting PlayStation owners had likely owned for some time and a temporary (and hence, effectively useless) subscription to the premier PlayStation+ service. Examined against this strategy, Nintendo’s handling of the situation can be considered masterful. In fact, those planning on picking up the 3DS when the discount kicks in should really weigh up picking it up beforehand given the exceptional value of the Ambassador Programme!

So there we have it – I still believe that the initial asking price of the 3DS isn’t as outlandish as some suggest; I think it was more a matter of poor timing. Rushing the device out the door to beat the PSVita hype was, clearly, a terrible move; perhaps launching it closer to this year’s holiday season with an RRP somewhere in between the launch price and the upcoming, discounted price would have been a better strategy (maybe even bundling in a first-party title a la the original Game Boy and Tetris).

Nintendo’s goal of 16 million units sold by the end of its first year is a lofty target indeed, and it’ll be interesting to see if the reduced price and a slowly improving library (with key titles due before the end of the year) edges the company any closer to achieving this. My belief is that it’s the titles, not necessarily the price, that will dramatically drive the device’s uptake. Interestingly, though, it seems that 3DS preorders have already increased fairly dramatically. If anyone can turn this seemingly impossible situation around, it’s probably Nintendo.