This week, Nintendo drastically reduced the price of the Nintendo 3DS around the world, a move that will significantly impact the company’s profits for the ongoing fiscal year. Following the price drop, Nintendo cut their profit forecasts for the year by 82%.
Speaking to investors, Nintendo president, Satoru Iwata, clarified why the price of the 3DS system was dropped this early on. Nintendo tend to sell the most hardware during the end-of-year holiday season, which is a fact that raised questions as to why they simply didn’t wait until the holidays for sales to pick up, or why they didn’t wait to drop the price of the system alongside the release of their high-profile games, scheduled for the second half of this year.
“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,” Iwata stated, in acknowledgement of this point. “Without creating such a circumstance, we would not be able to realize explosive sales in the year-end sales season.”
Another reason for the early price drop, Iwata said, was to eliminate any concerns retailers or third-party software publishers may harbour with regard to the 3DS. Retailers are currently deciding upon allocation of store shelves and what products to stock, while game publishers are in the process figuring out which development teams to allocate to which projects. In order to ensure that the 3DS is viewed in a favourable light in both cases, a price drop was necessary.
Iwata says that immediately following the price drop announcement, Nintendo began to receive positive feedback from both retailers and third-party publishers around the world. “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,” he stated.
Iwata requested of investors that they wait and monitor how the next four months play out, until the end of the holiday season, before making any judgements. In the mean time, in order to show accountability for the effects of the markdown and for “having damaged” the consumers’ trust, Nintendo’s management will be taking cuts to their compensation.
Iwata, who feels personally accountable for the situation, will be taking a 50% cut from his compensation. Representative directors will take a 30% cut. Finally, other directors will take a 20% cut.