Nintendo 3DS Will Miss the Holidays, but There's a Silver Lining
After telling the world last March it had a 3D, portable game system that didn't require 3D glasses, Nintendo (NTDOY) finally held a conference to announce its release date last week. The big news was that the handheld system, the 3DS, would on store shelves in Japan on February 26th and in North American before the end of March 2011. Unfortunately for Nintendo, the headlines told a different story, declaring, one way or another, that a delay by Nintendo meant it would miss the 2010 holiday shopping season.
The odd thing is that there is no delay. From their first announcement back in March, which came as a short press release possibly meant to jump ahead of any leaks, Nintendo claimed that it would get the new machine out by March 2011. So while Nintendo will indeed miss the holiday shopping blitz, it never meant to release the product before 2011.
M2 Research analyst, Billy Pidgeon, however, thinks the big problem was the announcement and not the release date. "It would have really pumped up the quarter," having the 3DS on shelves this holiday season, he says, but the announcement created a demand their marketing wasn't ready to address.
Complicating matters, the same day Nintendo announced the 3DS' release date, it cut its profit forecast for this fiscal year by 55%, citing a stronger than predicted yen, but also blaming "the decided release conditions for the Nintendo 3DS." The sales assumptions for this holiday season for the rest of their hardware also took a dive, since sales of the current handheld, the DS, will likely suffer now that customers know a better product is just around the corner. None of this helped with the negative headlines.
Sponsored Links
But Pidgeon sees a method where the headlines saw madness. He points to Nintendo's traditionally cautious attitude toward its hardware, which it never subsidizes, he says, always making sure to sell everything at a profit, including new systems. Even if Nintendo could have pushed the 3DS out by the holidays, Pidgeon questions whether it would have been cost effective to do so. Instead, he says, Nintendo could be "better off putting it out in a slow period," giving retailers a chance to discount the current DS while clearing space for the new and exciting product to sell during the industry's lean times.
The 3DS won't be cheap either. At 30,000 yen in Japan (about $360), it is twice the price of the original DS at its launch in 2004 (Nintendo has not announced prices for North America or the rest of the world). But, Pidgeon says, the higher price of new mobile devices like Apple's (AAPL) iPhone and iPod Touch give Nintendo the space to get more money for its new product. He also expects smaller shipments at first, with Nintendo putting out enough 3DS units for the early adopters who won't balk at the price. As manufacturing costs go down, Nintendo can increase shipment and lower the price in time for the next holiday season.
Throwing some cold water on those early headlines, Pidgeon says, "overall, the effect could be positive."
