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Tough Road Ahead

Fri 15 Apr 2011 7:00am GMT / 3:00am EDT / 12:00am PDT
RetailHardware

Naysayers are speaking too soon on the 3DS - but that's not to say it's all looking rosy for the system

If you'd like to get your hands on a Nintendo 3DS, there's good news for you - it's extremely easy to do so. In most if not all of the countries in which the new system has launched, you can walk into any major games or electronics retailer and pick one up off the shelves. You might, at worst, not be able to get the colour you want - black was sold out when I went to buy a couple of units in Japan earlier this week, but there were thirty-odd blue units stacked up behind the tills.

What's great news for consumers, though, is precisely the opposite for Nintendo. In some regards, the launch of the 3DS seems to have been engineered to avoid the massive shortages which we witnessed with previous hardware launches - most notably the Wii. The firm dropped the console into the market in spring, rather than autumn, far away from traditional times for mass market gaming purchases. If that was the strategy, however, it's unlikely that the firm expected - or wanted - success on quite this scale.

Bluntly, the excitement around the 3DS has fizzled out - with the first wave of early adopters driving a sales spike, only to discover that there's not much in the way of a second wave waiting behind them. The most worrying figures come from Japan, the market in which the DS launched first. Here, we can see a clear spike followed by an incredibly rapid fall in sales, to the extent that the 3DS now lags the PSP in week on week sales.

The excitement around the 3DS has fizzled out - with the first wave of early adopters driving a sales spike, only to discover that there's not much in the way of a second wave waiting behind them.

We don't have quite so much data from the USA and Europe, but the same pattern seems likely to be followed - an assumption supported by the evidence of this week's UK software chart, which saw 3DS titles plummet out of the rankings.

So this is it, right? This is the drastic fall of Nintendo's fortunes that half the industry has been anticipating ever since the company's star rose so high on the back of the DS and the Wii? Each new graph and sales ranking being released is another nail in the coffin of the 3DS, a system whose potential has been questioned - albeit cautiously - by analysts, commentators and insiders ever since its existence was revealed - right?

I wouldn't be quite so hasty. The 3DS isn't performing as Nintendo would expect, and it remains a risky gamble for the company - both in terms of the 3D technology itself, which quite simply may not resonate with the wider audience as much as Nintendo hopes, and in terms of the business model, which seeks to continue charging console-level prices for physical software, in an era when handheld gaming is obviously under pressure to move in a different direction. However, to declare the console to be in crisis after just a few weeks is to ignore the sheer weight that Nintendo is capable of throwing behind its platforms.

A few things to consider. Firstly, the launch timing is undoubtedly somewhat neutral - well away from major gift-buying times in all of the launch territories thus far. Several commentators have noted that the real test of the 3DS will come when we hit mass market buying seasons around Thanksgiving and Christmas (and, to a lesser extent, Japan's Golden Week holidays early next month), and this is a perfectly reasonable stance. For all that it has legions of devoted core fans, Nintendo makes no bones about how much of its market is made up of children and families - and for them, console purchases are often a holiday affair.

Secondly, those self-same core fans can't all be categorised together as "early adopters" - it's just not that simple. Some of them will run out and buy Nintendo's latest hardware simply because it's Nintendo, confident that the software will come with time even if it's not there right now. These people drove the stellar adoption rates that we've seen in the first week in every launch market.

Others, however, will wait for the software - and on that front, Nintendo has yet to deliver. Capcom's Street Fighter IV 3D is the early break-out hit for the platform, shifting over a million units so far, but even with a few solid titles to be seen elsewhere - Pilotwings, Nintendogs and Professor Layton being the particularly notable ones - the overall line-up is uninspiring. Nintendo needs to roll out its big hitters, and wait for other publishers to do likewise - recall the excitement at E3 over Konami's Metal Gear title for the platform, for example. There is undoubtedly a huge reservoir of consumers out there who are already mentally committed to investing in a 3DS, but they're "waiting for the games".

There are other factors to consider with regard to the system's slightly disappointing first month. While some of them - such as the Japanese earthquake, which has undoubtedly depressed demand in this market - are far from Nintendo's control, others speak to bigger problems that the 3DS will face in the coming months and years.

The most notable, in western markets at least, is that Nintendo has - perhaps foolishly - drawn attention to the biggest challenger of all by launching the 3DS in the same window as Apple's iPad 2. The comparisons are not flattering; Apple's much more expensive (albeit far more multi-purpose) device remains extremely difficult to acquire, with tools springing up online to track shipments to stores so that customers can line up in advance. This, it might be added, for a device that's little more than a logical iteration - adding a camera, slimming down the form factor, boosting the power, but not making anything like the dramatic change represented by the 3DS' functionality.

Nintendo has the most enviable library of IP and arguably the most talented pool of developers in the games business. It has a warchest of literally billions of dollars.

Apple's success, though, points an accusing finger right at a ball which Nintendo has fumbled and dropped repeatedly in the past few years - online. There was a lengthy period in which online functionality was talked about in vastly inflated terms, trumped as the next big thing despite being of interest only to a niche audience - and at that time, Nintendo's cautious, slightly sniffy attitude to online was laudable and sensible. Or so it seemed; now, with online capabilities being a fundamental part of both core and mass-market gaming, both in terms of distribution and functionality, Nintendo's holding out on online systems seems more like stubbornness than intelligence.

It's not that the 3DS doesn't do online - it does, and it even innovates to some extent with features like StreetPass and SpotPass. However, the fact that it launched without the most basic part of its online content offering, the 3DSWare store, even being online, tends to suggest exactly how much emphasis Nintendo places on this aspect. The continued use of Friend Codes, meanwhile, almost certainly robs the system of the ability to do straightforward things like adding friends directly from social network contacts.

None of this, of course, is essential functionality for playing games, and Nintendo and its fans can fall back on that argument very successfully. Make a great game for the 3DS, and it won't hurt the experience one bit that the online offering is weak - developers can work around it, and plenty of vocal gamers will actually prefer to see a console that doesn't dig its claws into their social networking sites, no matter how convenient (and commercially sensible) that functionality may be. Moreover, Nintendo knows that a major part of its audience is more interested in local play than online play anyway - PlaygroundPass, perhaps, might have been a more honest name for StreetPass, since it's in schools that the system is likely to be of most value.

However, in the longer run, there's a clash of philosophies evident here which goes far past in-game functionality. If you buy an iPad and bring it home, you can immediately start downloading game software for the device - filling it up with tons of surprisingly high-quality titles for only a few pounds or dollars each. Buy a 3DS, however, with the same budget to spend on games, and you'll get one game title in the shops - and have to return to the shop to get your next one. Compared with what's available elsewhere, the system's software doesn't just look expensive - it looks poor value and inconvenient.

Apple is just a relevant example of a company that understands this and is pushing firmly in this direction. Microsoft and Sony know, too, and it's evident which way the wind is blowing for them - without actually losing their focus on the big-budget AAA titles on which their markets are founded, they are increasingly allowing download games and lower-priced titles to take a place in the centre stage. Expect to see this re-enforced as more details of Sony's NGP emerge in the coming months.

All of which leaves Nintendo in a tough position, as has been argued many times before - but it's important to remember that it's a tough position occupied by an even tougher company. Nintendo has the most enviable library of IP and arguably the most talented pool of developers in the games business. It has a warchest of literally billions of dollars - an asset pool so large, in fact, that fluctuations in the values of the Dollar and the Yen can create paper profits and losses that totally obscure Nintendo's (enormous) operating figures on its balance sheets. It has superb recognition in the kids and family markets as well as a dedicated audience of veteran gamers.

3DS was always going to be an uphill struggle - a product that feels, for all its 3D wonder, like it belongs to a bygone era, one which we left behind when smartphones and tablets started to dominate the public consciousness. I maintain my view that it will never reach the sales peaks achieved by the original DS platform - but it's far too early to call "crisis" on this console, or on Nintendo's strategy, just yet. The real test will come in six months - when a console with more heavy-hitting software will face its first Christmas sales period. Only if the 3DS falls at that hurdle will it be reasonable to start seriously worrying about where Nintendo goes from here.

7 Comments

Mike Wells
Writer

61 28 0.5
All true, plus the fact that the 3DS's greatest innovation - 3D - literally has to be seen to be believed and this will take time. Any 3D technology has the same marketing challenge - how do you show it without physically showing it? If you show someone a 3DS the reaction is often: "wow - that's amazing/much better than I expected, well I'll have to get one". Expect the 3DS to go viral... s-l-o-w-l-y. It also needs an online app store for snack-length 3D games (and they need to market the hell out of it). Apple made the iPhone a success partly by incremental adding of software capability post launch. Nintendo could do it too (but it needs to do it confidently and loud).

Posted:3 years ago

#1

Daniel Hughes
Studying PhD Literary Modernism

436 496 1.1
The last two paragraphs are key, I think. It's up to Nintendo to remind us why dedicated games devices should remain relevant and remain on the market in an age of convergent devices. I for one hope Nintendo and their third party partners will be up to the task.

Posted:3 years ago

#2

Gwyn Howell
Developer

6 5 0.8
I don't see how you can make such speculation in such early days. The 3DS launched without a killer game. As Nintendo themselves say "Software sells hardware". The clearly released the 3DS at a quiet time of the year to satisfy the die hard. The killer titles will come in the coming months leading right up to christmas and who knows what they have up thier sleve to announce at E3? I have evey confidence that the 3DS will be a success - it really is a great little machine - they just need the software to back it up, the first of which being OOT this June.

Posted:3 years ago

#3

Gregory Keenan

102 11 0.1
I agree, the 3DS will be a viral product. I bought one and my freinds seeing it convinced them to buy one.

I also think there is a market for dedicated portable games consoles. The ipad is fun, but there is only so long you can play infinity blade.

Posted:3 years ago

#4

Nicholas Lovell
Founder

185 170 0.9
The true strength of Nintendo is that it has a massive pool of "whales" - people for whom spending a lot of money on their gaming hobby is natural.

The problem is that competitors are finding different ways of reaching their whales through freemium games, online distribution and so on.

The biggest danger is not that 3DS won't sell any units, or that Nintendo doesn't have committed players. It's that it doesn't have *enough* committed players to cover its expensive development costs (and even more expensive distribution costs)

Posted:3 years ago

#5

Andrew Ihegbu
Studying Bsc Commercial Music

439 146 0.3
No Zelda, no Mario, no starfox, not even sonic the hedgehog yet. It's not a real Nintendo console until its it's got at least two of the aforesaid titles. Atm it's like the original Xbox console has been launched without its own halo to pull people from their current devices with a game-changing experience. You can't launch a console with street fighter as your flagship title as it is an experience everyone has already played to death. I think it's possibly the worst leading titl in the world as I can't think of a game that thrives off keeping it all the same with every iteration than SF. You can't sell consoles with new 3d tech but only a side scrolling generic fighting game to play on it. (Face it SF defined generic fighting games)

Posted:3 years ago

#6

Mark Raymond
Gamer; Consumer; Blogger

40 0 0.0
To get right to the point, the landscape is changing/has already changed, and the 3DS conceptually looks like a dinosaur before the ice age hit. Sure, the 3DS may end up a success and prove the naysayers wrong, but I've yet to see any articles recently explaining how that may end up being the case. For all the negativity against Nintendo recently, the arguments against are sound and very plausible.

Posted:3 years ago

#7

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