Analysis: 3DS' Post-Price Cut Prospects In The U.S.

[As part of his monthly NPD analysis, Gamasutra analyst Matt Matthews estimates that Nintendo's 3DS is set to "exceed 300,000 units" for the retail month of September in the U.S. thanks to its August price drop -- but where does it go from there?] When we discussed the July 2011 sales estimates released by the NPD Group, Nintendo had already announced its intention to price the Nintendo 3DS at $170 as of August 12. Because the announcement came right at the end of the July sales period, it could only have affected three days of sales out of 28. According to Nintendo's press release after the August 2011 sales estimates were published, they saw sales 260 percent higher during the 19 days following the price cut compared to the analogous period in July. (This suggests that Nintendo is relying on its own sales tracking system, since that period extends beyond that covered by the NPD Group's estimates.) As a result of the price drop, the Nintendo 3DS saw sales increase from about 22,500 units per week in July to over nearly 59,000 units per week in August. Sales of the Nintendo DS systems (Lite, DSi, and DSi XL) dropped 45 percent month-over-month while total sales of Nintendo handhelds (3DS plus DS) were flat from July to August. Together, these facts suggest that consumer demand for Nintendo handhelds remained relatively flat and those shoppers largely opted for the 3DS over one of the older models. As the figure below shows, that sales rate puts it above every month except March 2011 (the system's launch). Moreover, we still haven't seen a full month of sales figures for the system at its new $170 price, so there is the possibility that its weekly rate will rise again in September. Given the preliminary readings, it would appear that the Nintendo 3DS will exceed 300,000 units in September (a five-week month for the NPD Group's purposes), which is clearly a strong push going into the holidays. Let us turn to where the 3DS will go from here, since it is likely to stay entrenched at its current $170 price for a very long time. Supplies of the $100 Nintendo DS Lite appear to be drying up at retail, leaving the $150 Nintendo DSi and the $170 Nintendo DSi XL as the only two alternatives to the $170 Nintendo 3DS. We expect Nintendo to announce new pricing for the older models in the coming months, perhaps putting the DSi at $130 and the DSi XL at $150. Even with its own older brethren competing at lower prices, the Nintendo 3DS should be well-positioned for the holidays, since Nintendo has made it clear that 3DS software will be its primary handheld focus going forward. The company is betting that Super Mario 3D Land and Mario Kart 7 will draw enough fans to the system to keep sales fueled into next year when, hopefully, more third-party software will begin to arrive. After a slow start, the last four months of 2011 are the window during which the Nintendo 3DS will have its second chance to establish itself as a major platform. As the older DS line recedes in importance, Sony's PSP continues its slow decline, and the PlayStation Vita remains unavailable in the U.S., Nintendo will have the dedicated handheld market all to itself. If it executes well, the company and current management could reap the benefits of a big turnaround, akin to the revival the Nintendo DS saw with the introduction of the DS Lite in mid-2006. Should it fail, and that possibility should not yet be ruled out, then the consequences will not only be dire for Nintendo. The industry at large is struggling with an ongoing image of weakness, and headlines inside and outside the video game press will likely portray Nintendo's stumbling as another indication that the iPhone and iPad app markets have irrevocably changed the economic landscape for games. In particular, we believe that that will be the storyline -- whether it is true or not. [For more on the performance of the U.S. physical retail games market for the month of August, read the full Gamasutra feature, available now.]