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No Nintendo 3DS Price Cut, but Increased Sales Expected

Is Nintendo's portable, 3D handheld in dire straits? According to these analysts, everything is going according to plan.

There's been a lot of debate surrounding the significance of the Nintendo 3DS' sales; it was strong at launch but has since seen its numbers fizzle. However, Nintendo's new glasses free 3D portable is performing exactly as expected...at least according to market research group Interpret LLC. Despite doomsday stories about the new device, analysts expect sales to pick up this fall and beyond.

According to Michael Cai, vice president of Games and Technology at Interpret, the data collected from gamers surrounding the Nintendo 3DS was much different from past and current Nintendo handheld devices; but that was by design. "Based on our research, we knew the 3DS curve would look more like the PSP curve early on," said Cai. "The industry should not base longer-term forecasts on initial sales."

Nintendo has sold 24.5 million units of its DSi hardware since launch and 3.61 million 3DS portables through March 31 of this year, according to its annual report. When you factor in sales of all of the Nintendo DS portables, the number jumps to 147.5 million worldwide, according to VGChartz.com. "We knew that Nintendo was targeting a different audience with the 3DS as part of a conscious effort to go back to core gamers," says Cai. "A lot of the games for the device are targeting the younger male demographic. That's what many in the games industry don't understand. Many people expected Nintendo sales to repeat the DSi story and even added higher expectations."

As for Nintendo, they've said all along that they were targeting core gamers. Although analysts agree that the game giant hoped a lot of people who owned a DSi would upgrade, so far that hasn't happened. But that's not to say that sales won't pick up moving forward. It's partially a matter of that hefty price point. "Nintendo launched a premium-priced device with very little software support, which the recent E3 lineup was intended to remedy," says video game analyst Michael Pachter. "I don't think that the price is so much of an obstacle as the software lineup, but given the high price, it's hard to justify buying a 3DS instead of a regular DS. Once there is a lot of exclusive software for the 3DS (Luigi's Mansion 2, Kid Icarus Uprising, Mario Kart 3DS, etc.), I expect to see sales pick up."

Pachter also expects Nintendo to cut the price of 3DS to $199 when Sony launches PS Vita in March 2012. But even without a price cut this year, Pachter forecasts Nintendo will sell 10 million devices this year and 12 million in 2012.

One of the challenges Nintendo faces is the "Angry Birds factor." The portable gaming world has changed dramatically in the past five years, and Nintendo faces new competition from companies that it's never dealt with before. Nintendo is no longer the only game in town. Cai said Sony' PSP is still selling well, but the bigger threat is from Apple's iOS devices, and games like Angry Birds. With libraries of tens of thousands of games selling for free or as little $0.99, the $30 price point for most Nintendo 3DS games can seem high to the average consumer.

According to Interpret research, Nintendo is doing some things right, though. For one, its 3DS marketing is working; Interpret research shows awareness of the Nintendo 3DS among gamers spiked from 16% in 2010 to 65% at the wake of its release. But purchase interest has actually suffered -- positive interest declined from 22% to 16% over the past year. On the plus side, 8% of gamers report owning a Nintendo 3DS already. And 64% of those who purchased a 3DS are extremely satisfied with the device, thirty-four percent are somewhat satisfied, and only 2% were not satisfied.

That's good news for Nintendo, which is now facing glasses-free competition from giants in the mobile space like HTC and LG. Sprint just launched the HTC EVO 4G 3D phone and AT&T will ship the LG Thrill 4G in a few months. Both phones offer a similar size screen as Nintendo's device (albeit only one), and have key game franchises from publishers like Gameloft. "We're really excited about 3D gaming on the mobile side," said Samir El Agili, Gameloft's general studio manager. "Nintendo 3DS launched and has showed gamers what's possible with 3D gaming without glasses. There are already two 3D mobile devices in the US and more are on the way."

But despite the huge marketing budgets behind these new 3d phones, Nintendo doesn't have anything to worry about. "I don't think that 3D phones are as much of a threat as smartphones are," says Pachter. "There will be a lot of smartphones, and they will become the de facto entry level phone in a couple of years, meaning that dedicated handheld gaming devices will see their addressable market shrink to only the hardcore."

Cai said 3D phones appeal to different audiences and are less a threat to 3DS and PS Vita than Apple iOS and Android devices. "I don't see a lot of people rushing out to get 3D phone unless it comes almost free and with no additional premium," says Cai. "But the more 3D capable devices that are out there, the better for everyone, from a consumer awareness and marketing standpoint."

As for Nintendo, games have always been the key drivers for the Japanese giant. Tetris sold the original Game Boy and Legend of Zelda titles helped drive sales of later generations. Nintendo 3DS is still waiting for its killer app, but E3 showcased multiple titles that could fill that void. Coupled with an anticipated price cut, the 3DS isn't going away any time soon.


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