2013/09/17 Nintendo Releases New, More Affordable Handheld Console; But is it Too Little Too Late?
Nintendo recently announced the release of a new handheld game console, the Nintendo 2DS. As the name suggests, the new handheld console is essentially a 2D version of the Nintendo’s 3DS console. By eliminating the costly 3D screen from the Nintendo 3DS, Nintendo was able to put out a device that costs considerably less. The 2DS will be available starting on October 12th, and retail for the low price of $129. For comparison, the Nintendo 3DS retails for $169.99. The new handheld, unlike the previous 3DS, does not fold in the middle and is hence a bit bulkier than previous Nintendo handheld consoles. The new console still has touchscreen functionality and will, of course, be able to play all of the games previously available to the Nintendo 3DS.
Figure 1. Nintendo 2DS
Source: Nintendo, Inc.
MRG Analysis:
Nintendo is clearly trying to bolster sales here by lowering the price of its product in the face of waning demand. Competition from other mobile gaming platforms like Apple’s iOS and Google’s Android has been affecting Nintendo’s mobile hardware sales in a very conspicuous manner. As a growing number of children and young adults have access to smart phones, the need for a dedicated mobile gaming device is obviated. Sales of Nintendo’s mobile platforms totaled 21.5 million in 2011 and declined 19% in 2012 to 17.4 million. More acutely, sales from the first two quarters of this year are down a massive 42% from the first two quarters of 2012. Nintendo’s release of a significantly lower priced handheld console seems like a last chance to squeeze life out of a hardware platform that is more than three years old and is rapidly diminishing in sales.
Figure 2. Apple iOS vs. Nintendo Platform Shipments, 2010-Present
Source: MRG, Inc.
Nintendo’s slowing hardware sales are sure to be detrimental to its future profits, which are generated primarily through software sales. Moreover, the growth of both Android and iOS is changing consumers’ expectations for gaming software and pricing. Consumers on those platforms are used to price points for games that do not usually exceed $10 per game. Nintendo’s handheld consoles also suffer from a deficiency in technology, lacking any type of gyroscopic motion controls. Furthermore, there are numerous examples of high-quality games on both platforms that can provide hours and hours of entertainment at everyone’s favorite price point, free. Nintendo’s price points for software, due mainly to very slim margins on hardware sales, are much higher, generally between $30 and $40 for new releases. With much lower prices for games than Nintendo platforms, users of Android and iOS devices may eschew Nintendo products altogether due to the high software prices.
On the Android platform there are numerous examples of games that unlawfully use Nintendo’s iconic characters. Nintendo can, and should begin to create iOS and Android games in order to prevent these copycats from diluting their brand value. At the very least, it would allow Nintendo to capture some significant additional revenue, especially if it is able to negotiate an exclusivity deal with a device manufacturer like Samsung, LG, or Apple. With the user base of both platforms growing exponentially, Nintendo’s latest offering definitely appears to be too little, too late.
