‘Drastic’ 3DS Price Markdown Was Needed Immediately, Nintendo Chief Says
Nintendo took its price markdown on the 3DS less than five months into its launch (CED July 29 p6) because the company decided “a drastic approach” was needed if the 3DS is to become the successor to the DS, Nintendo President Satoru Iwata said. “Having strong momentum is very important for game platform businesses,” Iwata said Friday at a financial briefing in Japan. “Once momentum is lost, great power is needed to change that trend.”
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"Some seem to have interpreted it as a hasty move” because the price cut, effective Aug. 12 in the U.S., is coming at a time when Nintendo doesn’t have any highly-anticipated games that will be released, Iwata said. Some observers had expected Nintendo to cut the price in the fall or holiday season in conjunction with several strong game releases, he said. Those coming Nintendo games for the system include Super Mario 3D Land in November and Mario Kart 7 in December. It’s “true that a great portion of our sales and profits are generated during the year-end sales season,” and if Nintendo was “just focused on maximizing the impact of the markdown, it might make more sense for us to do so when a number of anticipated titles are to be launched,” Iwata said. But he said it was taking “longer than we had originally expected in order for the appeal of this product to widely spread,” and for the company “to maximize the effect of the anticipated titles” shipping later this year it was “necessary to greatly expand the installed base” before those games arrived, he said.
Retailers also decide, based on summer sales, what kind of product allocations they should have for the holiday season, Iwata said. Initial feedback that Nintendo received about the price cut from retailers and third-party publishers was “rather positive,” he said.
Iwata asked analysts and investors to see how the price cut played out “over the next four months, until the end of the year-end sales season, before making any judgments” about the move. But Iwata conceded that a “drastic markdown like this, before the mass-production effect can take place for the hardware, will naturally generate red ink” on Nintendo’s hardware sales this year. In addition to the $80 U.S. price cut to $169.99, Nintendo is slashing the system’s price in Japan to 15,000 yen from 25,000 yen, effective Aug. 11, and cutting the price in Europe by about 33 percent Aug. 12. Pricing on the system in Europe varies by retailer.
Iwata also said he felt “greatly accountable for having to make the markdown shortly after the launch, for having damaged our consumers’ trust, for having made a significant impact upon the financial forecasts, for the annual dividend now being expected to be significantly less than originally expected and for now forecasting that there will be no interim dividend.” To that end, Iwata said, he and the rest of Nintendo management decided at a board meeting to cut Iwata’s compensation by 50 percent, representative board members’ pay by 30 percent, and other board members’ pay by 20 percent.