Today the world’s most successful video game company took some rare, drastic steps to jumpstart sales of their newest product with a giant price cut. Nintendo has long been considered similar to Apple, due to its ability to offer innovative gaming consoles (not to mention the white plastic industrial design) that are rarely discounted and can maintain premium pricing even during recessions, while competitors must slash continuously to maintain sales. Hopefully this is not the latest sign of the lingering nature of global economic malaise.
Some of the lessons from the struggles of the 3DS:
To quote MIT’s Charlie Fine, “All advantage is temporary,” and recent results are not an indicator for future success. While the two predecessors of the 3DS (the DS and the Gameboy Advance) were supremely profitable market leaders, the newest innovation is not maintaining that legacy. You are truly only as good as your last product. Nintendo has another major new console launch (the WiiU, successor to the mega successful Wii) coming up in the next year, and this recent development will surely affect their entire business model for that product. Could this ever happen to Apple?
The anatomy of damage control. By dropping the price over 30% just a few months into the product lifecycle, Nintendo has the unenviable task of smoothing things over with the 3DS’ early adopter market. To make it up to them, Nintendo is using the economical strategy of offering these folks over 20 free games from their back catalog through their digital download service. Sony had to create a similar package earlier this year to apologize to users of the PlayStation Network when it was hacked and service went down for over a month. The trend here is companies trying to delight angry customers as cheaply as possible, which digital content delivery can make a lot more palatable, but must be balanced with giving loyal customers enough value so they feel taken care of and not taken for a ride.
3D entertainment is not gaining traction regardless of the hype and investment by major companies. 3-D displays are not triggering purchase decisions at a high rate, yet they are permeating everything in multiple categories, now including smart phones. It’s clear that we will all soon be getting headaches by looking at them everywhere, but it may be because they are shoved down our throats rather than choosing the experience.
All is not lost. Nintendo has failed many times before with products like the Virtual Boy and the GameBoy Micro, and they will likely fail again in the future. While these types of things are embarrassing, especially a high profile public price reduction, there is no reason to think that Nintendo can not weather this storm and bounce back yet again, but it keeps getting harder.
The Apple Effect. Studies show that the top use of the iPad and other tablet devices is gaming. While this is no surprise, it presents new and difficult challenges for established industry players like Nintendo, Sony and also Microsoft. Not only must they compete for the customer’s money and mindshare, they also must now compete with suppliers who must now choose how to further divide their limited resources to support these multiple platforms for which to develop. And let’s not forget about Android and Facebook, also big players in the video game market now.
Link: Kotaku Article, “3DS In Crisis, Nintendo Must Execute a Drastic Plan B“