In February of 2011 Interpret LLC released the Interpretations Report “Nintendo 3DS: Fighting for Pocket Share,” in which it was suggested that Nintendo will be challenged by the rise of mobile gaming on phones and tablets alike. Months later, Nintendo acknowledged the shortcomings of its device by reporting an operating loss and re-pricing the 3DS. On the heels of this announcement, it seems like a good time to further examine why the handheld console did not meet expectations.
For the first time since Nintendo started reporting quarter earnings in 2003, the Japanese company suffered its first quarterly loss. In conjunction with this announcement, Nintendo also revealed that it would be dropping the price of its recently released Nintendo 3DS from $249.99 to $169.99, which indicates disappointing sales for its newest handheld device. From its release, the 3DS has received criticism for its three hour battery life, limited titles, and its peculiar price point compared to the $130 DS Lite. Although these are some big issues for consumers, the 3DS faces a more exogenous problem. Over the past year the handheld gaming market has changed, and Nintendo is no longer competing only with Sony for their share of the market; now, the accessibility and enthusiastic adoption of games on other mobile platforms, such as tablets and smartphones, are further impacting the marketplace.
Results from Interpret’s New Media Measure™ supports this trend of a fragmenting market and reinforces the notion that non-traditional mobile platforms with gaming capabilities are posing a considerable threat to game-centric devices. According to New Media Measure™, active use of iPad, iPod Touch, and smartphones has substantially increased over the past year: iPad – 0.9% to 2.6%, iPod Touch – 6.0% to 7.3%, and Smartphones – 7.8% to 8.3%. During the same time period, active users of the Nintendo DS and Nintendo DSi have decreased from 9.5% to 7.8%— a percent change of -19%. Additionally, devices like the PSP and PSPgo have exhibited similar declines: 12.2% to 11.8%. While this data provides a glimpse at the current mobile gaming market, to tell the full story we must take a look at how Nintendo DS gamers are reacting to the changing mobile gaming landscape.
According to the data, among those who currently own a Nintendo DS or DSi, active use of the devices for gaming has declined from 46.6% in Q2 of 2010 to 41.3% in Q1 of 2011, while active gaming use of iPads has increased from 1.8% to 5.2%, iPod Touch from 12.6% to 15.6%, and smartphones from 14.2% to 17.6%. It seems that Nintendo handheld owners have been putting aside their DS devices to use other mobile gaming platforms.
The mobile gaming environment has become increasingly competitive in recent years with the introduction of more mobile gaming devices, and as more gamers embrace non-traditional mobile gaming devices such as tablets and smartphones, the fight will only get more difficult for manufacturers. Nintendo is already experiencing the realities of the market, so it will be interesting to see how they react. Perhaps Microsoft was wise in staying out of the handheld gaming market, as their COO Dennis Durkin stated, it’s “a very crowded market and a very, very red ocean right now with a lot of change happening.” When the waters clear, we will see which platforms and manufacturers are left in the sea.