ConsoleWatch:  Nintendo Admits 3DS Sells At A Loss; Calls Mount For a Vita Price Cut

ConsoleWatch: Nintendo Admits 3DS Sells At A Loss; Calls Mount For a Vita Price Cut

Most of the major news in consoles this week was in handhelds, but there are major implications for both Sony and Nintendo. Nintendo broke a record that's stood for almost 125 years and posted the company's first ever yearly loss this week. The company had issued profit warnings as early as November, but the amount—$533 million—was double what the company projected back last fall.

Part of the problem was the massive price cut Nintendo gave the 3DS last summer, when it slashed the price from $250 to $160. The $90 cut drove the unit's price below its cost-of-manufacture, and has left Nintendo reliant on software sales to make up the difference. As a result, the 3DS faces a much slower road to profitability and is dependent on software sales and royalty fees to make up the difference. With over 13.5 million units sold to date, the 3DS is well on its way to becoming a profit center; Nintendo has pinned its hopes for a recovery on handheld software sales through 2012.

Vita aeger consilii

The PlayStation Vita's woes, meanwhile, have analysts and industry pundits calling for price cuts -- preferably yesterday. Unit sales have gone into freefall since the console launched, it's respectable sales of 324,000-odd units its first week out have slumped to less than 10,000 sales a week. US sales haven't slumped to the same degree but have fallen nonetheless; estimates put the figure at around 225,000 units sold in March, which is less than it sold for the four days it was available in February.


The Playstation Vita's graphics have been hailed as gorgeous, but that's not moving the devices very well

Would a price cut fix what ails the Vita? That's hard to pin down. Data from both the 3DS and Vita launches suggests that at their original prices, the systems only appealed to a core group of followers willing to pay such a high premium. The worry, in this case, is that Sony may not have the franchises it needs to haul the Vita's sales out of the doldrums, price cut or no price cut. 3DS sales only improved modestly after the price cut -- it was the launch of new Mario games and other first-party titles that really kickstarted the system's popularity.

The other question is whether Sony can afford to cut the price at all. The company is bleeding cash as year after unprofitable year have piled on, and the Vita isn't cheap. Nintendo's estimated manufacturing cost for the 3DS, for example, is about $104 -- yet the company is selling below cost at $160. The difference between the two is the cost of marketing, other manufacturing costs, and software development. If we take Nintendo at its word and assume that such costs add up to $180, how does the Vita look?

Not too well, it turns out. The Vita's BOM comes out to $159. That doesn't leave Sony with a whole lot of wiggle room, particularly if it's taking a loss on the hardware. The PSV's OLED screen and touchscreen capabilities are expensive, and there's no way to drive those costs down in the near future.

Between the two companies, Nintendo has a reasonable chance of eventually driving the 3DS to profitability, but Sony's fortunes are less clear. Of the two, Sony is far better positioned to create a convergence product that would mesh tablet functionality and a handheld game device, but the internal barriers to doing so are probably high. The entrenched game development community won't want to give up control of the device or of the overall experience. Regardless, the Vita is almost certainly the last handheld of its type--regardless of whether or not Sony cuts the price tag.


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Its hard to see these two giants in the video game and entertainment industry falter. Nintendo has been the one to look to for product advance and innovation. They have been the first to almost every new field in gaming. Nintendo what have you done? a 125 year streak has got to be a lot to swallow for the one CEO who now and forever will be known as the one who broke the legendary streak of profitability.

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the Vita's graphics really are amazing and yes it is sad to see the consoloe that i grew up on being having difficulty.

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I think the business model of selling a slightly improved Nintendo DS every six months finally caught up with them.

It's too bad though, as (of the current players in the market) Nintendo's games have been the ones with standout gameplay. If the rumors of their next console specs are true, and they don't have any other major tricks up their sleeves, they may be going the way of my beloved Sega.

Also, the Vita, and any other Sony product, can burn in hell as far as I'm concerned (as a disatisfied PSP & PS3 owner who's had to cancel two credit cards thanks to Sony and their anti-consumer BS that both pissed-off and inspired hackers everywhere).

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hahaha good point. sony is pretty much a rotten no good backwards tech company. i hate the Ps3 platform and until just seconds ago i forgot i ever owned a psp. now i remember, and i am pretty sure i repressed those memories because they were so horrible.

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Portable consoles are being used way less now so this had to happen sometime. Surprised Nintendo is going down when all the kids are using them xD.

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Nintendo isn't going the way of Sega any time soon at all. There's lots of people out there that'll still buy a wii u nomatter what. I'm probably more a 360 fan but i believe I'll be getting a wii u. Unlike what I hear from some I actually probably use my wii every day and more than my 360. Netflix without a gold membership is a biggie, but I also got the homebrew channel and media center to play dvds or youtube videos. Not to mention microsoft and sony are still quite a ways off from releasing their new systems, I'd say another two years at least. Both have announced there will be no hardware news at this years e3.

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@IGilliland

I agree, and yes the gold membership requirement is very frustrating!

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