Nintendo 3DS: Too Pricey To Win a Mobile Audience Over iPod, Smartphones

Nintendo (NTDOY) finally announced the details of its highly-anticipated 3DS handheld gaming system. While it isn't due in America until next spring, the 3DS has a price set for its early 2011 Japanese launch: 25,000 yen, or $298. It will be a game-changing system (as I said after a Nintendo 3DS hands-on for Gadget Watch), but the extraordinarily high price tag won't fly in America. Nintendo will have to make it cheaper for the U.S. market because of missing the crucial holiday season, a slump in handheld gaming machines, the rise of smartphones and, ironically, its own success with the Wii.

As discussed in previous Gadget Watch posts, this isn't the best time to launch a new gaming-dedicated portable:

Worse, Nintendo is missing its crucial holiday season. Calling it financially disappointing is an understatement: According to Daily Finance, the gaming giant cut its 2010-2011 profit forecast (ending March 31) in half to about $1.1 billion. A stronger-than-expected yen and overall weak video game sales are partly to blame, but the big culprit here is the delayed handheld. The Nintendo 3DS might make it in time for the current fiscal year, but critics (and Nintendo, obviously) aren't counting on it.

What is certain is that Apple (APPL) and other handheld competitors are happy to have another blockbuster holiday season. Last Spring Nintendo admitted that Apple -- not Sony nor Microsoft (MSFT) -- was its biggest concern. It's unclear how much of the actual video game market share Steve Jobs' company has taken: BNET Wired In contributor Erik Sherman recently argued that the Jesus phone and its ilk didn't steal customers, but expanded them.

What is clear is that the iPod Touch has more than 50,000 games, with dozens equal to or better than Nintendo's own classic titles, and more than 200,000 apps overall. (On the visual front, Sharp (SRP) is already implementing 3D technology in mobile devices that could be comparable, if not more advanced than the upcoming Nintendo portable.) The iPod Touch also starts at $229, nearly $100 less than the Nintendo 3DS's estimated cost.

Another major challenge here is Nintendo competing with its own Wii. To be clear, the 3DS is superior to the four-year old home console in almost every way:

3D and 2D options vs. 2D only
HD visuals vs. low-resolution graphics
Portability vs. home
Easy online access vs. counterintuitive online play

The real problem with the Wii is the $199 price, which, after Nintendo's price drop last year, makes it not only the cheapest home console, but one of the cheapest gaming options period. A consumer can choose from joining the 30 million U.S. Wii purchasers right now, buying one of the aforementioned Apple iPods, or waiting until next spring and spending an additional $100 for a slick game-focused portable. Nintendo's target audience is families, and unless the family already has a Wii, it's hard to picture recession-conscious parents buying a expensive portable playable by one instead of a cheaper living room alternative for the whole family.

After an impressive preview, it's obvious Nintendo didn't cut corners with the 3DS's cutting-edge technology. The estimated $300 price actually seems reasonable for what's inside. The problem is that the money-conscious, post-iPod American market isn't going to pay that much for a (comparatively) one-trick portable machine. Nintendo will have to make the MSRP $250 or cheaper. Otherwise, it should expect weak sales compared to its uber-popular DS predecessors.

Photo courtesy of J from the UK // CC 2.0
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