Iwata explains 3DSs price cut to investors, asks for four months

Satoru Iwata gives a detailed and humble explanation about the 3DSs price cut and takes a pay cut

As is customary after a quarterly report, Nintendo has held an investors briefing meeting the day after. Normally during an investors briefing Satoru Iwata shows off a bunch of slides and information regarding the statements and talks up Nintendo. However, it’s not a normal time for Nintendo – sales are down and they’ve just announced a massive price cut for their flagship product, the 3DS. Needless to say, things aren’t going to well for Nintendo.

No, at this investors briefing Satoru Iwata didn’t show off any new information, in fact, all he did was talk at length about Nintendo’s decision to cut the price of the Nintendo 3DS and answer questions from investors. Iwata’s speech was a humble one in which he asked his own question, "Why does the company have to make such a drastic markdown now?".

Iwata said that "First of all, we have made the decision to markdown the Nintendo 3DS because we recognise that the current situation surrounding the system is different from that before the launch and immediately after the launch. Having strong momentum is very important for game platform businesses. Once momentum is lost, great power is needed to change that trend."
You see, Iwata and Nintendo really want the Nintendo 3DS to be the successor to the Nintendo DS and to do that they had to take drastic action. But why now? Why not closer to the holiday sales period which is when we all know things sell great?

"Since we will carry out this markdown [price reduction] in a period when Nintendo 3DS does not have such anticipated titles as in the year-end sales season, some seem to have interpreted it as a hasty move.

It is true that a great portion of our sales and profits are generated during the year-end sales season. If we 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. In fact, thinking in that way must be the norm, and a number of people must have anticipated that we would make the markdown during the year-end sales season or in fall this year. However, there are some specific reasons why we have decided to make the markdown at this time.

First, since the launch of Nintendo 3DS, one of the things we have learned is that it has taken longer than we had originally expected in order for the appeal of this product to widely spread. We feel that those who have experienced the system appreciate its attraction, but this appreciation has not necessarily been expanding at the speed which we had expected. For us to maximize the effect of the anticipated titles of this year end, it is necessary to greatly expand the installed base (before the launches of the anticipated titles) so that the appeal of the new software will be able to spread to consumers in a short period of time. Without creating such a circumstance, we would not be able to realise explosive sales in the year-end sales season. This is one reason for the markdown."

Basically Nintendo wants the Nintendo 3DS in the hands of consumers now, not just to sell it to them but so they can spread the good word about the 3DS before it comes to the holiday season. But there’s another reasons too: "We thought that eliminating the concerns of future hardware expansion early on would make a great difference to how retailers and software publishers will allocate their energies." Basically if the Nintendo 3DS isn’t selling, retailers won’t stock or promote and game companies won’t make games for it. Something we’ve already seen happening with the cancellation and delays of several key titles.

Iwata said he knew that this price reduction so early would mean that their profit and loss statements are well and truly in the red and asked that investors give him at least four months to turn in around. He also blamed himself for what’s happened to the Nintendo 3DS and so has given himself a 50% pay cut and a pay cut of anything between 30% and 20% for people on the director boards as well. "For the management to show its accountability for the level of the operating loss of this time and the prospect of no interim dividend, we decided at the directors’ meeting yesterday that we would reduce the compensation we will receive as the directors of the company." Very humble indeed. He also feels bad about the disappointing the fans. "I feel greatly accountable for having to make the markdown shortly after the launch, for having damaged our consumers’ trust". So it’s not just the bottom line he cares about, he cares about the people who had bought the system early and feel down abbout it.

Nintendo are serious about not giving up on the Nintendo 3DS. Yes it hasn’t sold well and they know it. They’re to blame and they’re taking the steps to turn it around – it’s going to cost them a lot of money and they’re asking investors and fans to stick with them.

Nintendo does it’s best work when it’s against the wall, so let’s see what they can do. Satoru Iwata’s entire speech can be read on the Nintendo Japan website (it’s in English, so don’t worry) so if you call yourself a fan of Nintendo you owe it to yourself to have a read.

Source: Nintendo.co.jp