No matter how its console business is doing, Nintendo has always been able to lean on healthy portable system sales to prop up its finances. With the Wii U continuing to severely underperform sales expectations, though, it looks like the Nintendo 3DS is failing to pick up the slack as its predecessors once did.
A new revision to Nintendo's projected earnings, released today, sees Nintendo reducing its expectations of Nintendo 3DS sales for the full fiscal year, which ends in March. Nintendo now expects to sell 6.6 million 3DS units during the 12-month period, a 13 percent drop from previous projections and a 24 percent decline from the year before. That drop (and the accompanying drop in 3DS software sales projections) is a big reason why Nintendo is now also saying that its annual profits will be 50 percent lower than it had projected, though the company blames some of that decline on the weakening Japanese yen.
You might think this kind of decline is natural for a system like the 3DS, which is, after all, approaching its fifth birthday. But previous Nintendo handhelds have looked much more robust at this point in their lifecycles. The Nintendo DS was still near the peak of its hardware sales dominance in its fifth and sixth years, selling a whopping 31.18 million units in the 2009 fiscal year (and a healthy 27.11 million the next year). Game Boy Advance sales were still near a steady peak in the 2005-2006 period, bouncing up and down in the 15 million to 18 million annual sales range, thanks in part to the successful Game Boy Advance SP hardware refresh.
The 3DS, on the other hand, seems to have peaked earlier and lower than other Nintendo handhelds. After quickly soaring to sell about 14 million units in its second and third fiscal years, annual sales performance has dropped slowly and steadily, down to just over 8 million in the last full fiscal year. Nintendo seemed to hope it could at least keep 3DS sales relatively flat in the 2015-2016 period, but today's projection shows that the company realizes the 3DS' market decline is continuing. Blame the rise of mobile phones, the decline of the Japanese market, or whatever else you want. The fact remains that Nintendo's once-thriving portable business can't support the company as it once did.
To be sure, the 3DS hasn't been a total failure; the system just passed 55 million units sold since launch, after all, and that's been enough for Nintendo to keep generating modest (if smaller than expected) profits despite the decline. But with portable sales coming down faster than normal and the Wii U unable to help the bottom line very much, Nintendo doesn't have any cushion to ease the transition to a new and unproven generation of hardware. The shadowy NX, which is rumored to be a portable/console hybrid, will have to do a lot of heavy lifting right out of the gate if Nintendo wants to remain profitable going forward.
See, that's the thing- the handheld market is contracting. Nintendo cannot hope to survive meaningfully as a hardware maker and only rely on portable sales- they need to have a successful console too, or at least a console not as toxic and comatose as the Wii U is.
Having a moderately successful handheld and a moderately successful console is going to be far better for Nintendo in the long run than the position they are in right now- which is why Nintendo needs the NX done right, or their future in the hardware market is jeopardy.
All said and done, it's a bit of a shame, because I adore handhelds, and the 3DS is absolutely awesome. Five years later and still kicking with some awesome games. But the market has spoken, and unless Nintendo wants to be lost in the smartphone tide, it desperately needs a reinvention. One of the reasons we need to know what the NX is yesterday.