For the last few years, Nintendo's revenue and profits have been anchored by its handheld division, not its living room console. The Wii U's sales have never been strong, and Nintendo has had no luck reversing that trend. Unfortunately, the 3DS is running out of steam.
Nintendo released a revised copy(Opens in a new window) of its 2015-2016 fiscal year, which ends on March 31. The company has cut its sales estimates for the 3DS from 7.6 million units down to 6.6 million, with software sales falling roughly 17% as well. The company is predicting a 34% drop in operating income and a 51% drop in net profits for the year as well. There are some upward adjustments to sales estimates for Wii and Wii U games, but not nearly enough to compensate for the drop in hardware sales.An impossible lift
The 3DS had a rough debut and sales were terrible until Nintendo responded with a price cut and attractive software bundles. These promotions gave the console a much-needed sales kick, but it never matched the sales figures of either the Nintendo DS or the Game Boy Advance.
Original image by VGChartz
This chart is from 2014, but it illustrates the problem. The 3DS had a brief boom where it exceeded DS sales (that's the Nintendo cost cut in action), but it didn't sustain the sales rate. Worldwide, the Nintendo DS sold 154.88 million units over its lifetime. The 3DS has sold 58.2 million units to date.
Now, 58.2 million units is a very solid number, but handheld devices are typically cheaper than full game consoles and don't earn a company as much in profit per sale as a result. 3DS sales have been declining for a while, despite a strong game lineup and the release of titles like Super Smash Brothers.
Nintendo is set to demo their next-generation NX console at E3, and interest in the platform is running high. The combination tablet / console hybrid has users intrigued, despite fears from some that a true hybrid could cannibalize the profitable portable business without delivering enough of an upside to make that move worthwhile.
At the same time, however, it's hard to see how Nintendo could go on doing what they've done in the past. The company has lost market share to gamers who would rather play on an iPhone or Android device, and its franchise strengths simply aren't strong enough to offset the onslaught of mobile gaming.
It's still possible that Nintendo could build another handheld, but I suspect that the NX is meant to at least partially replace the 3DS. It's only getting harder to launch dedicated gaming devices in that market, and the 3DS isn't generating enough staying power to make a new launch a sure thing. Sony has already killed any plans it had for a next-generation follow-up to the PlayStation Vita.
Nintendo still expects to turn a profit for this fiscal year. But sales of the NX need to soar if Nintendo is to keep itself in the black. We still don't know when the next-gen hardware will launch on retail shelves; the earliest likely window would be Christmas 2016.
