Many people in the gaming community were taken aback by Nintendo's announcement last night that the 3DS would be dropping price from $250 to $170 only five months after its initial launch in America and after fewer than 900,000 units have sold in the U.S.
But that cut wasn't completely without precedent.
Nintendo's cut seemed unusually sudden. Let's look at some older systems: The original Game Boy was released in 1989 for $120 (or $90 without a game packaged in) and wasn't cut to $50 until 1991, and even then it was to coincide with the launch of Sega's Game Gear. The original PlayStation launched for $300 in 1995 and was cut to $200 in mid-1996. The Nintendo 64 launched for $200 in September 1996 and was cut to $150 in early 1997, six months later. Those cuts were fast and deep, spurred by the competition's own launches and cuts.
What about less successful systems? The star-crossed Dreamcast waited until late 2000, a full year after its September 1999 launch, to cut its price to coincide with the release of the PS2. The Gamecube and the original Xbox both dropped in price in 2002, less than a year after release their releases in 2001. Those cuts were timed to coincide with the PlayStation 2's first cuts, as that Sony console was released a year earlier.
Unfortunately for Nintendo, the only other console that dropped in price so quickly after launch without any competition utilizing similar cuts was Nintendo's last eye-popping experiment, the Virtual Boy. In August 1995 the Virtual Boy was released for $180. After lackluster software support and complaints of headaches the system was dropped to $160 in October of 1995, only two months after launch. In May 1996, only seven months after the first price drop, Nintendo cut the Virtual Boy to $100. By the end of the year the console was discontinued.
Nintendo's cut seemed unusually deep. A price cut of 32% seems like an awful lot no matter how long after launch it is. The Nintendo 64, Gamecube and Dreamcast all dropped from $200 to $150 with their first price cuts, a 25% drop. Some consoles had even smaller cuts, with the Game Boy Advance, the original DS and the Xbox 360 only dopping $20 in their first price cut (although Xbox cut $50 for a premium console, instead of the $20 for a core bundle). However, it is not unheard of to see price cuts of over 30%. The original PlayStation, the PlayStation 2 and the original Xbox all saw their prices go from $300 to $200 in the first price cut, a 33% decrease. While the PS2 waited two years to cut its price, the original PlayStation did it in eight months; the first Xbox cut its price by 33% in six.
The original Xbox comes close to having performed the same quick, deep cut as Nintendo did with the 3DS, but that console was released in November of 2001 and took full advantage of of the holiday rush, only choosing to drop its price the following May to keep up with the competition's price cuts and to bolster sales during a slow summer, with extremely positive results. The 3DS came out in March and will be cut in August, selling at its highest price point during the slowest months for gaming.
So what does this all mean? The money taken off the price is hefty, although not unheard of. The timing, in the absence of an obvious direct competitor launching or slashing price, is unusual, fuel for the argument that Nintendo is reacting to non-traditional competition, such as Apple or even its own DS.
Looking at another handheld, the PSP had similar problems with sales out of the gate. People don't seem to like expensive handhelds, but Sony resisted cutting the price. In fact, a year after the PSP's launch Sony released a slimmed down "Core Pack" that left out accessaries such as the 32MB memory card, and sold it for $200 compared to the original $250 price tag. Even two years after launch Sony only reduced the Core Pack to $170. So in reality it took them two years for any real price drop, and it was only a $30 cut.
Nintendo has rejected the PSP's strategy and in favor of a a strategy closer to what the Virtual Boy, first PlayStation and Xbox did. However whether it's the Game Gear, Virtual Boy, or PSP any handheld priced too high at launch for consumers' tastes has been torched in the open market. Nintendo is attempting to backtrack to a time when they were still perceived to be the price conscious company that sold a $90 Game Boy and launched the $250 Wii, but so far the 3DS has some pretty nefarious company for console comparisons.