The 2DS features a slate form factor.

AUG. 28, 2013 • The Nintendo 3DS is getting a less expensive younger sibling on Oct. 12 called the Nintendo 2DS. Arriving in North America at $129.99, the unit is $40 less than the cheapest 3DS SKU in the market. The 2DS will also launch in Europe during October, but pricing there has yet to be announced. Neither were any concrete shipment plans for Japan announced. As the name suggests, the 2DS will play all current and future 3DS games but not in 3D. All 3DS games already have the option of being played in 2D, so no changes to content are necessary.  The other major change to cut production costs was the elimination of the clamshell body. The 2DS is an always-open slate design closer to a tablet. To facilitate the new form factor, the directional pad, face buttons and thumbstick controls have been moved higher than on the 3DS. For the quarter ending June 30, 1.4 million 3DS units were sold globally, down from 1.86 million for the same period in 2012. Despite this, Nintendo projects that 18 million 3DS units will be sold globally during the fiscal year, up from 13.95 million during the previous fiscal year. The gamemaker has not said whether that annual forecast includes 2DS sales in the total.

In related news, Nintendo is reducing the MSRP of the 32GB Deluxe Wii U from $349.99 to $299.99 effective Sept. 20. To bolster the new pricing, Nintendo will release a limited edition The Legend of Zelda: The Wind Waker HD Wii U bundle on Sept. 30 at the same $299.99 price. The 8GB standard Wii U is being phased out in the North American market. In Europe console pricing is often set by retailers, and the Legend of Zelda: The Wind Waker HD Wii U bundle is already turning up in retailer advertising in the United Kingdom at £249.99. Although the lower MSRP in the U.S. is the first official Wii U price reduction in the market, European retailers have been discounting the Wii U for months. Only 160,000 Wii U units were sold globally during the quarter ending June 30.

Impact: It’s been a long time since we have seen a Nintendo handheld without a folding case – The GameBoy Micro from 2005 to be exact. The company’s usual strategy is to make successive versions of its handhelds sleeker and more efficient to use at little or no cost difference to the consumer, as in the GameBoy Advance to GameBoy Advance SP and DS to DS Lite. But these are very different times wherein tablets have become a major competitor for the affection of Nintendo’s usual consumers. That hasn’t stopped the 3DS from being a strong seller. In Japan for instance, 5.5 million 3DS units were sold during the last fiscal year, and Nintendo expects to sell another 5 million there this year. Yet in these competitive times, Nintendo obviously has felt the need to bolster 3DS sales with a cheaper version aimed at a wider consumer audience. The 2DS is not a cheap unit in construction or versatility by any means, but it is different – more toy like than cutting edge consumer electronics. That’s not a bad thing where the target is families with young children. While there is concern that uncovered screens can be scratched, we don’t remember all that many complaints about open-faced GBAs back at the turn of the century. And by all reports, holding the 2DS is quite comfortable, which makes for a good game machine. While the larger slate design is nowhere as easy to stash in a backpack like a DS Lite, for a family road trip using the two screens in this format is no hardship. Therefore, the 2DS seems like the perfect move for Nintendo at the perfect time to grow sales.

Nintendo is hoping a slew of major new titles like The Legend of Zelda: The Wind Waker HD will boost the fortunes of the Wii U.

As we segue to the Wii U, we wish we could sound as positive regarding the new MSRP. In some markets, the Wii U is posting unit sales numbers under those of the GameCube during the same period after launch. In the newly published console forecasts, DFC Intelligence anticipated the price drop but estimated it would have limited impact on sales. Nintendo is facing a catastrophe with the Wii U that $50 in savings is not going to fix. The bundling with The Legend of Zelda: The Wind Waker HD will definitely lift sales, yet we question by how much and for how long. With the promotional blitz ratcheting up behind both the PlayStation 4 and the Xbox One this fall, it is hard to see how the Wii U will not become obscured entirely in the eyes of consumers. To cut through the dust of those two console introductions, Nintendo would have been better advised to reduce the Wii U Deluxe by $100. We know that this move is anathema on cost grounds to the executive suite in Kyoto, yet there is little else in the toolbox at this juncture. Mainstream consumers don’t understand the value of the Wii U controller, and the console graphics they can see do not seem much different than what can be experienced on a PS3 or Xbox 360. Why then should they pay a premium for the Wii U over those soon to be eclipsed consoles? In our mind the Wii U gamepad actually can add a great deal to gameplay and the failure has really been around getting that message out to consumers.  It would seem launching a well-planned marketing effort could change things around but right now we are very skeptical that will happen and we are likely to lower our Wii U forecasts even more this fall. Nintendo is in no danger of collapse if the Wii U is not turned around. As mentioned above, the 3DS is doing very well, and the company has plenty of cash in the bank. We can see why this scenario would lead to a we-can-wait-and-see policy on the Wii U, yet in our view, more urgent measures are required than a $50 discount.