With Nintendo launching its glasses-free 3D video game portable, Nintendo 3DS, on March 27 in the U.S. for $250, new research shows that distinguishing itself among a slew of competitors is Nintendo’s greatest challenge. Research firm Interpret’s new report, “Nintendo 3DS: Fighting for Pocket Share,” predicts that platform fragmentation could hinder 3DS long-term .
“Though the Nintendo 3DS distinguishes itself from the competitive set with its unique 3D entertainment features, it faces the challenge of entering an oversaturated market and overcrowded consumer pockets,” says Michael Cai, Interpret’s vice president of Games & Technology. “Nintendo succeeded with its Blue Ocean strategy for the Wii, but in the portable and mobile gaming market, the water is deeper and muddier.”
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When it comes to enticing gamers, the Nintendo 3DS’s no-glasses feature is an important factor, as Interpret’s 3D Entertainment Study shows that having to wear 3D glasses is the number one dislike among those who have experienced 3D technology (57% among those who have experienced 3D gaming).
However, Interpret’s New Media Measure data shows that 79% of 3DS intenders already own a handheld gaming device (a Nintendo, Sony, or iOS handheld) and half own two or more devices. With the release of even more handheld devices in 2011 — including the iPad 2, Sony’s NGP (Next Generation Portable), Sony Ericsson’s Xperia Play, and a slew of powerful Android smart phones and tablets equipped with PlayStation Suite and powered by NVIDIA Tegra 2 technology — Nintendo must differentiate itself even further to gain pocket share.
Nintendo is also facing glasses free competition in gaming from LG, which launches its Optimus 3D smartphone this summer in the U.S. Game publishers like Gameloft are throwing their support behind this 3D mobile phone, which offers 3D games as well as 3D movies and other content.
The 3D nature of the Nintendo 3DS is attracting a young male gamer audience, according to Interpret’s New Media Measure 4th Quarter 2010 data. Almost all (96%) of 3DS intended buyers are active gamers (those who play video games at least one hour a week) and 78% are under the age of 35, compared to only 59% of Nintendo DS and DSi owners.
But Cai believes that if early sales numbers in Japan are any indication for the U.S. market, the 3DS should fare better than its predecessors. The Nintendo 3DS sold over 370,000 units in its first two days, compared to just over 170,00 units for the DSi.
Michael Pachter, video game analyst for Wedbush Morgan Securities, forecasts that Nintendo will sell 10 million 3DS portables each year for the next few years. Nintendo expects to sell 4 million Nintendo 3DS units worldwide by the end of this March, alone.
“Nintendo’s challenge is to fully exploit the 3D features because phone gaming is on the rise, as is tablet ownership,” says Cai. “The ability to take and share 3D photos, as well as connect with other 3DS gamers through StreetPass, and play online games, are all important to the early adopters of this device.”
According to Interpret, the majority of 3DS intenders already own a handheld gaming device—79% own either a Nintendo handheld (DS or DSi), a Sony handheld (PSP or PSP go), or an iOS handheld (iPod touch or iPad); 50% own two or more handheld devices, and 20% own three or more. With Apple selling 15 million iPads last year and iPad 2 selling out in stores, Interpret found that 18% of 3DS intended purchasers are also planning on buying an Apple tablet in the next three months.
The game industry is rapidly evolving with the mobile sector, fueled by tablets that feature dual-core HD gaming capabilities and the ability to connect to big screen HD TVs. Interpret found that two-thirds of iPad users have played games on that device.
Mark Rein, vice president at Epic Games, which makes games like Infinity Blade for iPad and iPad 2, said these new Android and Apple tablets are essentially portable gaming consoles. Gamers can play console-quality experiences when they’re out and then come home and plug them into their TV.
Nintendo 3DS is offering gamers free access to over 10,000 AT&T hotspots and is also introducing streaming of Netflix movies and TV shows for the new portable, in an effort to offer a more rounded entertainment experience.
Nintendo has dominated the portable gaming space since it created the market with the introduction of Game Boy. Nintendo has sold over 135 million Nintendo DS devices worldwide. Pachter believes even with the 3DS launch, Nintendo will continue to sell 10 million-plus DS devices a year.
But the speed of the evolving mobile market is creating a very different landscape. Nintendo has battled and beaten competitors like Sega and Sony in the past. But with so many new competitors, Cai said it will be crucial for the company to differentiate its 3DS from all of the competition.
