Due to a disastrous April, May, and June, Nintendo find themselves downgrading their profit estimates by 82 percent to 20 billion yen (about $257 million at current exchange rates). On Thursday, the Japanese game developer has also reported a net second quarter loss of $US324 million, their worst profit margin in 27 years.
The announcement comes in the wake of Nintendo's decision to reduce the price of their latest handheld device, the Nintendo 3DS.
The Nintendo DS was the best-selling handheld device ever, but the 3DS has struggled despite a strong launch. A dearth of quality titles for the 3DS is likely partly to blame for the declining sales, as only The Legend of Zelda: Ocarina of Time 3D is the real big seller at the moment. Others conjecture that gamers are waiting for the Sony PlayStation Vita, which will likely arrive in time for the 2011 holiday season. Yet perhaps the biggest culprit is the increased popularity of the Apple iOS and Google Android platforms.
Traditional powers Nintendo and Sony have rarely had to contend with others players in the handheld game market, but companies like Apple and Google have provided a spirited challenge with their touchscreen and motion control game technology.
While Nintendo dominated the handheld game market for years, the winds have quickly changed on the company. Nintendo has reportedly only sold 710,000 3DS units so far, far below expectations. On August 12, the 3DS will cost $170, down from $250, reflecting a change in strategy and perhaps a retreat for Nintendo.
"For anyone who was on the fence about buying a Nintendo 3DS, this is a huge motivation to buy now," Nintendo of America President Reggie Fils-Aime said in a statement.
While the DS enjoyed record-breaking sales and the Wii flew off the shelves, the 3DS suggests that after years of leading the pack, Nintendo has stumbled in a very visible way. Who will capitalize, or if Nintendo can recover, will be a story that plays out this holiday season.