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Down but not out: Nintendo shoots for 3DS comeback

Nintendo

Can a new color, a new price and some new games revive the Nintendo 3DS' flagging sales?

The Nintendo 3DS may be down, but don't count the struggling new game system with the eye-grabbing 3-D powers out just yet. Or so says Reggie Fils-Aime, president of Nintendo of America.

For the first time since Nintendo revealed the extent of its financial woes and slashed the price of its 3DS game system by a whopping $80 (this after a mere five months on store shelves) Fils-Aime is talking about what went wrong with the gadget's launch and what Nintendo plans to do to fix those mistakes.


I had a chance to talk with him Tuesday and one thing seemed clear: Nintendo is shooting for a 3DS comeback this holiday season.

The company has just announced that it will launch the 3DS in a new color — "Flame Red" — here in the U.S. starting Sept. 9. That new color comes as the new $170 price officially goes into place on Friday and as Nintendo begins rolling out several high profile games that many gamers have been (impatiently) waiting for — "Starfox 64 3D" on Sept. 9, "Pokemon Rumble Blast" on Oct. 24, "Super Mario 3D Land" in November and "Mario Kart 7" in December.

But with many a skeptical eye now trained on the portable game machine, can the company re-start the 3DS' flagging momentum? Once that kind of forward motion is lost ... can it ever be regained?

The coming months will answer these questions for certain. But in the meantime, here's what Fils-Aime had to say about the mistakes Nintendo made with the 3DS launch, how it plans to kick-start interest in the 3DS in time for the holidays and why  those who think Nintendo can't recover from this are wrong:

Nintendo has struggled with 3DS sales and the price cut was quite surprising. But why do you think Nintendo has had such a hard time with the 3DS?

Fils-Aime: First, a couple of data points. Over the course of about six weeks on a global basis in our last fiscal year, we sold about 3.7 million units of 3DS hardware. Last week, for the current fiscal year, we reaffirmed that we are projecting to sell 16 million units of 3DS hardware this fiscal year. So essentially, over the course of 14 or 15 months, we're projecting that we're going to sell just under 20 million units of hardware.

I share that just to put into perspective that, certainly, that is not meeting our expectations. But the use of the word 'failure,' I think is a little harsh in terms of what we've actually been able to do with the Nintendo 3DS platform. Now, when you compare it to a platform like the DS where, just in the U.S., we've sold over 50 million units, certainly it is fair to say the launch of the Nintendo 3DS has not met our very high expectations.

What do you think the primary cause of the poor 3DS sales is? Is it price? Is it a lack of big games at launch? Something else?

Fils-Aime: I would highlight three things — and these are three things we've taken steps to address.

First, making sure that we had key first-party games to drive the hardware. We've addressed that with the launch of "The Legend of Zelda: Ocarina of Time 3D" which is doing exceptionally well globally. And certainly with the upcoming launch of "Starfox 64 3D" plus "Pokemon" plus the two Mario games, we think we've got a great lineup of first-party games that will drive the install base and then certainly there is strong support by third party publishers as well.

The second thing we've identified and addressed is the digital side of the business. The 3DS launched without a digital shop at the time. We addressed that back in June with the launch of the eShop plus the launch of Netflix and Nintendo Video just in the last few weeks. So certainly making sure we have a robust digital series of offerings has been very critical and we've fixed that.

And thirdly, certainly, making sure the overall value equation is as strong as possible. These are still tough macro economic times. People are concerned and we need to be as sharp as possible on the value side. And now with the $80 reduction in price for the Nintendo 3DS, we believe we've made it as strong a value proposition as possible.

But why did Nintendo launch the 3DS ahead of having that digital shop ready and ahead of having those big games ready? Why not wait until all of these pieces were ready to go?

Fils-Aime: Here's what's so interesting about this business — as we were preparing for launch, we had very positive signals in the marketplace. We had very strong pre-sales being reported to us by retailers. We had an exceptionally strong first day of sales. So the issue really is maintaining the momentum for the platform. And those three requirements that I just touched on really needed to be there to maintain that strong initial burst of activity and make sure that we would power through the first year of availability.

So I would argue it wasn't so much launching it too soon, I would argue that we needed to do a better job following up the launch with these key initiatives. We needed to have a much shorter time between the March 27 launch of the 3DS and what ended up being a good three or four months before a lot of the capabilities were brought to bear on the market.

So you're saying that Nintendo launched the 3DS when it did because things looked good at that time?

Fils-Aime: That's exactly right.

For you and other executives, is there this feeling like, 'I just wish we'd launched the 3DS at the $170 price to begin with'?

Fils-Aime: What I would say is that, in retrospect, we should have made sure that the sequence of software was there and we should have had the digital offerings ideally available at launch if not shortly thereafter. And if we would have done that maybe the product would have sustained at the $249 price point.

But the fact is that we didn't. The fact is that those elements weren't there. And this business is a momentum business. We need to have strong momentum now going into the holiday season. And the reason that that's important is that we need to get consumers talking positively about the device, we need to get consumers asking for the device, putting it on wish lists. These steps are critically important in this business. Because it's part fashion, it's part entertainment. It is truly a momentum business and we need to re-energize our momentum right now.

But how difficult is that to do? As much as Nintendo is addressing these issues, once you've lost momentum, how worried are you about regaining that momentum?

Fils-Aime: That's a good question. And what I would tell you is that what we've learned is that the only way to regain momentum is to layer a series of initiatives on top of each other that, together, make it compelling for the consumer to buy in. One initiative is not enough. And that's why we've layered in the price reduction plus the new color plus the key software titles, plus the strong support by third-party licensees as well as by retailers. You need to have all of these elements in order to reinvigorate that momentum.

About the new Flame Red 3DS color have you found that a new color actually affects sales?

Fils-Aime: That color actually just launched in Japan. And we've already seen a very positive response in that market to the new color.

Colors do have an impact on sales. In the handheld space it really becomes one more reason for consumers to buy into a platform by having a particular color that they like. We've done a tremendous amount of research on colors and we find red is a color that has positive appeal for both men and women which is very important for us as we drive Nintendo 3DS. And so we do believe it will have a positive impact on our business.

The drastic price reduction certainly caught a lot of people's attention. Do you expect to see immediate results when the new price goes into effect Friday?

Fils-Aime: We believe the response to this is going to be significant and that it will build over time. And I think that based on some early reports we're getting from some retailers who have already begun reducing the price in order to jump-start their business. They are reporting very brisk sell through, and that is without a lot of consumer messaging at this point.

So we believe that, beginning Friday, we'll have very strong sell-through activity and it'll continue to build with the new color and with the key software titles.

Nintendo has offered 20 free games to those who picked up the 3DS at the initial price. Still, we've seen some resentment among early 3DS adopters who feel like, 'Hey, I spent so much more money on this machine!" What would you say to those people who did run out and pick up a 3DS for $250?

Fils-Aime: What we are saying is, first, these are our most loyal customers. They do buy our products on launch day and stay up so they can be at retailers at 12:01 in order to purchase a product. And to them we say, 'Thank you for the loyalty and thank you for the support.' And that's why we're making available these 20 digital games.

And many of these games will only be available to these ambassadors. They'll not be available to anyone else, not for purchase, because we believe it is critically important to reward these early buyers.

[For details on how early 3DS adopters can download their 20 free games including the 10 Game Boy Advance games that only they will have access to follow this link.]

With the 3DS price drop and some of Nintendo's other financial struggles, some critics are saying, 'This is a sign of Nintendo's decline, they're not going to be able to pull out of this.' What would you say to those people?

Fils-Aime: You know, I would point them to those similar types of stories that were being written about Nintendo oh, say, in 1998 and '99 as we were in a pitched battle with some of our competitors at the time. Or those same stories that were written back in 2002 and 2003.

All I can tell you is that we are a company focused on innovative experiences. We are a company that, fortunately, has some of the strongest franchises in not just video games but in all of entertainment with Mario and Zelda and Pokemon.

We are a company that has faced lots of naysayers and have continued to do quite well for ourselves. So I wouldn't bet against what we're looking to bring to the market.

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Winda Benedetti writes about games for msnbc.com. You can follow her tweets about games and other things here on Twitter or join her in the stream here on Google+. And be sure to check out the In-Game Facebook page here.