3DS price cuts to ignite holiday sales, Iwata says

Last week’s news of Nintendo’s massive price cuts on the 3DS seemed quite drastic at the time because the next generation portable system had just been released in March. This week Satoru Iwata explains that there is a method to Nintendo’s madness.

Said the Nintendo president, “We feel that those who have experienced the system appreciate its attraction, but this appreciation has not necessarily been expanding at the speed which we had expected.”

Iwata notes that the price cuts are in place now in order to increase the flow of 3DS units into consumers’ hands before the holiday season begins. That way, once Nintendo releases Super Mario 3DS Land and Mario Kart 7 towards the end of the year, there will be more 3DS owners to buy them.

This strategy seems to make sense for Nintendo because software almost always produces higher profit margins than hardware. Also, it’s not as though 3DS software prices are going anywhere. Nintendo knows that for a couple of Mario games like the ones they have coming, the demand will be inelastic. That is, consumers (as long as they already own a 3DS) will shell out the dough with little regard for software prices.

“Without creating such a circumstance, we would not be able to realize explosive sales in the year-end sales season,” said Iwata.