Nintendo Is Giving Away One of Its Best Games

Nintendo (NASDAQOTH: NTDOY  ) is a company in crisis: Its latest living room video game console, the Wii U, hasn't sold nearly as well as Nintendo had anticipated, and sales of its handheld video game machine, the 3DS, have also come in far short of expectations.

Facing rising competition, Nintendo unveiled a plan to rejuvenate its business back in January. The company promised, among other things, to alter the way in which it prices its games.

Investors are now getting their first look at Nintendo's new policy: This month, buyers of Nintendo's 3DS will get a digital copy of Pokemon X or Pokemon Y, two of the company's best-selling games. While the move should help Nintendo sell more hardware, and thereby expand its platform, it could put pressure on retailers like GameStop (NYSE: GME  ) .

Nintendo's 3DS comes up short
At this point, the Wii U is widely accepted as a disappointment as far as sales are concerned: In January, Nintendo reduced its estimates for the Wii U's sales by some 69% for the fiscal year, effectively ending the debate over the console's success.

But what remains far more interesting is the 3DS, and Nintendo's future in the handheld gaming space. While Nintendo's supporters will concede that the Wii U is a sales disappointment, most continue to cling to the notion that the 3DS is selling well. IGN's Keza MacDonald, for example, characterized the 3DS' recent sales as "solid," and described 3DS software sales as "amazing."

However, while Apple's mobile devices haven't destroyed the market for Nintendo's handhelds entirely, they're obviously having a noticeable impact: When Nintendo cut its sales estimates for the Wii U, it also reduced its estimates for the 3DS, both in terms of hardware and software. Historically, Nintendo's 3DS is -- at this point in its life -- selling much worse than its predecessor, despite the fact that the market for video games continues to grow at a rapid pace.

Bundling digital games is a growing trend
Nintendo's plan to bundle a free digital copy of Pokemon X or could be seen as a sign that the 3DS is falling further behind Nintendo's sales expectations.

Both games retail for $40, while the 2DS (the less expensive version of the 3DS) sells for just $130. To qualify for the deal, gamers have to purchase an additional game at full price in addition to the console, but Nintendo is still offering what amounts to a 20% discount for new buyers.

This isn't the first time Nintendo has bundled a digital game, and it likely won't be the last -- it included a digital copy of The Legend of Zelda with the Wii U last year. In January, Nintendo said it would be open to giving loyal customers discounted or free games going forward. It's difficult to imagine how Nintendo would work such a system without -- as it's doing with Pokemon -- giving away digital copies. And Nintendo isn't alone in pushing this strategy. Later this month, Microsoft will give away a free digital copy of Titanfall to new buyers of its Xbox One console.

While the inclusion of a select few digital games is unlikely to have much of an effect on GameStop's business model, it's just another sign that the industry is moving toward digital distribution.

By giving away a digital copy of Pokemon, Nintendo is effectively cutting GameStop out of the transaction -- twice. First by removing them from the initial sale and again by preventing them from making money off used games. At the same time, some gamers may be more comfortable with going to GameStop to pick up a physical copy of the latest Nintendo release. It's what they've done for years -- they're used to it. Offering up digital freebies could incline some to break their habit, turning to digital going forward.

As the vast majority of GameStop's revenue and profit comes from the sale of video game software (used and new), the industry's move toward digital distribution remains an existential threat.

Nintendo's future remains uncertain
Nintendo's willingness to give away one of its best games is definitely a win for consumers, and it could entice some holdouts to pick up a 3DS -- in the long run resulting in more software sales for Nintendo.

But Nintendo's problems don't stop with the Wii U. The 3DS, while still selling millions, is not doing as well as Nintendo anticipated. To make matters worse, the dominant mobile players, including Apple, Google, and Amazon, are increasingly shifting their focus to video gaming.

Ultimately, Nintendo's decision to give away one of its best games highlights the precarious situation the company faces.

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Comments from our Foolish Readers

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  • Report this Comment On March 06, 2014, at 8:59 PM, hudkina wrote:

    So the author thinks the 3DS is a disappointment, despite selling nearly 45 million units. Also, are we going to see as many articles about the Xbox One now that it is selling just as poorly as the Wii U?

  • Report this Comment On March 06, 2014, at 9:11 PM, targeyone wrote:

    Sam Mattera,

    Why do you choose to continually write about the video game industry when you obviously have neither interest or expertise in it?

    The 3DS sales ARE solid. It's the best-selling dedicated video game console of this generation, by more than 35 million units globally. You can claim it's not fair to compare it to home consoles, but when everything is said and done, it's dedicated hardware made to play video games. Many people only play them at home on the couch.

    The PS4, Xbox One, and Wii U will never come close to the amount the 3DS will sell in its lifecycle, for a variety of reasons.

    So how can selling the most videogame consoles by such a massive margin NOT be considered doing well?

    No, it's not selling as well as it's predecessor, but if you had any real knowledge in this area, you'd already know no video game console in the near future is ever going to sell as well as the DS did. It's not even realistic to expect it to. By your same criteria, the PS3 was nothing but a massive, hulking flop, since it didn't do as well as its predecessor.

    However, the 3DS did see a 45% gain in year to year software sales. That is anything but trivial. The PS4 and Xbox One may see sales spikes in certain weeks, but the 3DS will regularly top the hardware weekly sales charts from here on out.

    Stop trying to spin information to insinuate 3DS is in trouble. In fact, just stop writing about the video game industry. You've yet to actually write a factually accurate article about it to date.

    Frankly, it's insulting to your readers who actually DO have an interest in the subject.

  • Report this Comment On March 06, 2014, at 9:45 PM, PAJohnDoe wrote:

    Hasn't Nintendo ALWAYS given away one of its best games? Those are the games that sell SYSTEMS.

  • Report this Comment On March 06, 2014, at 9:49 PM, Burstedbladder wrote:

    lol, giving away games no one is buying. The Poky-man phase is done and over with. Once again, Nintendo has shown they are not a company that listens to the consumers on what they want. Give me a free copy so I can toss it in the trash where it belongs.

    No one wants these old and stale and outdated krappi games Nintendo.

  • Report this Comment On March 06, 2014, at 9:53 PM, woody2363 wrote:

    The Wii U is a great product...the tablet controller is awesome - never been anything like it. Nintendo just needs to pump out some killer games. They own the characters already. If that ever happened, the console would sell like hotcakes. Regardless, I have a Wii U and enjoy it to no ends!

  • Report this Comment On March 06, 2014, at 10:01 PM, targeyone wrote:

    @Burstedbladder

    Pokemon X/Y has sold 11.5 million since it's launch last Oct.

    If you don't like Pokemon, fine, no one is trying to make you.

    But you obviously have no idea what you're talking about.

    Nintendo is now giving it away to those that buy a system and selected game for the month of March.

    If anything, Nintendo is giving it away in the month of March because with its wild popularity, it's already sold enough as it is.

  • Report this Comment On March 06, 2014, at 10:22 PM, macoan wrote:

    Most players who LOVE and will buy Pokemon most likely already have a system and the game. To make a bundle with the game on it is smart - to get those who like Pokemon, have played it in the past but on the fence to buy the "new" system to play it... to jump and buy the new system.

    If Nintendo really wanted to start moving systems & games, start making all digital downloaded games 30-40% cheaper than physical copies purchased. Nintendo will still make the same (more) money on each game, and gamers who want to embrace digital games will more likely try the systems out.

  • Report this Comment On March 06, 2014, at 10:39 PM, NBSN wrote:

    You Sir, have no clue what you are writing about. Its great that you have a job to write about something you know nothing of. Maybe I can be a rocket scientist. Now that the berating is out of the way I will assist you with information that should have been included in the article.

    Did you know that Nintendo has pretty much always given away software in a similar fashion? When I purchased my 3DS-XL it came with a digital version of Mario Kart 7 installed already. And that was last year, so I guess their sales were horrible then also? Incorrect, the sales for the 3DS and 2DS have been amazing. More than 43 million units across the combined totals of the versions of the 3DS and 2DS. That is great. The PS Vita has done around 7.5 million, so that is much worse...did you write an article on that?

    Look up the bundles of hardware and software that Nintendo has been releasing for years. They typically include software of their most popular titles. In more recent years to just name a few I think of the Wii U releasing with Nintendo-Land, New Super Mario Bros. U, and Legend of Zelda Wind Waker HD. The 3DS had Mario Kart 7, Fire Emblem Awakening, Super Mario 3D Land, The Legend of Zelda: A Link Between Worlds, and Mario and Luigi Dream Team. The Wii had Mario Kart Wii, Wii Sports and Wii Sports Resort, New Super Mario Brothers Wii, and Just Dance 4. There are many other bundles, for these systems, as well as bundles for other systems that Nintendo has released many years ago.

    Of course hardware sales are going to have to taper off at some point, and become a lower but more even number in sales each month, gradually adjusting as more people have one as the individual consumer makes their handheld decision. It is fairly safe to say that Nintendo is close to reaching the end of the bulk of their initial install base for their current handheld offerings, and while sales will continue to come in, the sales numbers each week will be less. But so what, that happens to every single handheld, console, and phones and tablets. The software sales are huge for the handheld, and that is where Nintendo actually makes the bulk of its money, just like Sony and Microsoft.

    So, please don't try and spin anymore articles like this. I understand having an opinion and wanting to share that opinion. But when you form an opinion, you should perform proper research and get the facts. That way you don't have an opinion....you have an INFORMED OPINION.

  • Report this Comment On March 06, 2014, at 10:53 PM, SnakeDoctor01 wrote:

    Yawn, another "Gamestop is dead" article. Do you have anything new to write? Or what about acknowledging how there's still much of the country who doesn't have access to broadband or at least broadband fast enough to convert them from buying games at stores?

    Just stop. Please.

  • Report this Comment On March 07, 2014, at 12:38 AM, secretx wrote:

    where in the world is there proof that mobile are killing portable devices? last time i check none. yes everyone is buying tablets and mobiles but developers don't gain any profit. and last time i check the eshop has increase 26% of sales,

    who cares about gamestop, they have bad employs don't give a damn what's going on. my last game for there had scratches on the disk.

  • Report this Comment On March 07, 2014, at 12:52 AM, tonicmole wrote:

    Okay, so it's true Nintendo has always bundled their best games with their consoles. NES often came with Mario Brothers, or duck hunt. However, with the weight of Nintendo on the 3DS's shoulders, even a momentary hicup could be disastrous. It's not that the 3DS isn't making money, it's that the WiiU is so devastating. Realistically, if tomorrow Apple released a sub $200 iOS system Nintendo would be destroyed. The only thing that keeps them afloat is that they are cheaper then the iPhone, and iPad as far as being a portable casual gaming device. The truth is that we do not know whether Nintendo will still exist to see the next generation of consoles, however we do know that if they do, they won't be participating.

  • Report this Comment On March 07, 2014, at 1:55 AM, hudkina wrote:

    Nintendo didn't sell a boatload of Gamecube's but it came back and sold 100 million Wiis. Even if the Wii U tops out at 15-20 million units, that doesn't mean it won't develop another successful console.

    The gap between the last generation and this generation was the longest by far. Maybe Nintendo will go back to the old model and release a new system two or three years from now. It's very unlikely that Microsoft or Sony will release "next gen" systems within the next five years, so maybe Nintendo could create a more powerful console and really compete in the latter half of the Xbox One and PS4 life cycles.

  • Report this Comment On March 07, 2014, at 7:47 AM, targeyone wrote:

    Now that I've seen some of the other articles, it's clear: This is simply a piece to try and dull the fact that Microsoft had to bundle one of ITS best games in an attempt to keep the Xbox One afloat.

  • Report this Comment On March 07, 2014, at 7:49 AM, targeyone wrote:

    However, the two situations aren't even remotely the same. Nintendo is bundling a game that has already sold well over 11 million copies in 5 months. Microsoft is bundling their most-hyped game before it's even released.

  • Report this Comment On March 07, 2014, at 9:26 AM, Sarentack wrote:

    The whole idea of how MS markets a game and hypes it is proof just how gullible people are to buy into the brand rather than use common sense.

    We dont even know if Titanfall will be a good game, we know its over hyped and over advertised. We pretty much falling for the same strategy MS used with Halo, Halo is nothing much different than any other FPS game, Halo 1 was great, then it got worse and worse afterward in the series. As far as Titanfall goes, theirs nothing new to see with that, contrary to what people think, I dont really see why people even really care for Xbox 360 let alone the Xbox One when the bulk of its Library is FPS games or Sports games, the FPS games are all about the same in 1 way or another except maybe COD games which is the only reason Xbox 360 ever sold.

    As far as I am concerned, the Xbox has never fit into any console war, this was is Nintendo vs Sony where exclusives are actually EXCLUSIVE.

  • Report this Comment On March 07, 2014, at 11:48 AM, thegenius wrote:

    I think Nintendo should get rid of its CEO immediately. Why not have Shigero Miyamoto as the main CEO of the company? Nintendo is the best video game company in the world even if they don't make the best consoles anymore. I would like to see them develop something groundbreaking like Virtual reality consoled which would revolutionize the industry because by combining the vr experience with online gaming it will become more interactive and interesting and as well innovate the whole video game experience in general. The CEO of Nintendo needs to step down and Nintendo should just let the Nintendo Wii U die and focus on making games for the future. Sony and Microsoft have done well in developing decent consoles with the PS4 and XBOX One although Sony wins the video game fans respect because they actually listen to what is important for the fans. Interestingly enough Nintendo as a video game company is a lot better than Sony, but Sony build a better system and has third party developers make awesome games for them. Sony also has the best marketing concepts in the world right now. Nintendo needs to grow up and stop making such childish systems and focus on making a widespread variety of games which will interest all gamers in the world. I always been a big fan of Nintendo the video game company but overall what they are doing right now is not going to cut it with the Nintendo Wii U. At most they can put the mobile games as fun versions of games that mobile users can play. But no matter what happens the mobile industry will never surpass console developed games and no respectable gamer would sell out given the high quality of the world's best developed games will always be reserved for hardware development. At best mobile games will be like those cheap and cheesy facebook games but it will never match the greatness of well developed console games. Nintendo's problem lies that the Nintendo Wii U is a terrible console. They need something better than the PS4 and XBOX One and that would be a new groundbreaking system which will make waves in the industry.

  • Report this Comment On March 07, 2014, at 11:52 AM, mitch079 wrote:

    The Motley Fool never ceases to amaze me with the absolute crap they publish. Here's an article for you Sam: Sam Mattera writes absolute rubbish. Continuing to be employed by the Motley Fool could be bad for their brand.

  • Report this Comment On March 07, 2014, at 12:37 PM, Vold wrote:

    Why is it that every Fool article about the gaming industry either starts with or ultimately ends up at "this is going to cause Gamestops downfall" ?

    I think we get it, the Motley Fool hates Gamestop and wishes they'd go bankrupt. But its not going to happen. They like the rest of the gaming industry will evolve based on the current systems.

    That's why they take in Apple products now and resell them as used. They are well aware of the the mobile gaming industry and are adjusting. They are well aware of what digital distribution can do, but are most likely prepared for it. After all, someone has to sell prepaid gaming cards for the people who either don't like having their credit card info on their console or don't have/use a credit card.

    So get over it. Gamestop isn't going anywhere and your biased articles are nothing but absolute rubbish. Their is a reason the is site is called the Motley Fool, because you are nothing but fools who write stupid articles that make us readers laugh.

  • Report this Comment On March 07, 2014, at 2:07 PM, InformedGamer wrote:

    Didn't know pack in games were considered giving games away...

  • Report this Comment On March 07, 2014, at 2:09 PM, InformedGamer wrote:

    @BladderBuster - I didn't know you could throw a digital copy in the trash...

  • Report this Comment On March 07, 2014, at 3:09 PM, AutumnShantel wrote:

    This is why I love Nintendo. I don't even mind that I registered my 3DS and 3DS XL a long time ago and already bought Pokemon X and Y; I just love that they do stuff like this.

  • Report this Comment On March 07, 2014, at 3:16 PM, joe368 wrote:

    Um is this an article on free Pokemon X & Y, or just another excuse to s*** all over a completely different hardware unit they sell?

  • Report this Comment On March 07, 2014, at 8:33 PM, ffrisky wrote:

    Uh, this website wants us to be respectful with our comments, but that is kind of hard when the author is a complete moron, who doesn't know what the hell is going on and is spouting nonsense out of his arse.

  • Report this Comment On March 07, 2014, at 10:51 PM, Jarky wrote:

    There's been no lack of things spelling doom for Gamestop coming from this site.

  • Report this Comment On March 08, 2014, at 11:56 AM, AnthonyLucynski wrote:

    Oh wow! Another Gamestop is doomed and Nintendo is a failure article from Sam Mattera!!! NEVER SAW THAT COMING!!! Let's not let facts like Nintendo outselling Microsoft get in the way of baseless opinion! Wouldn't want to come off as a pseudo-journalist, would you? Naw, leave that to to the pros! You can just spout your nonsense all day long on this site instead! So......is Motley Fool literally a website where they let fools run free? Like free range chickens? I'm starting to think that's the case....

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