IR Information

Corporate Management Policy Briefing/Semi-Annual Financial Results Briefing for the 68th Fiscal Term Ended March 2008
Q & A
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Q 1   I recall Mr. Iwata told us all last spring that you would like to create a market where you can sell 300million units of software between Wii and DS in one year. According to your forecast, you are expecting to ship 260million units in this fiscal year. I think it possible that you may reach 300million units shipment even within this fiscal year. Under such a circumstance, what do you think of this number you raised as a mid-term goal? What will you look for after you will have achieved this number?
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Satoru Iwata (President):

  When I discussed this 300million unit number at the Financial Results Briefing last April, I was referring to it as goal in the mid-term . If we had known that the software market for Nintendo platforms would have dramatically expanded in such a short time period, we might have made the unit shipment forecast based on a different basis. From that point of view, we may be able to say that the market has expanded faster than even we could expect. Now that we are forecasting 262million software shipments during this fiscal year, as we revised yesterday in our financial forecasts, we may be able to say that we are within reach of our mid-term goal. The fact of the matter, however, is that we have not reached that goal yet, and it is premature for us to say what we will be aiming at next. So, as of today, let me just say, “It is likely that we may be able to reach it faster than we originally expected,” and “We will do our best to achieve that goal as soon as possible.”

Q 2   I know there are increasing numbers of fun software titles of good quality. What kind of check-and-development system do you have in order to sustain this high level of quality? I would like to know about both first party and third party software titles. As we can expect the number of software titles to further increase going forward, what kind of new plans do you have in this regard? Is this an issue’ you’re tackling?
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  Shigeru Miyamoto and I will explain about first party titles, and as for the ones made by other software makers, Shinji Hatano, who is in charge, will answer.

  As for first party titles, we learned a very important lesson this summer, when we found a significant bug in one first party software title and had to collect them from the Japanese market. We caused big trouble for both our customers and people who are involved in the software’s distribution. Of course, we have never reduced the level of our software checking before launch, and we have never skimped in making software. Neither have we stopped any relevant procedures we had been conducting before. On the other hand, software is becoming more and more complex year after year. We understand that we are required to check software from more different angles as well, or we may face this kind of issue again. So, with this incident as a lesson, we have to make sure that similar issues will never arise again. I’ve just discussed one aspect of quality, but another quality I’d like to mention is whether or not the game is fun and, since we are aiming to expand the total gaming population, we need to think in terms of whether software can be played by people who are not very familiar with video games. From this perspective, testing must not only be done by our internal groups with deep knowledge of video games, but also we are trying to investigate, for example, how people in their 50s without any deep knowledge on video games will react when they first start playing a title…and what kinds of problems they will face. So, we are trying to improve the software quality from both of these perspectives. I’ll ask Miyamoto to supplement any points I’ve missed.

Shigeru Miyamoto (General Manager, Entertainment Analysis & Development Division) :

  This is a fairly big theme, but as far as my attitude in developing games is concerned, I’d like to put my first priority on making something brand new. There is no question about the fact that quality is important. However, to entertain customers, it also must be fun. So, we all need to maintain an environment where we can play both good offense and defense, where we will always be trying to create something new while maintaining quality. If I may add, creating something brand new requires a lot of courage. If managers are trying to exercise too tight control, young developers will not dare challenge them. Management has to urge young developers to dare to challenge traditions even when they are scared to do so. We are urging that kind of mindset and are trying to create a system to build even better human interactions inside our company. We are establishing software development groups from a technical point of view, with veteran developers who have the experience of playing major roles in developing other software assigned the job of providing quality control and technical assistance between different development teams. Today, those kinds of activitiy are already taking place rather actively. As active communication and interaction among Nintendo employees are being promoted, we are eager to include younger and capable engineers who can work among them.

Shinji Hatano (General Manager, Marketing Division) :

  The third party software makers have been making their own efforts to increase the quality level of their software. When it comes to DS and Wii, since we introduced our new control mechanisms, sometimes software makers approach us and sometimes we advise them as to how they can incorporate DS’s touch panel without letting users feel stress, and how the movement and the manipulation of the Wii Remote can best be reflected on the display screen. We are inviting our internal developers to take part in such dialogues. Since we should not be telling these third party developers what they should do in terms of the game content per se, we are offering advice and cooperation in order to produce software which is accessible to users with the least possible stress. Sometimes we let our internal developers be involved in some aspects of the third party software development when our involvement can be expected to create new elements in the game. Of course, we can not assign too many of our internal developers for all these projects, so we are asking the third party developers to create their own internal team which can work closely with our developers. Such a joint-working relationship has actually born fruit in our first party title called Flash Focus, with which Bandai-Namco was involved in development. Talking in general about our collaboration with our third party developers, we have been working with Sega to develop an Olympic sports game for Wii called, “Mario & Sonic at the Beijing Olympics,” that will be launched in November. As characters from our Super Mario titles will show up in the game, we are joining forces with Sega in development. By doing so, we are also collaborating with other companies to maintain the level of quality. We will continue to work with software makers in these and other ways.

Q 3   I heard news that an increasing number of young people are buying DS instead of buying a car. If the budget to buy a car can be allocated for video games, you may be able to expect huge market impact where one can buy dozens of DS hardware units and hundreds of the software titles instead. If they stop purchasing cars, it will also do good in preventing global warming. From these perspectives, I am assuming that the aggregate market value of Nintendo’s stock could surpass that of Toyota Motor. What do you think of such an estimate?
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  Since it is difficult to imagine that a single person will buy dozens of video game machines for himself or herself, and because the aggregate market value is decided by the stock market, not by ourselves, it is very hard for me to make any direct comment here. However, DS and Wii have been showing very good sales so far in Japan. But some in this industry today say that the current sales pace is not as fast as it used to be. We have been working with the belief that it is not over yet at all, and we can do more from now on. We would like to continue to make efforts so that results will be appreciated in the stock market.

Q 4   I personally started to use a silicon-disk-based PC and I feel the speed is much faster than for PC’s with hard disks. Benchmark tests actually show much faster random access than for sequential PC’s with a hard disk. You put a priority on the random access nature in the design of Nintendo GameCube. In other words, while the importance of random-access has been recognized quite recently in the world of PC, Nintendo was aware of it a long time ago. Ordinarily, when hardware people design hardware, they end up making a machine which boasts only peak performance, and actual performance is not that fast at all. You know, like hardware made by somebody else. But Wii and GameCube were not anything like that. I personally feel your machines have a very good balance between hardware and software. I’m very keen to ask Mr. Takeda and Mr. Miyamoto this question: How have you been able to develop such machines?
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Genyo Takeda (General Manager, Integrated Research & Development Division) :

  Miyamoto, who is sitting next to me today appreciates, “engineers who do not tell lies,” if you can follow me. We engineering people tend to only talk about something good when we have developed something new by saying, “it can exercise this kind of function” or “what is splendid about this technology is this.” At Nintendo, however, because what benefit can actually be realized in the real world is always questioned, we have a culture that values “engineers who do not tell lies.” At Nintendo, both hardware and software developers work at their jobs from the users’ viewpoint. I think that is a tradition or the DNA of Nintendo.


  In developing something new, we have been focusing upon this point you have identified for many years. Some people have agreed with our position, but most often, that aspect was unnoticed. Recently, we have asked a number of people to test-play Mario Galaxy, and one of them wrote about his experience on the Internet, saying that he thought the game was running on a ROM and not on a disk. Since the days of GameCube, we have been paying special attention to developing games running on disks so that the players can misunderstood as running on ROMs. But this remark by the test-player was the first recognition that we have ever seen about our efforts. When I read more about the preview, I noticed that the person had never played Nintendo games. The test-play of Super Mario Galaxy was the person’s first experience of playing a Nintendo game running on a disk and that created the impression of the game running on a ROM. So, we have been doing this for many years, but it has hardly been noticed by the general public. But all of our hardware developers are great fans of video games. They are actively using their hardware devices themselves and know that they have to brush up on them to their satisfactory level in order for them to ultimately enjoy the new software running on the new hardware. I think Nintendo has already established such an internal development environment.


  If I may supplement, now that the traditional method to stimulate people’s interest based solely upon improved technical performance is nearing its saturation point, people are beginning to notice some other aspects. When we launched GameCube, I was well aware of the significant leap in technology between GameCube and PlayStation2 and their predecessors. As a person who could easily perceive a big difference between them, it was really shocking to realize that those who are not interested in such technical matters could not even tell the difference in the graphical expression powers of GameCube and PlayStation2 on one hand, and Nintendo64 and PlayStation on the other. And I began to believe the general public people would feel this way more and more. Internally at Nintendo, I often talked about my assumption and proposed(to Takeda and Miyamoto when we were discussing what we should do with the design of Wii), “if fewer and fewer people will appreciate the traditional way to improve hardware, why don’t we focus on other aspects?” Our software developers have always been concerned with how they could eliminate the stress felt by the users in the first place. Our developers hate to ask users, “you have to wait here” while they are playing a game. They have always been working to assure that users do not have to wait at all in games, including the technique of preloading behind the scenes. Regarding this, we know there are many other things we can still do to improve. I am often asking our hardware developers to think in terms of this aspect when they are working on new hardware projects.


  And, don’t misunderstand that we are contented with the status quo. As you may be aware, there is still much room for improvement. We will make efforts, for example, to improve the Wii Channels so people can use them with more comfort. Wii will be a more comfortable machine to use in 5 years or so, so please stay tuned.

Q 5   There was some error in the firmware update for Wii in August. Can we assume there will be no recurrence of such an error in the future?
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  Firmware updates, or updates for the hardware console’s functionality, must be properly conducted or it can cause a serious issue. However, the net environment differs for each user. The general issue with the network is that the number of different circumstances are almost equal to the number of people who have net connections. As a matter of course, Nintendo has been performing a number of different tests, but on some occasions, there were some holes in our efforts. Of course, we have already fixed the hole. As we want Wii to be the machine which can change everyday, we cannot afford to repeat such an errorf. We are making further efforts not to repeat it.

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