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Financial Results Briefing for Fiscal Year Ended March 2011
Q & A - Apr. 26, 2011
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Q 4

  I am interested in your plans for Nintendo 3DS in emerging markets. I hear that, after the announcement of the financial results yesterday, you implied that you would launch Nintendo 3DS in those countries at a relatively early stage. I would like to know your view on the price and distribution. Do you accept the price gap of video game systems between developed countries and emerging countries? In which region do you have special difficulties in building a distribution network? Also, I would like your comments on the time of distribution.

A 4

Iwata:

We have already launched Nintendo 3DS in Japan, the U.S., Europe and Australia and we hope to also sell it in due course in other countries, including in what are called emerging markets, when we are ready. Needless to say, localization is a must for doing business in these markets. Since we can realize only a small part of the sales potential in these markets without localization, it would be an important point for us to construct systems and make preparation for localization. The price issue is not only a question of how much is reasonable in an emerging country. For example, in some countries which adopt protectionist stances, the high tariffs could make video game systems several times more expensive, so we need to see if we can find an appropriate way to avoid such a thing from happening. Considering such situations, it would be difficult to do the same business in all emerging countries.

Anyway, at this time, we do not have a definite plan on when, in which country and at how much we will launch Nintendo 3DS in all the countries. All I can say today is that we plan to start selling it in countries other than Japan, the U.S., Europe and Australia during this fiscal year. Once the decisions are made, local launch plans will be announced basically from our local subsidiaries.

Q 5

  I have a question about your mid-and-long term strategy. I understand that the characteristic of Nintendo, which has especially been reflected in the business since Nintendo DS, is continuous innovations based on the policy "Jimae-shugi (doing things by one's bootstraps)," in other words, the commercialization of unique products that your company has developed by itself. Are you thinking of strategically taking advantage of outside resources in the future? In that case, what is Nintendo's strong point to be kept in-house and what are the parts to be outsourced? In this context, additionally, I hope to know how Nintendo will utilize its retained earnings.

A 5

Iwata:

 The policy "Jimae-shugi" you mentioned has two aspects: it is a great honor to succeed in a business by making the best use of our own unique strengths, but on the other hand, it is a shame to fall behind the times clinging to it. I believe that it is the key to Nintendo, which develops both hardware and software in-house, to create new experiences which have been neither enjoyed nor requested by consumers, and let them say, "This is the very thing I have been wanting to play" once they have actually tried it. The more we depend on outside resources for this point, the more strength Nintendo will lose. It is vital for Nintendo to reinforce this point and cultivate developers inside the company. I hope that Nintendo is continuously considered as a company which is particularly good at such a thing, and I will make efforts for this.

On the other hand, it is not true that Nintendo is able to internally develop everything and keep up with the current pace of change. In fact, some of the software titles published by Nintendo are developed by outside developing companies, called "second-party developers" in this industry. There are already a lot of companies which receive various advice from Nintendo in the process of software development and whose products are sold under the brand of Nintendo, and for instance, I was working for one of such companies, HAL Laboratory, Inc., which developed "Kirby's Dream Land" and "Super Smash Bros." Considering the existence of such companies, Nintendo is not totally based on the policy "Jimae-shugi."

In the field of networks in particular, however, I admit that we cannot do business in pace with the changes in the world and the requests from consumers only within our company and with development companies we have long been in touch with. I am not sure which term suits us as collaborations for this purpose, M&A or partnership. Anyway, I feel that we would spoil the party in a negative way if "we sticked to create everything by ourselves" based on the policy "Jimae-shugi," and eventually it would make our business slow.

In slight connection with the question about Wii's concept before, honestly speaking, Wii's future could have been different if Nintendo had made better partnerships with outside companies in the field of network services at the early stages of the penetration of Wii. In other words, Nintendo might have been a little obsessed with the policy "Jimae-shugi" at that time. Although we have already put ourselves back on track, we would like to clearly differentiate what is our true strength from what we can basically do by ourselves but can be done better by more skillful outside specialists in order not to fall into that trap again. You may be aware of some features which I am implying now in relation to the future developments of Nintendo 3DS and Wii's successor system that we announced yesterday. I am sorry I cannot say anything more specific today.

Q 6

  At the Game Developers Conference (GDC) in March, you made a presentation on the issue between quantity and quality of video games in front of many developers developing free video games. I am interested in the feedback you got from them, including their counterarguments. Could you please tell me your ideas of how to develop high-quality games which can be sold at high prices.

  Also, I would like to know why you made the announcement of Wii's successor system at the same time as the announcement of the financial results, while investors seemed to expect this announcement at GDC. Did you intend to avoid the leakage of information? Or, were you trying to persuade people to attend E3?

A 6

Iwata:

First of all, regarding my presentation at GDC, we have posted my entire keynote speech on our websites (the webcast in English is available here and the full translated text in Japanese is available here), but I am very disappointed with one thing.

Many reports said that I talked about a conflict between the quantity and the quality of video games, which made me think that reporters should have at least written an article after reading through the full text of the presentation since we have posted the Japanese translations of the entire keynote speech. I have never mentioned the conflict between quantity and quality at all. Some articles based on this misperception even said, "Nintendo hard hit by video games for smartphones and social games, and criticized them as low quality" but, again, I have never said such a thing at all. The only message that I had hoped to convey at GDC was, since my keynote speech was dedicated to the game developers, that, without carefully trying to preserve the value of the games we develop, the digital distribution revolution could very easily depreciate their value, which might make all of us have a hard time.

Naturally there are both high-quality games and low-quality games in the traditional video game business that we have long engaged in. It is obvious that some games are fun and others are boring. As there is no accounting for tastes, I cannot say that all of the games Nintendo has released are definitely considered to be high-quality to everyone, and nor did I intend to refer to the quality of games by other developers. At the same time, however, I am reflecting on how I made my presentation, which was eventually summarized by some as if I had argued a conflict between quantity and quality.

What I wanted to argue most was that video game developers need to be careful about "preserving the value of video games" so that the video game industry, regarded as valuable by many people, can be sustainable. This is the message I was eager to deliver. Since GDC is a place for developers who create games, I dared to do that there even though there was a chance that some people might have a misunderstanding.

I sincerely hope that you will read my presentation on the website again and understand that it is a story about how to preserve the value of video games, not about a conflict between quantity and quality of video games.

Next I would like to tell you why we announced Wii's successor system at this time, not at GDC. Naturally, the earlier we announce a new system, the more speculation will be encouraged and there will be a higher risk of information leakage from those who are working cooperatively on it outside Nintendo. In addition, a lot of people interested in our next move might be less amazed at E3 if we disclose too much information in advance.

At the same time, however, if we make a totally surprising announcement at E3 on the spot, which would be an effective way to astonish people, some busy people might say, "Oh, Nintendo is a mischievous company. I could have visited E3 if I was informed of the announcement in advance." We decided to make the announcement at this time because now is our last opportunity to inform people so that they can arrange their travel schedule for E3.

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