IR Information

2011 E3 Expo Analyst Q & A Session - June 8, 2011
Q & A
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Q 1   Six years ago before the Wii launched, we discussed the Blue Ocean strategy, a strategy which aimed to bring in lapsed gamers and to capture non-gamers. The Wii, I think, appropriately addressed that issue in that it made gaming accessible to everyone. So, you addressed a consumer need that consumers did not know they had; but when they picked up the remote for the first time, they said, "Wow, I could be a gamer," and people were immediately drawn in, and you were very successful. What consumer need does Wii U address that will attract new gamers, keep gamers within the Wii family or potentially take market share from the other HD consoles? Or, what is the feature that you think will draw consumers to this platform?
A 1

Satoru Iwata (President):

  So, the first thing that we did when we designed the Wii U console was to think about what we could do to enhance and refresh the Wii experience.

  We started by looking at some of the things that we wanted to achieve, but weren't fully able to, with the original Wii console. And, we also looked at things like technological advancements in terms of the penetration of HDTV, and we have incorporated it into the Wii U console.

  What we are proposing this time with Wii U is a console that will give those consumers who did not even have an opportunity to interact with the Wii system, more opportunities to connect with and use the Wii U console and, at the same time, offer the consumers who desire those high-quality HD visuals in their gameplay, a product that will meet their needs as well.

  In Nintendo's E3 Presentation, I mentioned that there are now two categories of consoles: one for casual players, and the other is for core gamers. In our world, what has been said is that there have been two categories of players: one group is casual and the other group is core and that there is a barrier between these two groups. We believe novice players, who started playing games as casual players (since there is no one who is inherently a core gamer), come to have a budding interest in games and spend a greater amount of time with gameplay so that they mature into core gamers. What we have tried to do with the Wii U console is to create an environment where we can break down the barrier that exists between those two groups and provide, on a single console, an experience that will satisfy both types of users. Through that process we continue to expand the gaming population.

  I believe the concept of the "Blue Ocean" conveys the idea that if you try to have too broad of a focus, then you may not have as great of an impact, or things may not go as well as you desire. So, part of the philosophy of the Blue Ocean strategy is to really bring your focus into a specific area by "abandoning" or "eliminating" some good ideas.

  Perhaps the reason that you asked this question is because you may feel that we have lost our focus by going with this seemingly broader strategy.

  So, to define what the focus is this time, there are really two points that we are focused on. One is that we looked at the system and we asked the question, what can we do to attract people who were not inspired by even the Wii Remote or the Wii Balance Board to participate in video gaming, and how can we, through this system, capture their attention? The second point that we focused on was how can we satisfy and meet the needs of everyone in the industry who is developing games now and their desire for HD visuals, and how can we convince them that this will be a system with which "they can take full advantage of their game development."

Q 2   It seems like the product cycles of both the handheld system and the new console are at pretty interesting inflection points but there seems to be some skepticism, I think, among investors as exhibited by your low stock price. Have you given consideration to doing a share repurchase just as you did before, and why or why not?
A 2


  Of course, we keep that (a share repurchase) open as a possible option for us. But, of course, we can't announce anything related to that here because of fair disclosure rules. So, please understand that we will keep that in consideration as well as other options but, unfortunately, I can't answer that question today.

Q 3   I am concerned that your potential new customers may hold off buying a Wii console and games until you launch Wii U because Wii U looks more attractive. So, how will you cope with this concern?
A 3


  It can be said that for any consumer product, different audiences buy a product at different points in time, and there are certain audiences that want to buy a new product when it first comes out, before its reputation becomes solid, because they want to be the first ones to try it. There is also, for every product, an audience that waits until some of those first impressions have come out and want affirmation that the product is one that is worth their investment and, at that point, they will purchase that product. Similarly, there is another group that waits an even greater period, for a product to really take hold for the vast majority of people in the marketplace, before they move and purchase that product themselves.

  So, what we are considering with the current state of the Wii system is that our objective is to sell Wii to the group of late adopters.

  And, of course, this is a group of people who, despite the Wii becoming a social phenomenon, still have not bought the system. So, we need to move beyond that and try to find other reasons for them to want to purchase the system.

  The same could be said for last year and even the year before but, as we went into the spring through fall months, sales of the Wii console were not as strong as many people had expected, and we certainly heard concerns to that end. But, in both of those years, once the holiday season started, we saw that the Wii console then began to gain great momentum so that by the end of the year, it had retained its top spot as the best-selling hardware system.

  So, the more that our business focuses on that group of late adopters, the more that our sales tend to peak in the holiday season.

  For those people who are considering their holiday season purchases, it becomes our job to convey to them that the Wii has great entertainment value and it will make their family and friends happy during the holiday season while they are at home." If those individuals are looking to make a purchase during the holidays this year, then the Wii U system, which won't be out in time for the holidays, will not be an option for them to choose from. Conversely, because the majority of the people who will purchase the Wii U system initially already own the Wii system, I don't think that the information about the Wii U system launch taking place next year will affect the sales of the Wii system. Of course, the ideal scenario for Nintendo would be that if people are considering purchasing another HD video game console, then knowing that they will have opportunity to purchase Wii U when it is released next year, they perhaps might delay their purchase of a console.

Reggie Fils-Aime (President & COO, Nintendo of America Inc.):

  If I could add three points from a Nintendo of America perspective: first, we recently changed the configuration of the Wii hardware less than a month ago to include "Mario Kart Wii," which here in this market is the number 2 selling Wii title — so that is a very strong consumer offering. We priced that bundle at US$149, and we've already seen positive momentum from that move.

  Secondly, we just launched a line of games called Nintendo Selects. These are value priced offerings at US$19.99 that have sold very well again in this short period of time, and we believe that that will continue to offer great value to consumers who are buying right now.

  And, the third opportunity I would highlight from a North American perspective, or from a total Nintendo of America perspective, is that we continue to have targeted opportunities here in our territory to continue driving penetration. Whether those opportunities are regional, for example, in our Latin America markets, or whether those opportunities are ethnic, we have identified the Hispanic consumer as a key opportunity for us. They share the family values that we have in our Nintendo product line. And then, from a demographic standpoint, there continues to be specific age segments that have indicated an appeal or a desire to have a Wii system, but they have not yet bought it. So, certainly as Mr. Iwata highlighted, we look forward to a very strong holiday season, especially with the launch of "The Legend of Zelda: Skyward Sword," but in addition, we have very specific opportunities on a regional basis that we will continue to focus on even in advance of the holiday season.

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