IR Information

Corporate Management Policy Briefing/Third Quarter Financial Results Briefing
for Fiscal Year Ending March 2012
Q & A - Jan. 27, 2012
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Q 7

 I often hear that you, Mr. Miyamoto, have been actively nurturing your subordinates.  What are your thoughts on balancing your own development works and such nurturing activities? Also, how do you evaluate the actual works? For example, if what you make is 100, how many of your subordinates are at each level? Would you share with me your impressions?

A 7

Miyamoto:

I’m afraid that I am being chosen to answer all of the difficult questions today. As for your question regarding allocation of my energy, the ideal situation is one in which I do not need to give any direction. If we look at such a situation from one perspective, my giving directions may hold back my subordinates’ independent and voluntary growth. Accordingly, sometimes I intentionally give them freedom. Of course, I do not let everyone go totally unchecked. I supervise whenever necessary. The basic idea is, I’m reminding myself to exercise patience (so that I will not state my opinion nor get myself involved in their work.) I end up using less of my energy and, as a result, I am starting to have time that I can spend for myself. When I recently chatted about some general things, including how I am taking advantage of the extra time that I have now, some misleading reports were made. Now, I am spending more time than before on finding new ideas for new developments rather than focusing my energy on work in my (development) teams in order to solidify the contents of (existing) franchise titles. After all, developing big hit titles must be the solution. I am acting with the understanding that one big hit title can change multiple phases of a situation in the entertainment business, and I feel that finding such one big hit is my basic job. If you ask me, “So, how is it progressing?,” well, I think this is common in any organization, but when we look at the team within which we work, the organizational structure has been set up so that it works with the premise that each individual’s role is there. In other words, it is difficult to find my alternative within this existing structure. Accordingly, for that specific purpose, we are trying to create a new structure. As a result, I feel confident that we are gradually making improvements, and we have already come to the stage where quality software titles with a high completion level have been developed without my active involvement.

On a related note, people often say that you can make excellent products when you gather excellent people. However, when they are fresh out of college, nobody really stands out. Of course, some graduates received very high scores at school, and some did not. Ten years after entering a company, however, rather than how they scored at school, what kind of work they do in which phase makes the difference in their ability, I believe. So the question is, “10 years after joining Nintendo, is the company able to take advantage of each individual’s ability?” Also, while a particular team’s overall performance may not be highly appreciated, I feel that there are a number of members within that team whose abilities are excellent. So, we are internally attempting such new things as organizing in-house seminars or gathering people who have not worked together before and letting them work on one mission. I do not know about the level of people who joined the company many years ago with me, but as far as employees who joined the company in the last 20 years or so are concerned, their basic abilities are pretty high. Today, I feel that I can trust them.

Iwata:

Some of you may not be able to follow one of the subjects Mr. Miyamoto just referred to, so let me supplement it. During one of the interviews he accepted abroad, Mr. Miyamoto commented that he always tells his subordinates that he’s going to retire soon, in order to nurture the young developers. Mr. Miyamoto’s intention in making these remarks is to change the developers’ mindset because they will continue to believe that “this is Mr. Miyamoto’s responsibility, not ours” unless he encourages them to envision the workplace without him. Unfortunately, the article was reported as if Mr. Miyamoto had made his retirement announcement. Follow-up articles were created one after another on the Internet. Before we knew it, articles containing completely different messages from Mr. Miyamoto’s original message were circulated, which once again reminded us how scary the Internet can be.

Also on Mr. Miyamoto’s answer, there are two big development divisions at Nintendo, and I am supervising one, and Mr. Miyamoto is doing so in the other. We are encouraging active communication between the two. We are actively doing so and observing what happens if we assign particular work to people who have never done such work before. So far, we have observed more solid results than originally anticipated. In the future, we may be able to disclose, “as the result of this endeavor, we are now able to make this happen.” Of course, no single person can replace Mr. Miyamoto instantaneously. They are living in a different age from Mr. Miyamoto and their experiences are different from Mr. Miyamoto’s. On the other hand, there have been many people who have observed how Mr. Miyamoto works, have worked with him or have been left in situations where they have to take on more significant responsibility without being allowed to be dependent upon Mr. Miyamoto. Those who have been close to Mr. Miyamoto have been making developments with the world as their target, and they have been coming up with a number of products. Because there are a number of people who have gained a significant amount of experience, I am confident that people are growing. Even for the development fields that required Mr. Miyamoto’s involvement in the past, the situation is changing. Of course, there are the areas that we have to say, “Mr. Miyamoto’s involvement certainly makes a difference here.” However, when we look at the culture and know-how held as a group, not just one particular person at any given time, the situation has significantly changed over the past 10 years. Please take this as a remark from an individual who has been watching Mr. Miyamoto.

Q 8

 You just mentioned that the third fiscal year from the launch will be a critical year for the Nintendo 3DS. I guess that, thanks to the success of "Monster Hunter 3 (Tri) G," (Japanese title) an increasing number of core users are entering the market in Japan. I'd like to know about the change in the core user demographic there after the Christmas sales season. As for overseas, I have the impression that only Nintendo fans have started to purchase the Nintendo 3DS. You mentioned the change in the mindsets of the overseas software publishers and said that a number of quality titles would be released by them. What is your strategy to expand the Nintendo 3DS into the core user demographic overseas? In addition, I think the success of Nintendo DS was due largely to the great popularity you were able to gain among casual game players both inside and outside Japan. Taking the new "Animal Crossing" game as an example that we can expect to see for the Nintendo 3DS in the future, if it can accelerate the net connection ratio of the Nintendo 3DS, or I can also think of some linkage with some applications like the just-mentioned "Swapnote," will there be an opportunity for you to secure more casual players by making existing hit Nintendo DS titles into new software for the Nintendo 3DS by integrating network functionalities into them?

A 8

Iwata:

This chart shows the transition of the Nintendo DSís and the Wiiís software shipment numbers in each fiscal year. As I said that the third fiscal year is important, each platform shows a sales jump in their third year. When a platform can show such an increase, the entire platform business can significantly grow, so we recognize that the third year is very important. Although in the case of the Wii, we were able to create an explosive boom around the world even in its second fiscal year, in general, around the third year we usually see a good balance between the proliferation of the hardware and good sales of applicable software. This is one viewpoint with which we see the market. Of course, each platform has its own consumer characteristics and market environment, so I am not saying that we always see a transition like this. Please just take this as an example of the structure of a good game platform business.

Regarding your remark on Capcomís "Monster Hunter 3 (Tri) G," (Japanese title) making a change in the Nintendo 3DSís user demographics, you are exactly right. The number of Nintendo 3DS users who think of themselves as skilled game players is increasing. Also, the number of male Nintendo 3DS users in junior high school, high school and university is increasing. I believe I have previously shown you a pyramid chart of Nintendo DSís and Wiiís user demographics, which showed surges in children and their parentsí age demographics, and between which was a dip, so that it looked like a two-humped camel. I think that dip is now being significantly filled. For years, Nintendoís video game platforms have had an almost equal split between male and female consumers but, probably with such a background, the male-female user composition for the Nintendo 3DS at this point in time must be about 6 to 4 in favor of male users. Of course, there are a large number of female users of the product, but the ratio is more male-favored at present.


In the overseas markets, the main battlefield for third party publishers is the home console market. As you once again look at the graph that I showed you today, you will notice that a higher ratio of software sales is generated on home consoles. As the result, the major western publishers tend to put more priority on developing their software for home console systems. On the other hand, now that they were able to confirm the Nintendo 3DSís marketability in the just-finished holiday sales season, their attitudes are gradually changing. Also, until such software from the overseas publishers pours into the market, the Japanese software makers have a great business opportunity, I believe. This is one thing that I often talk about with Mr. Hatano. If the company can cooperate with the Japanese software makers and increase the overseas sales of their quality software, we can prove to the others that the market is there for them and the Japanese software makers will be able to expand their markets. Therefore, if we can do so, there will be a number of advantages. In other words, the important factors are: One, such titles will be launched by the western software makers and succeed in the market, and: Two, Nintendo and the Japanese software makers will effectively cooperate so that their titles will sell well outside Japan.

As for the "Touch-Generations" titles for the Nintendo DS, as many of you recognize that these titles were able to gain popularity among different consumers and to expand the total number of consumers for the hardware, we often receive such questions as "Why donít you do the same for the Nintendo 3DS?" If the company was to simply port these "Touch-Generations" titles to the Nintendo 3DS, there would be nothing fresh. Although we have not included the software in the lineup that we have announced so far for this year, we are, of course, preparing several titles with which we will be able to aim to expand the entire gaming population. By releasing these titles in the market, and by linking them with other network activities of the company, by taking advantage of such communications among friends as "Swapnote" or interactions in public enabled by "StreetPass" communication, if we can beef up the joy of the software, and if we can communicate to consumers the brand-new experiences such software can deliver, I believe we will certainly make a change. For example, in comparison to the Nintendo DS and the Wii, fewer senior consumers are using the Nintendo 3DS today. It must be inevitable as there are few titles among the Nintendo 3DS software so far developed with this age demographic in mind. The situation must change after applicable software is introduced. However, for the Nintendo 3DS, we have to first maintain the situation in which the current owners of the Nintendo 3DS will be satisfied. We cannot put too much priority on expanding the entire user demographic at present. It is important to maintain a good sense of balance here.

Q 9

 Iíd like to ask about the development of the Wii U. You mentioned that, after the launch of the Nintendo 3DS, an insufficient number of applicable software titles were able to be released. Looking at todayís environment, I believe you will either have to prepare software further in advance or increase the number of people working on the software. On this analysis of mine, I have questions for Mr. Miyamoto. As a man responsible for managing the software, how do you see the challenges of the software development period and necessary human resources, and how are you going to cope with these challenges? I also have a question for Mr. Takeda. Do you have any measures to improve the situation for the Wii U from the hardware perspective? I recall that the company incorporated various ideas to improve a similar situation to reduce the number of the development staff members for the Nintendo GameCube. Are you going to do something similar this time? If you cannot elaborate on the details, please tell me about it in general. Finally to Mr. Iwata, as a person who makes decisions as the judge, what do you think about the increasing development costs for the business of the Wii U and other platforms in the future?

A 9

Miyamoto:

Regarding the size of the development teams, after releasing various titles this year, I think that we will be able to explain about the teams that are developing the software, but we have already started working with a number of other companies. Talking about game development in general, if we develop video games based upon similar concepts and scale as before and release it for multiple hardware systems, the time each developer has to spend to do similar work again and again increases, which is not so interesting for the developers. Talking about the Wii U, it is going to be compatible with high-definition TV sets, which are now widespread and, with the graphics capabilities catching up to the general trend, some people consider it to be the "next-generation Wii." On the other hand, as far as graphics capabilities are concerned, there are already other hardware systems with similar functions. Therefore, we have designed the Wii U to be recognized as being different from any other hardware system. Although I cannot elaborate on its network functions today, as we are preparing for the launch of the Wii U, we are taking into consideration its network-related capabilities.

In short, the bottom line is the number of new things which are possible only on Wii U we can create, and our basic policy is to nurture the younger people who can think about the ways to create such things. We are making efforts so that when we release applicable software in the future, you will be pleasantly surprised and you might say, "Oh, this is what you were trying to achieve!" or "These are the titles you were preparing."

Genyo Takeda (Senior Managing Director, General Manager of Integrated Research and Development Division):

I was worried about being asked about the Wii U today. As we are preparing for the announcements at E3 this year, we need to refrain from talking about it so that we can keep the surprise for that opportunity. If there is anything that I can answer today, perhaps on the question of how the developers will be able to reproduce attractive visuals in HD graphics by using shader functions, but the fact is, a number of the developers have already had sufficient experiences on doing so on several hardware platforms. In other words, they have already experienced and overcome the challenges in this regard. But if I stop here, my remark will be interpreted as, "So, the Wii U has just caught up with the trend" if I borrow the words that Mr. Miyamoto just used. So, how to differentiate the Wii U in terms of brand-new uniqueness with other video game systems is important, and regarding this point, all I can say today is, we now have the new controller which revolves around the original concept of the Wii Remote, and the developers can take advantage of multiple screens, which enable them to leverage upon the unique combination of a big TV screen and a smaller screen in playerís hands. As you know, at Nintendo, those who are developing the contents are working closely with us, the hardware developers, in the same building. We are once again working together closely by exchanging ideas. Also, NFC can be one answer to your question as a new trial.

Iwata:

You are asking for my comment as a judge, but I also need to think about the software content, so my remarks are two sided. Looking at the software for home console systems, there are certainly the software titles for which very rich graphics must be reproduced on HD displays and which demand a large number of developers to spend a very long time to develop. It is one of the truths that a certain number of such software titles must be prepared, or the consumers will not be satisfied. But we do not think that any and all the software must be created in that fashion. When you look at Nintendoís software, extraordinary rich graphics, massive gameplay volume and astonishing rendition effects are not necessarily the appealing point. It is, in fact, important for us that our games are appealing in other ways as well. An example of this is the Wii software, "RHYTHM HEAVEN FEVER," that we released last year in Japan. It became one of the hits, but if we had adopted rich photo-realistic graphics, it would have lost much of its appeal rather than improving its appeal. Similarly, about the Japanese title "Tomodachi Collection" for Nintendo DS, the developers themselves confirmed that this software is based upon the "cheap concept." It is not necessary for us to deploy a huge number of people in order to develop such games. When we need massive power and have a lack of internal resources, we collaborate with outside resources and pour necessary resources to where they are needed. We are increasing the frequency of working with outside developers where Mr. Miyamoto and our internal developers alone used to develop. At the same time, however, we do not forget to ask ourselves in each such opportunity, "Isnít this something our internal resources alone could sufficiently deal with?" Also, when we have such a doubt in the development as, "Will such cheap pictures do in terms of todayís home console graphicsí standard?," sometimes we conclude that "showing such pictures are unique and rather appealing, so itís OK." So, there are a variety of different ways to show the unique appeal of software. Whatís important here is not to narrow down what we can do. Rather, we have to create the dynamic range of appeals that the consumers can appreciate. We decided to make a proposal of an additional screen into the Wii U controller because developers could think of a variety of different possibilities here and there of using both a big TV screen and a screen in a playerís hand. As we will showcase the Wii U at E3 in June this year, the detailed announcements must wait until then, but we are aiming to make a system which shall not be forced into competing with the others where the contenders can fight only with massive developer resources and long development times as their weapons. Having said that, however, as I mentioned, it is true that, in some software areas, we need to be engaged in the power games. Take The Legend of Zelda franchise, for example, the fans must be looking for the graphic representations that they do not see as cheap at all when the title is released for the Wii U. When it is necessary, we do not hesitate to role out our resources.

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