IR Information

Financial Results Briefing
for Fiscal Year Ended March 2012
Apr. 27, 2012
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And this approach not only will cater to Nintendo’s needs to expand the exposure of our digital products but it will also make it easier for our consumers to learn about our new proposals and can be beneficial for retailers by creating a new business opportunity for them.

Asking our retailers to be proactively involved not only increases consumers’ exposure to our digital download products but also will make sense in other ways.

Recently, except for certain software, the lifespans of software in general are increasingly becoming shorter. Even a small excess of inventory can cause a price break of the software at the outlets just shortly after the launch, and retailers are taking a rather cautious attitude in making purchase orders. This situation is simultaneously causing frequent losses of sales opportunity for the software titles that have sold more than the retailers’ original modest expectations.

By asking our retailers to take part in selling our digital products as we propose, they can prevent the losses due to having excess inventory and prevent their business opportunities from being lost due to being out of stock, we believe.
In addition, if they make use of a technology called POSA (Point Of Sales Activation), where they can have a software exchange code without any inventory value and their purchase is realized when a consumer buys the software and activates the software exchange code through a POS register, they do not have to stock the inventory until the actual sale occurs, which further increases the advantages of this distribution system. Even to those retailers who have not been able to deal with our products due to the inventory risk issue until now, Nintendo might approach them with this sort of transaction option and we might be able to further expand the exposure of our digital download software to consumers as the result.


So far, the software sold at the Nintendo eShop has not been offered in other sales channels, so the price points for the consumers are virtually fixed. When it comes to the digital download software that our retailers are going to deal with, just as they do so for our packaged software, we will ask them to decide the price points. Accordingly, the retail prices for the same digital download product can vary by retailer. In terms of the fact that the company is offering the value of the software itself, we do not have an idea to act on such a belief as, “digital download software should be sold at a cheaper price point than the packaged software counterpart.” In terms of the Japanese “maker’s suggested retail price,” in principle we intend to set the same maker’s suggested retail price point for a software title. By taking this approach, there will not be a situation like “there is no markdown for the digital products while markdowns are the norm for the packaged software.” We would like each of our consumers to choose the most appropriate purchase option for them.

So, if I can illustrate what I have said today…


As you can see here, in the common digital product distribution of today, it is the standard business model where the platform holder makes direct sales to consumers, which is often called the disintermediation type of digital product distribution. However, the digital product distribution channel Nintendo conceives is not the disintermediation type.


As you can see, Nintendo sells its digital download products to its retailers, and the retailers sell them to the consumers.

In this case, retailers are going to decide the retail prices of our digital download products, which have been decided by Nintendo so far. Nintendo will not be involved in the retailer’s retail price decision. Also, Nintendo has so far been shouldering the billing and the settlement costs at the Nintendo eShop business, but with this system, just like the ordinary packaged products, Nintendo will not shoulder these costs.

Although I said earlier that I will not discuss any details of the Wii U today, I would like to share with you just one piece of information.


For the Wii U, we will start the digital download sales of packaged software that I just discussed, so our consumers can choose either the packaged version or the digital download version of the same software from day one of the Wii U’s launch.


To adapt to the changes in circumstances surrounding the video game industry, Nintendo is intending to deploy its digital business significantly. Today, with the spread of the Internet to the ordinary households, the rise in the net connection ratios of video game systems and the other changes in our environment, the company is in a position to make the offers which once appeared to be premature for us to make to the wide range of Nintendo consumers.

As you know, all of my remarks and explanations on our digital business are kept and made available for public viewing on our IR site inside Nintendo’s official website. Unfortunately, as some people seem to have a misunderstanding, I would like to once again sum up my comments here. First, we clearly distinguish digital distribution of packaged software from add-on content and, when it comes to making packaged software digitally available, we do not intend to offer any products that the consumers deem incomplete. Second, we sell add-on content so that the consumers can play a software title for even longer and on a deeper level and, when we sell this add-on content, we are making a proposal to consumers to pay for the content our developers have additionally created. In other words, as we have repeatedly confirmed, Nintendo has never conducted and will never conduct what is now widely known (in Japan) as a “gacha-type charging business” (capsule toy vending machine business), which asks consumers to pay money without knowing what kind of item shall emerge as a result of their payment, even if such a business model might temporarily yield high profitability. Nintendo does not believe such a business model can establish long-lasting relationships with our consumers. We hope that everyone understands our policy, and we will continue to make efforts to avoid such misunderstandings as, “the next ‘Animal Crossing’ might be a game which relies upon add-on content sales.”

I hope all of you will be able to once again understand this as the basic principle for Nintendo’s digital business. With that understanding from everyone, Nintendo will continue to make its utmost effort. We would like to prove that our challenges in the digital business will result in an expanded business sustainable for the long term.


Thank you for listening.


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