IR Information

2012 E3 Analyst Q & A Session - June 6, 2012
Q & A

Q 13

Here at E3, Microsoft announced SmartGlass, which appears to take away or minimize one of the Wii U’s key differentiators, the type of game play and entertainment by using two screens of a device at hand and a TV. Are you worried about SmartGlass? How does Nintendo intend to differentiate its hardware system?

A 13


One thing that I can say is that previously, after we’d introduced motion control, it took the other companies about three years before they introduced their own style of motion control. This time, the fact is that we’ve seen something of this nature come out within a one-year time frame from when we first announced the Wii U. That suggests to me that they clearly see value in what we’re trying to do. I think that an approach that nobody follows is one that few people see value in. So the fact that we have so quickly seen somebody following in the footsteps of what we first introduced with the Wii U, suggests that there are people who see great appeal in what we’re offering. I think that’s proof of that.

On the other hand, the question is, is what they’re offering truly capable of doing everything that we’re offering? From what we have seen so far, it looks to us as if what they are able to offer really is only a small facet of what the Wii U is capable of. We know that the core users who love playing video games like controllers that you hold with two hands. But what you don’t have on smartphones and tablets are the buttons and the control sticks that they prefer to use. Now, if they could hold a controller with two hands and hold a tablet or a smartphone with another hand, there would be no issue. Unfortunately, since it is not possible for humans to do that, you can’t play a game in a way you can play with the Wii U. The other thing that’s important to know is that with the Wii U GamePad we have paid particular attention to the latency (the time to be spent for wireless communication between the Wii U system and the Wii U GamePad) issues to allow the Wii U to truly create seamless gaming experiences on the Wii U GamePad. What that means is that when the user presses the button on the Wii U GamePad, the signal of the button processes a transmitter to the Wii U hardware, and the Wii U hardware draws graphics in reaction to the signal received from the Wii U GamePad and transmits those graphics back to the screen in the Wii U GamePad. If you have latency within that process, or lag within that process, it’s no longer a quality game. So clearly and naturally the latency for a situation like that is going to be very different from a device that has specifically been designed to achieve that type of seamless interaction versus a device that simply has conventional technology layered for each device to be purchased for individual reasons. If you were just talking about streaming movies, there would be no issues because there would be no interactive development for that. The moment that you look at an interactive experience, people become very sensitive to the lag and the latency, so that’s the reason why we thought it would be meaningful to create the Wii U GamePad. The advantage of the Wii U system and the Wii U GamePad bundled together is to ensure that everyone will have the same experiences. I believe that even if Microsoft is able to bring SmartGlass to their console or if, according to the Sony story, the company is able to connect two different consoles, the advantage that we see in the Wii U will not be taken away.

Q 14-1

Could you articulate for us how the business model will be different in this current generation with the Wii U? Will you see greater profitability, better margins with the digital downloads? Could you give us a taste of what we should expect?

A 14-1


I do think that we can improve profitability because with digital goods you avoid things like the cost of goods for media. You do not have the cost of shipping physical goods and you also can hold down inventory risks.

Additionally, as I explained in my discussion of “Miiverse,” historically speaking, our audience is one that has often been described as being a more casual audience, and it has been said that our tie ratio has been low compared to other companies. In order to cope with the situation that the tie ratio goes down without any measures, and by proposing special new opportunities (to recommend suitable games for each consumer to play next) in a natural way through the main menu screen, we will try to improve the tie ratio. This is our challenge to improve the profitability as well.

I also think that with what we’ve done to make the Wii U a device central to the living room will see a higher active use rate, and a higher active use rate for the Wii U system will also mean more opportunities to generate profit in other places. Of course I’m sure that there are people who wonder about the long-term ability to maintain the value of the software our consumers appreciate and maintain strong purchases going forward, and these are some of the different measures that we’re taking to try to ensure that we’re able to maintain higher profitability than before.

Q 14-2

I think there’s a lot of speculation in the market right now that Apple is going to launch a TV for the living room. While Nintendo and Sony and, to some extent, Microsoft as well have enjoyed really dominating the living room, if in fact Apple does do that, what does Nintendo think about such a scenario?

A 14-2


I think that what Nintendo is proposing with the Wii U is the only platform that has a second screen that is seamlessly and completely integrated with a large TV screen, and this feature characterizes the Wii U well. Therefore, we have a lot of chances to differentiate what we have to offer and will help drive appeal and interest among the consumers around the world. Our proposal could create a unique blue ocean.

We see in the mobile phone market that typically there is a cycle of people replacing their phones roughly every couple of years so a new device like a smartphone penetrates the market quickly. But when it comes to the television market, the cycle for television replacement is actually much longer; say a five-year cycle at the shortest, to a seven or even 10-year cycle at the longest. So, however fantastic the new television is to be launched, it’s not as likely that people will immediately move to upgrade a television necessarily because of that longer cycle.


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