IR Information

Second Quarter Financial Results Briefing
for Fiscal Year Ending March 2013
Oct. 25, 2012
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In addition, I need to answer your question about whether the Wii and Nintendo 3DS systems, which currently lack momentum, will really sell as expected in the U.S. and European markets in the upcoming year-end sales season.

First, for the Wii hardware, we have sold no more than 1.32 million units in the first half of the year despite five million units expected to be sold in the full fiscal year. As we plan to launch Wii U in the second half, you living here in Japan might think that our expectation for Wii is unfeasible. However, it has been repeatedly demonstrated that there is a new market for a video game machine after a significant markdown in the U.S. and Europe. As I referred to the sales of Nintendo DSi in the U.S. and PSP in the European market, there is new potential demand for each price range of products in these markets, which have a very broad base. Last week in the U.S. market, we launched a new set that contains the Wii hardware and one software disc, which includes both "Wii Sports" and "Wii Sports Resort" at the price of 129.99 dollars, which was marked down by 20 dollars. Since people will have time to enjoy family gatherings at the end of the year, we believe that Wii and Wii U will attract different consumer segments without cannibalizing each other.

The Nintendo 3DS system currently has stronger momentum than during the same period last year after the price markdown, though we are not satisfied with it.


The release of "Pokémon Black Version 2" and "Pokémon White Version 2" in the U.S. and Europe this month raised the sales level of the Nintendo 3DS hardware and has accelerated the trend towards the year-end. These titles are for Nintendo DS, but you can play them in conjunction with "Pokémon Dream Radar" and "Pokédex 3D Pro" which are downloadable on the Nintendo 3DS system. They have therefore worked to boost the Nintendo 3DS sales even in the U.S. where Nintendo DSi has been sold relatively well. We consider them important products to boost the momentum of Nintendo 3DS. This is for Nintendo DS, but this is a big difference from October last year when we had a hard time to keep the sales momentum. In addition to the evergreen titles like "Mario Kart 7" and "SUPER MARIO 3D LAND, "


we have "New Super Mario Bros. 2" which was released in this summer and much of the demand for it is yet to be met, and "Paper Mario: Sticker Star" which will be available in this year-end season.


Also, as you can see, the software lineup from third-party software developers will be enriched.
We acknowledge that the awareness of the Nintendo 3DS system has risen and that there is an increasing number of consumers who are considering purchasing it. We will attempt to achieve an explosive sales pace of the platform during the year-end sales season.


Here, I would like to mention our digital business, which is becoming more and more important.

Deployment of a digital business is predicated on consumers connecting their game systems to the Internet.


At the end of September, the ratio of users who had connected their Nintendo 3DS to the Internet reached 72% worldwide, a 10% rise from a year before. In Japan and the U.S. where the Internet-connection ratio is high, it has surpassed 80% and is still on the rise. The pace in Europe and Australia is relatively mild.
It partially depends on the number of places like "Nintendo Zone" where Nintendo 3DS systems can carry out "SpotPass" communications without the need for the hardware owners to go through any network connection setting procedures. In Japan and the U.S., it has reached the stage where consumers are spreading the word about the advantages of connecting to the Internet.


As a side note, we started "Nintendo Direct" one year ago, a new approach in which we directly deliver new information on our games to video game fans. The increase of the net-connection ratio for Nintendo 3DS has caused something we didn't anticipate.

Those who watch Nintendo Direct live use their PC or smartphone because you cannot watch it live on the Nintendo eShop and the Nintendo 3DS web browser cannot playback videos. By checking the number of playbacks on Niconico Live and Ustream, you can see that there are a fairly large number of such viewers. One week after a webcast, however, the most popular way to see the video is


through the Nintendo eShop. This was totally unexpected when we launched Nintendo Direct. The high net-connection ratio is beneficial to us even for purposes such as this. On the Nintendo eShop, you can enjoy promotional videos and download demo versions as well as purchase downloadable software, but you cannot watch Nintendo Direct live. As Nintendo Direct is also available after its real-time distribution, many consumers who regularly visit the Nintendo eShop watch Nintendo Direct there. We feel it is very interesting that consumers try 3D videos and demo versions soon after they have seen Nintendo Direct through the Nintendo eShop, which means we have created a new path for them to receive information on video games.


This graph shows the transitions of download sales so far. They were soaring up until three years ago, but were not able to rise for the past two years.
As you can see, however, the sales in the first half of this fiscal year were up 50% from a year ago and nearly reached the level of the highest sales ever in the first half of the fiscal term three years ago. It was the time we shipped 56.14 million units of the Wii system and 10.17 million units of the Nintendo DSi system in total, and both platforms were actively used. Considering that we have sold only 22.19 million units of the Nintendo 3DS system and it is still during its spread period, you can see our digital business has stronger momentum than at that time. The current sales growth is due to the sales of add-on content and


the digital download sales of packaged software that we started in July.

Without any advertisements in the mass media, the world average ratio of digital download sales of packaged software as of the end of September varied from slightly more than 3% to slightly over 10% of the total sales, depending on the software titles among which both packaged and downloadable versions are available. In the Japanese market, the ratio for a certain game has recently reached no less than 15%, and we consider it to be a promising start to our new attempt.
In comparing the ratios of digital download sales of "New Super Mario Bros. 2" which is digitally available in Japan, the U.S., Europe and Australia, the U.S. consumers were particularly active in purchasing the download version, followed by the Japanese consumers. The ratios in Europe and Australia are relatively small. The download ratios for "Brain Age: Concentration Training" which you spend a short time playing every day, and "Art Academy: Lessons for Everyone!" which you are inclined to carry around, are higher than other game titles, as those who understand the features of games like these ones prefer download versions.


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