IR Information

Corporate Management Policy Briefing/
Third Quarter Financial Results Briefing
for Fiscal Year Ending March 2013
Jan. 31, 2013

The Internet-connection ratio for the Nintendo 3DS has reached a level that no handheld gaming device has ever experienced. In Japan and the U.S. where the ratio is specifically high, the number of Nintendo 3DS units which have been connected to the network has surpassed 80 percent. I referred to "approximately 60 percent" in one of my presentations here last year, and that ratio has significantly increased in one year.

When it comes to StreetPass, users in the automobile-dominated U.S. do not use it as much as Japanese users do. In contrast, it has gradually become popular in the metropolitan areas of European countries. This year we plan to add some StreetPass-related features to the Nintendo 3DS in order to encourage more people to go out with their Nintendo 3DS, and make StreetPass and SpotPass more popular overseas.

As a new challenge, we started download sales of packaged software last summer. The download sales have expanded based on the high Internet-connection ratio. The number of consumers who use the Nintendo eShop has increased and now the most popular way to see the Nintendo Direct presentations is through the Nintendo eShop.
Stock of the packaged version of "Animal Crossing: New Leaf" ran short as we could not increase production due to its customized ROM card using SLC-NAND memory last year. Also, the game is one that you can enjoy every day over a long period of time. Many consumers therefore have chosen its downloaded version and the number of sales has already surpassed 700,000 units, occupying one-fourth of the total number of sales, which is an unprecedented achievement.

In the overseas markets, there has been no packaged software title which marks such a high ratio of download sales. The reason we made it in Japan is that, in addition to the unexpected shortage of supply and the nature of the game mentioned above, we have diversified the sales methods of download versions including selling POSA (Point Of Sales Activation) cards.
This year we will try to diversify the sales methods to raise the ratio of download sales overseas with the aim of increasing our business opportunities and profitability.

Regarding the Wii U, it is now clear that many consumers have not understood its product value. We would like to work thoroughly for its penetration.

Both the Nintendo DS and the Wii have finally become highly-appraised platforms. The Wii attracted people at a glance, but it took us a rather long time to have many people understand the value of the Nintendo DS. The Wii U has a lot of factors appreciated by users, including the possibilities of the Wii U GamePad and Miiverse, and we are confident that it will have high sales potential once they are familiar to more consumers. We hope to change the situation from now and make a drastic improvement before the latter half of the year starts.

We will have few titles to be released early this year, but our software lineup will be gradually made stronger from spring to summer. To give sales momentum to the hardware, from the latter half of this year to next year, we will intensively launch our key titles including those we announced in the Wii U Direct - Nintendo Games presentation last week.
As a decisive factor in buying a console is that you cannot play a much-anticipated title without the hardware, we will make a lot of such titles available during this time.

We announced a collaboration title of the "Shin Megami-Tensei (Japanese Title)" series and "Fire Emblem" series which ATLUS and we are cooperatively developing. As the developing cost of games for home consoles has been high, it has been very difficult for third-party developers to take a risk by developing games only for one home video game console. We therefore have had various discussions with software developers for the projects.

Our in-house development team will create Nintendo-like unique games on our own and various games with the help of second-party development companies. However, this is not enough to have a large variety of games, and we have to do something to strengthen our lineup. Our efforts include the cooperative development of our IP games like the new "Super Smash Bros. (temp.)" which we are developing with Namco Bandai and collaboration titles like the one with ATLUS I mentioned before, "LEGO CITY: Undercover" which we are developing with Warner Bros. Entertainment and TT Games, and Ubisoft’s "JUST DANCE" series which was a smash hit in the overseas markets and we localized for the Japanese market. We are willing to actively cooperate with software developers to produce something new beyond the traditional licensing business. We believe that this is possible because Nintendo is not only a platform holder but has a powerful in-house software development team.

The Wii U is a game console you can enjoy most with the Internet connection and the current Internet-Connection ratio is 74%, which means that almost three of four consoles have been online already. This is clearly higher than the previous hardware system we released. We will continue to inform our consumers about the advantages of using the Wii U consoles online to further increase this ratio.

One of the unique qualities of the Wii U is the Wii U GamePad, a new standard controller with a touch screen. We think that, together with the high Internet-connection ratio I referred to before, the controller has the potential to make TV smart, innovate the relationship among the TV, Internet and video game console, and then expand the TV-based entertainment in living rooms. Unfortunately, the Wii U has not fully expressed this potential as there is room for improvement in its toggling speed and usability.
The existing online services have been designed for PCs and smart devices, and are not suitable for one screen shared by multiple users. You cannot feel comfortable while using them with your TV. This is probably why the trials to blend TV and the Internet have been not so successful.
However, there are some services which will be more attractive with a large TV screen and handy screen. What could be one example is a new service called "Wii Street U powered by Google," which we announced in early December and in which you can enjoy Google StreetView on the Wii U. We will delay the release date from late January to mid-February to spend some more time on final development work. Please see the latest promotional video of this service.

Click to play

As you can see, through this application, Wii U enables you to experience linking your living room to various places in the world.
Needless to say, the primary use of Wii U is to enjoy video games. We believe that, however, these kinds of services will help people widely understand the unique value of Wii U and increase the number of people who are interested in Wii U in a family and eventually lead to a bright future of this console.

By the way, this service has been developed by a small team mostly using web technologies based on HTML5, not the so-called native codes only for Wii U applications. Both Miiverse and Nintendo TVii have been created as web applications utilizing browsing engines. The Wii U console is powerful enough to smoothly run such applications as developed in this way without writing any specific programs. We have been able to deploy various services for this console with less in-house development resources in a more timely manner than our previous platforms.
Now is the time the development of video games for dedicated platforms requires a vast investment. Thinking of diversion of web services, creation of prototypes and development of independent label games, it has become more important to expand the range of software developers. At GDC (Game Developers Conference) to be held in March, we will show you some of our efforts to expand the range of software developers. They will include the development environment used for "Wii Street U powered by Google" and some VOD services, where you can develop the Wii U software using web technologies like HTML5 and JavaScript and Unity, a cross-platform video game engine used by many users.

As you might already know from some newspaper reports, we will reorganize our development divisions next month for the first time in nine years. Two divisions which have independently developed handheld devices and home consoles will be united to form the Integrated Research & Development Division, which will be headed by Genyo Takeda, Senior Managing Director.

Last year we also started a project to integrate the architecture for our future platforms. What we mean by integrating platforms is not integrating handhelds devices and home consoles to make only one machine. What we are aiming at is to integrate the architecture to form a common basis for software development so that we can make software assets more transferrable, and operating systems and their build-in applications more portable, regardless of form factor or performance of each platform. They will also work to avoid software lineup shortages or software development delays which tend to happen just after the launch of new hardware.
Some time ago it was technologically impossible to have the same architecture for handheld devices and home consoles and what we did was therefore reasonable. Although it has not been long since we began to integrate the architecture and this will have no short-term result, we believe that it will provide a great benefit to our platform business in the long run. I am covering this topic as today is our Corporate Management Policy Briefing.


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