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Financial Results Briefing for the 73rd Fiscal Term Ended March 2013 - Q & A
Q & A
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Q 7

I have some questions about Wii U. Since you have a problem that the more you improve the quality of games, the more delayed their release will be, investors here must doubt if the game titles after "Pikmin 3" will really be available on time. I would like your comment on what the most serious bottleneck is in the development to upgrade games and whether it will affect the development of future titles. Also, I am wondering if the current slow sales of Wii U will have any influence on the attitude of software developers overseas. In frequently receiving inquiries from individual investors, they seem to have the impression that the Wii U system is not so powerful and that few third-party games will be developed in the future. The current weak software lineup has deepened their concerns. I would like to hear your view on this point.

A 7


The reason for the delayed release of our first-party titles was the fact that completing the games released at the same time as the launch of Wii U required more development resources than expected, so some staff members from development teams working on other titles had to help complete them. In short, the development teams of "Pikmin 3" and other future games were understaffed during that period. We do not simply have one easily identifiable bottleneck in software development. These days it is becoming increasingly challenging to determine the minimum development resources required for customer satisfaction. The point I am trying to get across is that currently it is more challenging to sell packaged software for around $50-$60. On the other hand, we can offer digital games in other formats. It is true that it is becoming increasingly challenging to meet the expectations of consumers who are willing to pay $50-$60 for a game, and it is difficult to break even unless a huge number of units is sold all over the world, so it cannot be denied that software development is becoming more challenging. Among such packaged software, however, the sales of popular games are much larger than in the past. Therefore, if we create more hit games, the software development business can still be very profitable. All games break even if they sell millions of copies worldwide, so we will continue to do our best to develop games which have high sales potential.

In addition, we have started working to expand the range of software developers for Wii U, as I announced in the Corporate Management Policy Briefing in January. As I mentioned just before, the development challenges for home console games selling for around $50-$60 have increased significantly. Around the time when I first wrote a program for a home console game 30 years ago, two developers, including me, completed it in only three months. Things have changed dramatically since then, and we therefore need to expand the range of software developers. We made two announcements at GDC held in San Francisco in late March. One is "Nintendo Web Framework," which is the development environment used for "Wii Street U powered by Google" I mentioned earlier and some VOD services available for Wii U. The number of developers who can use versatile web technologies such as HTML5 and JavaScript is probably more than 100 times larger than that of the current software developers for dedicated gaming machines. We would like them to create software for our console. "Wii Street U powered by Google" was actually developed by a very compact team whose core members had never developed games for dedicated gaming machines. As I have already mentioned, the application has been and will be updated constantly by a small development team, which means that the development environment has enabled us to significantly reduce development challenges. Since our announcement at GDC, we have received inquiries about it from hundreds of new development companies and individuals. We believe there will be something novel and fascinating from their development work, thereby expanding the range of the software available for Wii U.

The other thing we announced was that developers can now use Unity, a cross-platform video game engine, for Wii U development, and we have started offering it to the developers. There are over a million Unity developers, including many in developing countries where the business of dedicated gaming machines is not prosperous. We would like to create opportunities for these developers to have their games available for Wii U. We hope that these actions to expand the range of software developers, in addition to the functions of Nintendo eShop and payments through e-money I mentioned before, will give us new business possibilities.

As you stated, it is a fact that some software development companies assume that Wii U is not powerful enough. On the contrary, some developers say in interviews that Wii U has a different architecture from other consoles and that, when utilized in the right way, it can perform well. At the moment, there is a great deal of contradictory information. Nintendo is required to make more efforts to dispel such a misconception. In fact, some software companies are actively supporting Wii U and others are not. It is important to have supportive companies enjoy successful sales of a game and feel that their decision to develop something for Wii U was correct. We understand that this cannot possibly be achieved overnight and it may sound unconvincing under the current slow sales of Wii U. We would like to work to revitalize the Wii U market and show you favorable results for third-party software from this summer.

Q 8

You aim to achieve 100 billion yen of operating profit. Is there a possibility that you will consider a share buyback?

A 8


We often receive questions about share buybacks in these sessions. We understand that a share buyback is one possible way to provide returns to shareholders. Also, when extraordinary circumstances cause a supply-demand imbalance, this can be an effective way to counteract it. However, share buybacks are not always the best form of returns to shareholders. It is true that this might cause a short-term rise in our share price, but whether we can maintain that rise in the long-term depends on other factors. Also, it can be said that only those who are waiting for a time to sell can receive the advantages of a buyback. Therefore, we would like to consider various possibilities of returns to shareholders and decide on the best option overall.

Please understand that we cannot say whether we will or will not perform a share buyback on occasions such as this as we are committed to fair disclosure of information. Nonetheless, we will continually consider what the best method is to provide returns to shareholders.

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