IR Information

Second Quarter Financial Results Briefing
for Fiscal Year Ending March 2014
Oct. 31, 2013

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Thank you for attending our Financial Results Briefing despite your busy schedules. I am Satoru Iwata, president of Nintendo.

Tatsumi Kimishima has just explained the financial figures. For the six-month period ended this September, ordinary income was in the black for the first time in four years. However, in connection with the price reduction of the Wii U hardware in the overseas markets, the effects of absorbing the inventory markdown at retail, revaluating the hardware as finished goods, and loss arising from the hardware for production in the second half of the fiscal year, led to an operating loss situation.

No interim dividends are distributed because our policy is to pay out interim dividends based on the operating income for the first half of the fiscal year. I feel deeply responsible for not distributing interim dividends for three consecutive years.

To begin with, I would like to talk about the environment surrounding the global video game market and our prospects for this year-end sales season by showing the transitions of the video game hardware market share in the Japanese, United States and European video game markets just as I did in the last Financial Results Briefing.

This is the same graph of the hardware market share during the three-month period of January to March in 2013 that I used in the Financial Results Briefing in April.

Although I have said this a number of times, the handheld platform shares are high in Japan, and Nintendo 3DS, in particular, progressed well. On the other hand, in the U.S. and European markets, the presence of Nintendo 3DS is lower in comparison with that of the Japanese market. In the Financial Results Briefing in April, I announced that vitalizing the overseas markets was our top priority for our Nintendo 3DS business.

This graph shows the hardware market share from April to September of this year. The period covered in the U.S. bar has been aligned with NPD data, which is only reported monthly, and covers April 7 – October 5, while the data for Japan and Europe covers April 8 – October 6.
As you can see, the Nintendo 3DS market share has been growing not only in Japan but also in overseas markets. You could say that we are now starting to see the results of intensively and actively releasing strong first-party titles since March this year as part of our effort to expand Nintendo 3DS in the overseas markets, which is our top priority for this fiscal year. On the other hand, the higher market share of Nintendo 3DS is not attributable solely to its increased sales. The overall sales units of dedicated gaming hardware platforms decreased by approximately 10 percent in Japan and 30 percent in the U.S. and Europe on a year-on-year basis as other platforms are in transitional periods, which have the effect to relatively increase Nintendo 3DS's market share. Of course, since the software market for Nintendo 3DS is expanding much more than in the previous year, there is no doubt that its presence is increasing and is now being recognized as the growing platform business in the video game market.
Some might feel it is odd that even though the market shares in the overseas markets are increasing, the sales units from Nintendo in the first half of this period were less than in the previous year. This is because, in addition to the relative nature of the market share, Nintendo 3DS XL was released in July in Japan and Europe, and in August in the U.S. last year.

Also, as I said in April, the Nintendo platform shares in Europe vary in each country, so I would like to show you the market share by country as well.

This graph contains data from the previous graph, and compares the hardware market shares of countries within the European region.
Compared with the data from January to March, which was shown in the Financial Results Briefing in April, the market share has increased by 8 percent in the UK, 12 percent in France and Germany, and the Nintendo 3DS market share has greatly increased in all countries. The market share in the UK, our main concern, has also improved, and there was a month in France that the monthly hardware share reached 50 percent, a presence that is as high as Nintendo has shown in Japan.

I would like to explain the results from this September in detail because it is when we noted a large difference in trends between the Japanese market and the overseas markets. In the Japanese market, Nintendo 3DS sales sharply increased after the release of Capcom's “Monster Hunter 4” and its market share grew to over 80 percent. On the other hand, the sales in the overseas markets for other video game platforms experienced significant growth in September due to the releases of software such as “Grand Theft Auto V,” which became a big hit, and “FIFA 14,” the soccer franchise that is particularly popular in Europe, causing the market share of Nintendo 3DS to slightly decrease temporarily. Even though Nintendo 3DS had not actually lost momentum, the games for other platforms were selling very well in this period, and this trend was particularly noticeable in Europe.

On October 12 the latest title in the Pokémon series, “Pokémon X” and “Pokémon Y” was simultaneously released globally for the first time ever in this series. As many reports stated, the sales in the first two days after its release exceeded more than four million units, and since this software went on sale, the hardware sales share has also changed significantly.

With regard to the sales data in October, although the NPD data in October has not been announced yet, we have data from the three-week period of October 7 – October 27 in Japan and the two-week period of October 7 – October 20 in Europe, so I would like to explain the current market situation based on this partial data.
“Pokémon X/Pokémon Y” greatly boosted Nintendo 3DS sales in Japan and Europe, which can be seen in the market share. We have no sales data for other companies, so we are unable to show the U.S. data here, but the sales of Nintendo 3DS are growing in the U.S. just like they are in Europe.

In the game business, most of the demand is generated in the third financial quarter, the period from October to December, and business performance really depends on its success or failure, and it can be said that Nintendo 3DS is in good shape for the start of the year-end sales season.

When we look at the September market shares of each country in Europe, although Nintendo 3DS dropped temporarily,

as you can see from the data covering the two weeks after the “Pokémon X/Pokémon Y” release, the market share and presence of Nintendo 3DS has grown in each country. “Pokémon X/Pokémon Y” is off to a good start, so we must now consider how to maintain this sales momentum until the peak of the year-end sales season in order to achieve wider hardware popularization.


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