IR Information

Corporate Management Policy Briefing / Third Quarter Financial Results Briefing
for the 74th Fiscal Term Ending March 2014
Q & A

Q 6

I would like to know how much manpower and money will be used for Nintendo’s future strategy and whether there will be partnerships with other companies or M&A deals for the business to succeed. My first question is regarding active utilization of character IP. Is Nintendo aiming for a business model similar to that of Sanrio? Is there a possibility of taking a step further and running a theme park? In utilizing Mario in digital areas, is there a possibility that Nintendo will allow Mario to be used, for example, in wallpapers for smart devices? My second question is regarding the expansion of the fit population, which I think is a splendid approach, but I would like to know more details on the direction of this business. Is Nintendo aiming for a model in which it sells, for example, games that help people quit smoking, or a business model that, for example, involves strategic collaborations with fitness clubs?

A 6


First of all, concerning the utilization of character IP, there may be common ground with the business model of Sanrio, but there also may be differences. As I mentioned at the beginning of my presentation, Nintendo places great value in doing things different from others, so we do not conclude that since there is an ideal business model in another company, we should do the same thing. But if there is something that others are doing that we feel would leverage Nintendo’s strength, we will incorporate that into our business. Of course, incorporating a business model in the same way as other companies is not Nintendo’s usual way, so it would depend on the situation. For your information, depending on the offers we receive, we are planning to consider many options including the examples that you shared with us, but we have not prepared our specific plans to share with you today. Licensing Mario in digital areas would mean that there is a possibility that Mario will appear in stamps or wallpapers for smartphones, and I will not rule out this kind of business. This is because we believe that this would not be in direct competition with Nintendo’s business and would not threaten our video game platform business which integrates hardware and software. We will flexibly consider options including those that Nintendo has not done in the past. What we will permit will depend on the matter, client and conditions. Also, I will not deny the possibility of an M&A deal to implement this business. Yesterday, we announced our share buy-back plan. We only mentioned the upper-limit amount and possible period of the acquisition yesterday, so we will officially announce when and how we will acquire them as timely disclosure at a later date. However, we are considering acquiring shares at a considerable level, and this will considerably increase the ratio of our own shares (to the number of shares outstanding). When the treasury share ratio increases significantly, we might be questioned about whether we will retire the shares. Currently, our video game dedicated platform business is reaching a transition stage in several different meanings, and we would like to have the option of using our shares for M&A purposes. We will not cling to this option for a long time, and when the transition stage ends, retirement of shares would be one option. However, at the moment, there is nothing that we can share with you regarding M&A deals.

As for the QOL (Quality of Life)-improving platform, I made some slides which explain how Nintendo came up with this idea. These are examples of something ordinary turning into a hit product with the power of applications. In 1980, we released “GAME & WATCH,” which, I am told, was an idea that was born from watching people use calculators. “GAME & WATCH” was made by adding an application to a watch, and this is the origin of the current handheld games. In 1998, adding an application to a pedometer gave birth to a very small handheld game called “Pokémon Pikachu.” Also, and this may be still fresh in your minds, by adding an application to scales, we made “Wii Fit.” When we talk about “health,” it often involves measuring something and showing the results, but if we add an application to something, maybe this application would encourage people to continue in an enjoyable way, and we feel that we can use our strengths in this area. I mentioned that I would like to redefine the notion of entertainment as something that improves people’s QOL in enjoyable ways, and “enjoyable ways” come from the power of applications. There are many players in this market, but Nintendo is one of the few that make both hardware and software, offer and deliver propositions to people throughout the world, and make people enjoy and continue playing with them, so we think we have a great deal of possibilities ahead of us. I am not planning to announce any specific themes today, but to give you a hint, “non-wearable” does not necessarily mean it is something that will be used in the living room. I apologize for not being clear, but please allow me to leave it at that today. I will explain in detail when the time comes.

Q 7

My question is regarding expanding the gaming population. As long as you continue to produce hardware and software, I think expanding the gaming population will remain your core strategy. Among the items in the medium- to long-term prospects that you spoke of today, I would like to know which of them would contribute to the expansion of the gaming population. In particular, I would like to know what kind of audience you wish to reach out to by redefining the concept of a video game platform, utilizing smart devices and changing the way Nintendo sells hardware and software.

A 7


The reason we talked about such points today was because there are many consumers who are perhaps not so interested in games but are passionate about trying something interesting, and, in expanding the gaming population, we are considering how we can get our messages across to these consumers, create ties with them and develop an environment in which it is easy for them to participate. I only talked about software in detail despite promising to change the way we sell both hardware and software, but we would also like to change the way we sell our hardware from now on, too, and we think that it will be very important to make it as easy as possible for consumers to buy hardware. Particularly, if we are able to manage and recognize customer relationships in terms of accounts, or individuals, we can clearly differentiate those who only played one game in the lifecycle of a system from those who played, say, 10 or 20 games, and predict their engagement levels when they purchase their next systems. Among other things that we are considering, we feel that this will enable us to provide hardware to consumers in new and flexible ways.

There are avid game fans that look for new information proactively and buy new products no matter how expensive they are, and we, as a video game company, cannot hope for better consumers. In addition to thinking about ways to entertain these consumers, however, we should also consider what we can do to make it easy for people who are perhaps not strongly attracted to games but are always eager to try something fun, to enjoy our propositions. In addition, since many of our entertainment offerings are tailored toward families, instead of viewing our consumers on an individual basis only, we should also think in terms of families and consider what kind of new offer we can make to them. We need to think about creating an environment that is easier for people to enter and start playing games and make sure that those who are potentially interested in our games but are not aware of them are always kept informed. I outlined our mid-term and long-term prospects today with these aspects in mind. To put it in another way, I tried to outline today how, in order to expand the gaming population, we are going to remove some of the obstacles that exist in today’s environment that restrict Nintendo’s business from growing.

Q 8

I would like to ask a question about capital. Have you recently considered enhancing corporate value by receiving capital participation? Also, what is your take on the risk of being forced to change your business model or philosophy as a result of capital participation from other companies?

A 8


As we are certainly not able to do everything by ourselves, we would like to be flexible and consider various ways in which we can share the same vision with third parties and move in the same direction. On the other hand, as I explained when I talked about what Nintendo will not change in the future, our essence lies in creating unprecedented products of our own, continuing to be different from other companies and changing with the times as necessary. Joining forces with companies that do not embrace these qualities will narrow down Nintendo’s future choices, so it depends on the situation. Of course, if our share price decreases significantly, it will naturally lead to various risks, so we have a variety of ideas of our own about that. Our current stance is to actively cooperate with third parties when necessary while firmly holding our corporate identity.


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