IR Information

Financial Results Briefing for the 67th Fiscal Term Ended March 2007
Q & A
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Q 16   Though Mr. Kutaragi will leave the front line operations of Sony, I can hardly imagine that he will retire from any activities in the video game industry. How about headhunting him?
A 16


  I don't think we will do that.

Q 17   I don't know if we can call it a game, but something called Second Life is gaining in popularity. What do you think of Second Life? Will it have any impact on the video game industry? What do you think is the definition of "Video Games" in the first place? Where will video games be heading in the future? To understand your philosophy, I would like you to tell us your observations on these points.
A 17


  I personally have virtually no interest in Second Life. I don't think it will be considered as an important existence in the future. That is all I can say today. If I need to supplement my remarks, modern human beings have less and less time and energy to spend on any activity. A great many things are changing with incredible speed. The energy one can spend on any entertainment has never been very big in the first place. With this background, I would define a video game as something to which a human being makes an input and from which the human being receives something more valuable than the labor needed to make the input. Maybe it is more of the definition of interactive entertainment than of video game. You touch something and, as the result, you receive something back. That something is more beneficial than what you originally did to get that result. In such a circumstance, people feel like continuing their efforts, without stopping them, I believe. If you receive a smaller reward than the energy you have spent, a lot of you won't feel like continuing. The reward varies depending on the software.

  We have very unusual software for DS, which tells you how to make a dish. I myself love to use this cooking software and I myself am now cooking at our home on my days off. There are no rewards in this game. But it will let you cook real dishes, and you will enjoy eating the results. That is the reward in this case. So, because I received the reward as the result of my efforts, I have not gotten tired of this software by now. Ever since I touched this when it was still a prototype and I gave the developers my advice, I have been touching this software from time to time.

  I think it important for us to create this type of software that will keep the owners' interests for a long time period without letting them stop using it. There are different types of people. Some of us want to spend a lot of energy in a short time period and look for rather complicated play natures. Some of us just don't have time and want to have quick fun in a short time. So, there are different types of ways to let the users feel they have received their due rewards. But rewards must be there if it is being called a game, I believe.

Q 18   Your expressions of "enriching daily lives" and "putting smiles" are rather abstract to me. Without disclosing trade secrets, I would like you to share with us your ideas about the next change in the market and your tricks to make that happen. As a result of such efforts, I understand you are aiming to sell 300 million copies of software in one year. Someone already asked about the number of developers, and another asked about the expansion of outlets. In addition, do you have any plan to increase your territories, such as Asian countries?
A 18


  I'm afraid that any concrete answer would reveal secrets, and it would create competitive issues here. We have a number of bitter experiences with revealing our plans too early in the past. In case of Wii, a lot of people asked why Nintendo was not willing to disclose its controller. In retrospect, I think we did the right thing in delaying the disclosure until the last minute. Right now, I have some concrete images about what I am talking about. However, the results of a lot of our projects will be introduced to the market in 6 months or one year from today. For competitive reasons, we really have to avoid a situation where similar products are introduced by other companies. So, allow me to refrain from talking about anything concrete.

  When we want to create a market where we can sell 300 million software, not only do we have to expand the gaming populations in Japan, the Americas and in Europe, but also we should tackle other challenges. Actually, we have established our Korean subsidiary to initiate the local business. I also heard that Wii is much talked about in Taiwan. Many other Asian and non-Asian countries are thriving in their economies. However, if you ask me if we should seriously expand into these countries, we have to prioritize on meeting the current demands from existing markets. In the mid-term, however, the challenge of cultivating the foundation to sell our software in such regions will also be important. However, each country has its own needs and the types of software it will appreciate.

Q 19   Don't you have any plan to provide your software for the other platforms, such as mobile phones that are expanding game offerings?
A 19


  I understand many people have been predicting that mobile phones would eat up the portable game machine business in the future, since more than 5 years ago. If their predictions were right, we would not have today's situation.

  Also, we are able to offer a comprehensive business approach by making use of both our own hardware and software, and we have been able to create a number of tricks to surprise people in meaningful ways. This is our strength and this makes our business lucrative. If we conducted only the software business on someone else's hardware, we might be able to have some decent success. However, doing so would be like throwing away one of our strengths. So, rather than looking for a small increase in our revenue for the short term by licensing our products to other platforms, I believe it is more important for us to realize what we can do only with our own platforms, which no other machines can offer. What we really have to do is to find out the themes that can give pleasant surprises to people, that none other than the combination of Nintendo hardware and software can realize.

  Nintendo is unique because hardware engineers and software developers are working in the same building and closely communicating with each other to create new products. We are disclosing some of these stories on our official Web site in detail, in which I was playing the role of interviewer. I hope you can read them to have a better understanding, but this is our unique strength, and we should not throw away this strength of Nintendo.

  Also, if we should be content with the success we have so far achieved with DS and stop going after new challenges, others would surely try to duplicate our success, whether it was the result of our challenges on DS or Wii. After all, what we have done was not by magic, and most of the successes are reproducible by the others. So, Nintendo has to always try to create something other platforms, including cell phones, cannot do. Cell phones will make improvements and will show better performances. The bottom line of Nintendo is how far ahead we can go beyond what others will be able to reach. And to do so, we need to stick to our existing hardware-software integrated business approach. This is our basic policy.

Q 20   You had so many million-seller DS titles in the previous fiscal year. Some of them sold even 4 million and 5 million or more, which was just incredible. Will you be able to do the similar thing this fiscal year? In comparison, Wii had few million-seller titles and none of them appear to have created a strong impact. Is this because the developers are late in making Wii software? How will you improve the situation?
A 20


  When 2 million hardware is being sold in one marketplace, if one software tops its millionth sales mark, it means one out of two hardware owners have already purchased the software, which is not normal at all. In the case of Japan, we already had two million-seller titles for Wii. I do not think we are lacking million-seller titles for Wii at this moment. Of course, as we expand the Wii sales towards the end of this year, we have to make efforts so that the third and fourth million-seller Wii titles will be there. In the case of DS, we were able to have a number of titles which sold 3 million or 4 million. If anyone were to say, "In fact, I was carefully planning to make that great sales success happen," he would be a liar. We are always trying to make software that will be appreciated by as many different types of people as possible, but only when we have the following wind, such as when the hardware and software can be taken as a social phenomenon, can they sell in this huge volume. In other words, these are not numbers we can artificially try to create with our own efforts.

  Looking at the software unit shipment forecast, some of you may think that Nintendo has not increased the number over the actual sales result of the previous year especially when the hardware are expected to enter into its expansion phase in this year. If we should base upon more aggressive assumption, or if we should assume that a series of 3 million- or 4 million-seller titles will be sold one after another like the previous year, we might be able to increase the target now that we are expecting even more hardware installed basis. Please note, however, having a number of 3 million- or 4 million-seller titles is not a norm but an exception. While we are always trying to make that happen, we can never base our forecast upon such ambitious assumptions. As a result, we have disclosed our financial forecasts as they are. Nevertheless, we will always try to achieve great sales. In case of DS, for example, when there are 16.5 million DS hardware in Japan, software can become a million seller if just one out of 16.5 DS hardware owners have purchased the software. In that sense, the hurdle to develop a million-seller title is becoming less high, so we will challenge to create software that can sell more than a million. Some can say that making a million seller means, from one perspective, that you will have to let only one out of 120 Japanese to have purchased the software, and from that perspective, having million seller title may appear not so hard in theory, but it is not that easy in real business. We have to ask potential consumers to know the contents of the software, have them become interested in purchasing the software and actually have them purchase the software. From my own experiences of the past many years, I know how hard it is. By understanding the hardship, we would like to continue our efforts to realize as many million-seller titles as possible.

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