Nintendo Conference Q & A Session

Nintendo Conference Q & A Session - September 29, 2010

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13	As for your home game console business, I understand that the new software titles are not driving the hardware sales as you had expected. As for the future, my guess is that you will launch the new "Legend of Zelda" game and such other titles, for which the details have yet to be announced, and "Wii Vitality Sensor" in the next fiscal year. Do you think that you will be able to realize an incremental hardware increase with these kinds of software? Or, do you need something else to drive the hardware sales? If something else is necessary, at which timing will you need to make that decision?
13	Iwata: About Wii, the current sales are not very strong as you pointed out. The hardware did not show immediate and rapid growth in the sales as soon as we launched "Super Mario Galaxy 2." On the other hand, if we had analyzed that the current sales trend was too bad, we could not have announced the revised Wii hardware forecast. So, we do not think the situation is that bad for Wii now. When we see the current situation, and when we analyze the mindsets of people who have not purchased Wii yet, our understanding is that the sales will be much more concentrated during the year-end sales season than before. This is not an observation held by Nintendo alone. In fact, as we discuss with many retailers around the world as to what will become of this year-end sales season, most of them view the trend just as we do. Accordingly, when our consumers are ready to select what they want to purchase for a Christmas gift, how we can encourage them to choose Wii, has now become important. In other words, we do not have the mindset that our home game console business will not see any further growth so therefore, we have to do something to sustain the sales. Having said that, however, in that critical sales season, if everything doesn't go ahead just as we hope, and if we do not do anything about it, our platform business will be in trouble. We will need to prepare for such situations. For your information, we announced "Wii Remote Plus" today. This offer is just one part of our endeavors.

As for your home game console business, I understand that the new software titles are not driving the hardware sales as you had expected. As for the future, my guess is that you will launch the new "Legend of Zelda" game and such other titles, for which the details have yet to be announced, and "Wii Vitality Sensor" in the next fiscal year. Do you think that you will be able to realize an incremental hardware increase with these kinds of software? Or, do you need something else to drive the hardware sales? If something else is necessary, at which timing will you need to make that decision?

Iwata:

About Wii, the current sales are not very strong as you pointed out. The hardware did not show immediate and rapid growth in the sales as soon as we launched "Super Mario Galaxy 2." On the other hand, if we had analyzed that the current sales trend was too bad, we could not have announced the revised Wii hardware forecast. So, we do not think the situation is that bad for Wii now. When we see the current situation, and when we analyze the mindsets of people who have not purchased Wii yet, our understanding is that the sales will be much more concentrated during the year-end sales season than before. This is not an observation held by Nintendo alone. In fact, as we discuss with many retailers around the world as to what will become of this year-end sales season, most of them view the trend just as we do. Accordingly, when our consumers are ready to select what they want to purchase for a Christmas gift, how we can encourage them to choose Wii, has now become important. In other words, we do not have the mindset that our home game console business will not see any further growth so therefore, we have to do something to sustain the sales. Having said that, however, in that critical sales season, if everything doesn't go ahead just as we hope, and if we do not do anything about it, our platform business will be in trouble. We will need to prepare for such situations. For your information, we announced "Wii Remote Plus" today. This offer is just one part of our endeavors.

14	I have a question about the specs of Nintendo 3DS. I recall that you perhaps said last time that Nintendo 3DS may become a rather high-spec machine, and it actually has turned out to be a fairly high-spec machine. What is the background to raising the specs higher than in the past? According to Mr. Iwata's past explanations, the new hardware shall be launched only when you have done everything possible with Nintendo DS, but why do you need a game machine with such high specs? Not to change the subject, but I have a concern that Nintendo 3DS, with such high specs, may run out of the battery during StreetPass communications. When I turned on my Nintendo DS one morning and kept it on until I returned home that day in order to enjoy the Tag Mode communication of "Dragon Quest IX", it run out of battery and my data was lost. Are you planning to do anything with Nintendo 3DS in this regard? Finally, when I look at the fact sheet for Nintendo 3DS, I notice that the hardware package box will include an SD memory card. Won't you embed internal storage capacity for Nintendo 3DS? Will users activate an application directly from the SD memory card?
14	Iwata: First, about the specs, this time we have designed the hardware so that developers will not think that they cannot make the software that they would really like to make (on Nintendo 3DS) due to spec limitations. Another thing I'd like to discuss is about its capability of generating 3D images. For many years, Nintendo has been trying to make it happen. And the reason why we have come to believe we can finally make it with Nintendo 3DS is the availability or the good combination between the graphics capability of the 3D LCD, its resolution and the ability of the hardware to generate 3D images which can deliver the realism of the 3D world. More specifically, we needed a certain level or higher of LCD resolution. With the LCD, we needed a certain level or higher 3D projection capability. We needed hardware which could generate a certain level of the realism when it creates the 3D graphics. I understand that a number of you were able to have the hands-on experience of Nintendo 3DS today. The level of the 3D expression that you've just experienced has been realized by the combination of these factors. The Tag Mode of Nintendo DS has already been fun, but there were certain limits as to what it could do with Nintendo DS. While we understood that it would be good if Nintendo DS players could easily pause game play at any time in order to do other things, the specs of Nintendo DS did not allow us to do so. Above all, we needed to improve the system, such as how we could add much more memory and what needed to be done on the CPU and so forth. We intensified the hardware so that a number of new ideas that were impossible before can now be the reality. For example, we shall be able to make new proposals about what you can do by easily pausing the game on play. Another concrete example is AR (Augmented Reality). While 3D image production ability is suited to AR games, doing so requires a certain type of processing capability. So, taking into consideration various factors, we have come to the current specs. As for the battery, it is inevitable that Nintendo 3DS will be a device which requires more frequent recharging than Nintendo DS. This is why we are going to include the cradle, which is a dedicated battery charger. Perhaps we may need to dispatch to our consumers a message, something like, "Please place your Nintendo 3DS on the cradle as soon as you return home with it." As for your final question, Nintendo 3DS, in fact, embodies storage (NAND memory). However, we'd like to use it mainly for the system. Our consumers' needs widely vary depending on who plays with Nintendo 3DS. Some won't need the expanded memory at all. Some will download much software onto Nintendo 3DS. If they download many titles, the SD memory card that we will include shall not be big enough. We wanted to make the system, so that, when Nintendo 3DS owners require additional memory, they could do so simply by inserting a new bigger-sized SD memory card. We have designed the system as if the hardware's internal memory can be expanded simply by adding a new SD memory card. The owners can save the software on the new SD memory card and activate the software from the SD memory card. The ability to be able to do so can sometimes contradict with the maintenance of tight security. We would like to brush up on that aspect before the launch.

I have a question about the specs of Nintendo 3DS. I recall that you perhaps said last time that Nintendo 3DS may become a rather high-spec machine, and it actually has turned out to be a fairly high-spec machine. What is the background to raising the specs higher than in the past? According to Mr. Iwata's past explanations, the new hardware shall be launched only when you have done everything possible with Nintendo DS, but why do you need a game machine with such high specs?
Not to change the subject, but I have a concern that Nintendo 3DS, with such high specs, may run out of the battery during StreetPass communications. When I turned on my Nintendo DS one morning and kept it on until I returned home that day in order to enjoy the Tag Mode communication of "Dragon Quest IX", it run out of battery and my data was lost. Are you planning to do anything with Nintendo 3DS in this regard?
Finally, when I look at the fact sheet for Nintendo 3DS, I notice that the hardware package box will include an SD memory card. Won't you embed internal storage capacity for Nintendo 3DS? Will users activate an application directly from the SD memory card?

Iwata:

First, about the specs, this time we have designed the hardware so that developers will not think that they cannot make the software that they would really like to make (on Nintendo 3DS) due to spec limitations. Another thing I'd like to discuss is about its capability of generating 3D images. For many years, Nintendo has been trying to make it happen. And the reason why we have come to believe we can finally make it with Nintendo 3DS is the availability or the good combination between the graphics capability of the 3D LCD, its resolution and the ability of the hardware to generate 3D images which can deliver the realism of the 3D world. More specifically, we needed a certain level or higher of LCD resolution. With the LCD, we needed a certain level or higher 3D projection capability. We needed hardware which could generate a certain level of the realism when it creates the 3D graphics. I understand that a number of you were able to have the hands-on experience of Nintendo 3DS today. The level of the 3D expression that you've just experienced has been realized by the combination of these factors.

The Tag Mode of Nintendo DS has already been fun, but there were certain limits as to what it could do with Nintendo DS. While we understood that it would be good if Nintendo DS players could easily pause game play at any time in order to do other things, the specs of Nintendo DS did not allow us to do so. Above all, we needed to improve the system, such as how we could add much more memory and what needed to be done on the CPU and so forth. We intensified the hardware so that a number of new ideas that were impossible before can now be the reality. For example, we shall be able to make new proposals about what you can do by easily pausing the game on play.

Another concrete example is AR (Augmented Reality). While 3D image production ability is suited to AR games, doing so requires a certain type of processing capability. So, taking into consideration various factors, we have come to the current specs.

As for the battery, it is inevitable that Nintendo 3DS will be a device which requires more frequent recharging than Nintendo DS. This is why we are going to include the cradle, which is a dedicated battery charger. Perhaps we may need to dispatch to our consumers a message, something like, "Please place your Nintendo 3DS on the cradle as soon as you return home with it."

As for your final question, Nintendo 3DS, in fact, embodies storage (NAND memory). However, we'd like to use it mainly for the system. Our consumers' needs widely vary depending on who plays with Nintendo 3DS. Some won't need the expanded memory at all. Some will download much software onto Nintendo 3DS. If they download many titles, the SD memory card that we will include shall not be big enough. We wanted to make the system, so that, when Nintendo 3DS owners require additional memory, they could do so simply by inserting a new bigger-sized SD memory card. We have designed the system as if the hardware's internal memory can be expanded simply by adding a new SD memory card. The owners can save the software on the new SD memory card and activate the software from the SD memory card. The ability to be able to do so can sometimes contradict with the maintenance of tight security. We would like to brush up on that aspect before the launch.

15	After all, with the so much better specs, I am concerned about the software development costs. Or, will the need to generate 3D graphics consume a lot of hardware power so that the actual software development costs won't be significantly increased? In the past, software development costs were increased with the change in the generation (of the hardware). Will the increase in the software development costs this time be less than the average hikes we have observed so far during a change from one hardware generation to the next?
15	Iwata: How to calculate the "average" costs is never an easy task. It is not confined to Nintendo DS, but for all platforms there exist very dynamic gaps between the costs for developing so-called big titles, for which each publisher stakes their prestige, and the costs for making experimental software, for which the developers won't look for any big return. Having said that, the ceiling must be raised for Nintendo 3DS when we compare the software development costs for Nintendo DS. If we want to make something really big, the hardware will make that happen. Depending on the size of the development, as we try something bigger and bigger, the development costs too can potentially become more expensive. However, I am not saying that the development costs will rise for all Nintendo 3DS software, but you may want to consider that the dynamic range of the development costs shall be expanded.

After all, with the so much better specs, I am concerned about the software development costs. Or, will the need to generate 3D graphics consume a lot of hardware power so that the actual software development costs won't be significantly increased? In the past, software development costs were increased with the change in the generation (of the hardware). Will the increase in the software development costs this time be less than the average hikes we have observed so far during a change from one hardware generation to the next?

Iwata:

How to calculate the "average" costs is never an easy task. It is not confined to Nintendo DS, but for all platforms there exist very dynamic gaps between the costs for developing so-called big titles, for which each publisher stakes their prestige, and the costs for making experimental software, for which the developers won't look for any big return. Having said that, the ceiling must be raised for Nintendo 3DS when we compare the software development costs for Nintendo DS. If we want to make something really big, the hardware will make that happen. Depending on the size of the development, as we try something bigger and bigger, the development costs too can potentially become more expensive. However, I am not saying that the development costs will rise for all Nintendo 3DS software, but you may want to consider that the dynamic range of the development costs shall be expanded.

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