Corporate Management Policy Briefing / Semi-Annual Financial Results Briefing for the 76th Fiscal Term Ending March 2016

Corporate Management Policy Briefing /
Semi-Annual Financial Results Briefing
for the 76th Fiscal Term Ending March 2016

Outline | Presentation by the President | Q & A

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1	Regarding the smart device business, could you let us know specifically what monetization model you are planning to implement and what role DeNA Co., Ltd. (hereinafter “DeNA”) will play?
1	Tatsumi Kimishima (President): 　Miitomo is a free-to-start type application which can be downloaded free of charge. Regarding monetization, we are considering to distribute paid content such as clothes for Mii, etc. For the smart device applications that we will be releasing after Miitomo, we are considering monetization methods optimal for each application, including charging a fixed amount at point of purchase. 　Regarding the alliance with DeNA, things are running smoothly as initially announced. Nintendo has been developing the applications and DeNA will take care of data analysis, etc. The alliance is moving forward with each company contributing in their areas of expertise.

Regarding the smart device business, could you let us know specifically what monetization model you are planning to implement and what role DeNA Co., Ltd. (hereinafter “DeNA”) will play?

Tatsumi Kimishima (President):

　Miitomo is a free-to-start type application which can be downloaded free of charge. Regarding monetization, we are considering to distribute paid content such as clothes for Mii, etc. For the smart device applications that we will be releasing after Miitomo, we are considering monetization methods optimal for each application, including charging a fixed amount at point of purchase.
　Regarding the alliance with DeNA, things are running smoothly as initially announced. Nintendo has been developing the applications and DeNA will take care of data analysis, etc. The alliance is moving forward with each company contributing in their areas of expertise.

2	The smartphone app market appears to already be saturated with the lack of new ideas. With its new applications, is Nintendo attempting to dramatically change the play structure there? What you have just shown to us today may be only a small portion of the entire application, but isn’t placing importance on communication for the Nintendo app deviating from the core essence of Nintendo’s way of making video games?
2	Kimishima: 　Although we have introduced Miitomo as a “communication application,” we believe that it is a unique and Nintendo-like application in terms of the fact that it will encourage people who usually do not proactively share messages and information with others to enjoy a new type of communication by utilizing Nintendo’s IP called Mii. Shinya Takahashi (Director, General Manager of Entertainment Planning & Development Division): 　Miitomo will be closely linked to “My Nintendo” and “Nintendo Account,” which we have also announced today. Those who have used Miitomo during the development at Nintendo have already experienced the joy of discovering unknown aspects about their long-time colleagues whom they thought they knew very well. We believe that smart device users will enjoy Miitomo as we are offering Nintendo IP called Mii with which anyone can feel an affinity. 　Other than this first application called Miitomo, we are planning other applications that will work with Nintendo’s dedicated video game systems. For our applications that will be enjoyed only on smart devices, we are creating ideas so that even those smart device users who do not usually play with applications can enjoy them. Shigeru Miyamoto (Senior Managing Director, Creative Fellow): 　Just as you mentioned, the situation of the smart device application market is that an enormous amount of titles exist and there are several established styles that are popular with users. 　If we can expand to smart devices what we have been challenging ourselves with on Nintendo’s dedicated game systems by taking advantage of the unique characteristics of smart devices, we believe that Nintendo will be able to create a new style of games and spread them all around the world. 　By asking DeNA to support us in as many of the operational aspects as possible, Nintendo would like to focus on “creating new things.” 　While it is important for us to earn profits from our smart device business alone, our primary objective is to encourage smart device users to be interested in and to play with our dedicated video game systems, and we are focused on this goal.

The smartphone app market appears to already be saturated with the lack of new ideas. With its new applications, is Nintendo attempting to dramatically change the play structure there? What you have just shown to us today may be only a small portion of the entire application, but isn’t placing importance on communication for the Nintendo app deviating from the core essence of Nintendo’s way of making video games?

Kimishima:

　Although we have introduced Miitomo as a “communication application,” we believe that it is a unique and Nintendo-like application in terms of the fact that it will encourage people who usually do not proactively share messages and information with others to enjoy a new type of communication by utilizing Nintendo’s IP called Mii.

Shinya Takahashi (Director, General Manager of Entertainment Planning & Development Division):

　Miitomo will be closely linked to “My Nintendo” and “Nintendo Account,” which we have also announced today. Those who have used Miitomo during the development at Nintendo have already experienced the joy of discovering unknown aspects about their long-time colleagues whom they thought they knew very well. We believe that smart device users will enjoy Miitomo as we are offering Nintendo IP called Mii with which anyone can feel an affinity.
　Other than this first application called Miitomo, we are planning other applications that will work with Nintendo’s dedicated video game systems. For our applications that will be enjoyed only on smart devices, we are creating ideas so that even those smart device users who do not usually play with applications can enjoy them.

Shigeru Miyamoto (Senior Managing Director, Creative Fellow):

　Just as you mentioned, the situation of the smart device application market is that an enormous amount of titles exist and there are several established styles that are popular with users.
　If we can expand to smart devices what we have been challenging ourselves with on Nintendo’s dedicated game systems by taking advantage of the unique characteristics of smart devices, we believe that Nintendo will be able to create a new style of games and spread them all around the world.
　By asking DeNA to support us in as many of the operational aspects as possible, Nintendo would like to focus on “creating new things.”
　While it is important for us to earn profits from our smart device business alone, our primary objective is to encourage smart device users to be interested in and to play with our dedicated video game systems, and we are focused on this goal.

3	I understand that you are developing roughly two types of smart device apps: One that you are aiming to earn profits from directly and another that you are prioritizing contribution to the revenues of your existing dedicated game device business. In the mid-term, how much are you expecting your smart device applications to contribute to your sales and profits?
3	Kimishima: 　Because, other than Miitomo, we cannot discuss today what kind of applications and with which Nintendo IP we will release, we need to refrain from discussing their revenue forecasts now. On the other hand, revenue is gained at different times on free-to-start applications and the ones we will ask consumers to pay a certain amount of money for when they download them, and we are planning to apply different revenue systems for each of the approximately five titles that we are aiming to release by the end of March 2017. 　While we have not changed our policy of wanting to grow our smart device business into one of the pillars for revenue, the dedicated video game system business remains to be the core of Nintendo’s business, and we do not expect our smart device business to immediately constitute half of our revenue. Miyamoto: 　Nintendo is not a company that deals in daily necessities. Because we are engaged in the entertainment business where no one can forecast what will be the next big thing and where we have to create the demand ourselves, our job is to always evaluate the situation from time to time and increase the possibility of creating the next big thing. Just when Nintendo started to earn stable revenue with the hit of GAME & WATCH, our sales doubled with the Donkey Kong arcade game. And when we were able to earn rather stable profits from the arcade game business, because our Famicom (known as Nintendo Entertainment System overseas) business started to get on track, we ceased our arcade business and started focusing on the home entertainment business. I believe Nintendo has shown results with its core dedicated game business by flexibly deciding how to allocate its limited human and other resources, but we are also always challenging ourselves with projects that have the potential to become the next big thing. And now, we see that our smart device business has the potential to become this next big thing. We are simultaneously working on the multiple projects with different possibilities. Due to their unprecedented nature, each one of these challenges has to be exposed to and actually experienced by consumers in order to tell if it has been nurtured well, but we are making efforts so that some of them will eventually become the next big things.

I understand that you are developing roughly two types of smart device apps: One that you are aiming to earn profits from directly and another that you are prioritizing contribution to the revenues of your existing dedicated game device business. In the mid-term, how much are you expecting your smart device applications to contribute to your sales and profits?

Kimishima:

　Because, other than Miitomo, we cannot discuss today what kind of applications and with which Nintendo IP we will release, we need to refrain from discussing their revenue forecasts now. On the other hand, revenue is gained at different times on free-to-start applications and the ones we will ask consumers to pay a certain amount of money for when they download them, and we are planning to apply different revenue systems for each of the approximately five titles that we are aiming to release by the end of March 2017.
　While we have not changed our policy of wanting to grow our smart device business into one of the pillars for revenue, the dedicated video game system business remains to be the core of Nintendo’s business, and we do not expect our smart device business to immediately constitute half of our revenue.

Miyamoto:

　Nintendo is not a company that deals in daily necessities. Because we are engaged in the entertainment business where no one can forecast what will be the next big thing and where we have to create the demand ourselves, our job is to always evaluate the situation from time to time and increase the possibility of creating the next big thing. Just when Nintendo started to earn stable revenue with the hit of GAME & WATCH, our sales doubled with the Donkey Kong arcade game. And when we were able to earn rather stable profits from the arcade game business, because our Famicom (known as Nintendo Entertainment System overseas) business started to get on track, we ceased our arcade business and started focusing on the home entertainment business. I believe Nintendo has shown results with its core dedicated game business by flexibly deciding how to allocate its limited human and other resources, but we are also always challenging ourselves with projects that have the potential to become the next big thing. And now, we see that our smart device business has the potential to become this next big thing. We are simultaneously working on the multiple projects with different possibilities. Due to their unprecedented nature, each one of these challenges has to be exposed to and actually experienced by consumers in order to tell if it has been nurtured well, but we are making efforts so that some of them will eventually become the next big things.

Outline | Presentation by the President | Q & A