Third Quarter Financial Results Briefing for Fiscal Year Ending March 2016

Third Quarter Financial Results Briefing
for Fiscal Year Ending March 2016

Outline | Presentation by the President | Q & A

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7	In the next fiscal year, I understand that some up-front costs will be incurred, particularly in the first half of the fiscal year, as you will invest in new businesses before their actual execution. Could we estimate that the new businesses will contribute to the overall profits for the full fiscal year? If that is the case, should we expect that new businesses will drive results in the next fiscal year? On the other hand, I believe that you will have results from the holiday season and you are able to see the pipeline for the next fiscal year. Do you expect that the existing Nintendo 3DS and Wii U businesses will continue to contribute to profits, for example through sales of current titles? Please share whatever you can about where you expect to see profits over the next fiscal year.
7	Kimishima: First, I'll address Nintendo 3DS and Wii U. As I described in the presentation today, Nintendo 3DS has sold over 20 million hardware units in Japan and over 54 million units globally. This presents an excellent chance to increase revenue through software sales in the Nintendo 3DS business. We presented a number of titles today that show what kind of software can drive our business. We have not yet announced all of the Nintendo 3DS software for the next fiscal year, but we are proceeding with development, including major titles. The Nintendo 3DS will continue to be a major pillar of our business in the coming fiscal year. As for the Wii U, we have just passed 10 million units worldwide, so it is not quite on the level of the Nintendo 3DS. However, we have received a great response for titles such as Splatoon and Super Mario Maker, and we would like to continue to release titles we expect to be received positively in the next fiscal year. As for new businesses, we will present further information when we go into details about our forecasts for the next fiscal year. We do not plan to speak about NX today. We continue development and planning efforts for NX in preparation for launch, so it will require additional investment. Our expansion into smart device applications will depend on what kind of response we get from consumers. We will also be licensing our IP to partners for other business opportunities. We believe these endeavors are important to spreading awareness of our IP among consumers, but we do not expect that they will drive a major share of our business immediately. That's all I can share about the next fiscal year at this time.

In the next fiscal year, I understand that some up-front costs will be incurred, particularly in the first half of the fiscal year, as you will invest in new businesses before their actual execution. Could we estimate that the new businesses will contribute to the overall profits for the full fiscal year? If that is the case, should we expect that new businesses will drive results in the next fiscal year? On the other hand, I believe that you will have results from the holiday season and you are able to see the pipeline for the next fiscal year. Do you expect that the existing Nintendo 3DS and Wii U businesses will continue to contribute to profits, for example through sales of current titles? Please share whatever you can about where you expect to see profits over the next fiscal year.

Kimishima:

First, I'll address Nintendo 3DS and Wii U. As I described in the presentation today, Nintendo 3DS has sold over 20 million hardware units in Japan and over 54 million units globally. This presents an excellent chance to increase revenue through software sales in the Nintendo 3DS business. We presented a number of titles today that show what kind of software can drive our business. We have not yet announced all of the Nintendo 3DS software for the next fiscal year, but we are proceeding with development, including major titles. The Nintendo 3DS will continue to be a major pillar of our business in the coming fiscal year.

As for the Wii U, we have just passed 10 million units worldwide, so it is not quite on the level of the Nintendo 3DS. However, we have received a great response for titles such as Splatoon and Super Mario Maker, and we would like to continue to release titles we expect to be received positively in the next fiscal year.

As for new businesses, we will present further information when we go into details about our forecasts for the next fiscal year. We do not plan to speak about NX today. We continue development and planning efforts for NX in preparation for launch, so it will require additional investment.

Our expansion into smart device applications will depend on what kind of response we get from consumers.

We will also be licensing our IP to partners for other business opportunities. We believe these endeavors are important to spreading awareness of our IP among consumers, but we do not expect that they will drive a major share of our business immediately.

That's all I can share about the next fiscal year at this time.

8	Could you go into a little more detail about why the Nintendo 3DS software sales have not lived up to forecasts, and what plans you have to address this in the next fiscal year? You seem to be confident in your ability to some degree to win over more female fans in Japan, but the hardware and software targets were not met on a global level. Please explain why you think software sales have been lower than expected.
8	Kimishima: First, I will address Nintendo 3DS software sales in this fiscal year. As I acknowledged in the presentation, the titles we have released this fiscal year have not had quite the same potential as titles such as Pokémon Omega Ruby/Alpha Sapphire and Super Smash Bros. for Nintendo 3DS that we released last fiscal year. To expand this business in the next fiscal year, reaching young consumers and women and expanding our sales of our evergreen titles will be key. As I said before, we have sold over 54 million units of Nintendo 3DS hardware, but it would have been possible to sell more software if all 54 million systems were in frequent use. I believe there are two approaches we can take to improve this. The first is to release software that makes people want to play, and the other is to create an environment where people around you are playing. These approaches will spur people who have not played games recently to jump into our games again, and help our software drive hardware sales. For the next fiscal year, it will be important to release titles that are different from the ones we have released this fiscal year, so we will make efforts to provide a strong lineup. The question asked about issues that we have had. One of our endeavors this fiscal year has been to release multiple titles for young consumers and women. There was some variance in the response to these endeavors across different countries. For example, each of the European markets has different characteristics, but we were able to achieve a great response with our promotions and advertisements aimed at women in France and Spain. Going forward, we will also focus on promoting sales in regions where we did not meet expectations for this period so that Nintendo 3DS will be well-received there, too.

Could you go into a little more detail about why the Nintendo 3DS software sales have not lived up to forecasts, and what plans you have to address this in the next fiscal year? You seem to be confident in your ability to some degree to win over more female fans in Japan, but the hardware and software targets were not met on a global level. Please explain why you think software sales have been lower than expected.

Kimishima:

First, I will address Nintendo 3DS software sales in this fiscal year. As I acknowledged in the presentation, the titles we have released this fiscal year have not had quite the same potential as titles such as Pokémon Omega Ruby/Alpha Sapphire and Super Smash Bros. for Nintendo 3DS that we released last fiscal year. To expand this business in the next fiscal year, reaching young consumers and women and expanding our sales of our evergreen titles will be key.

As I said before, we have sold over 54 million units of Nintendo 3DS hardware, but it would have been possible to sell more software if all 54 million systems were in frequent use. I believe there are two approaches we can take to improve this. The first is to release software that makes people want to play, and the other is to create an environment where people around you are playing. These approaches will spur people who have not played games recently to jump into our games again, and help our software drive hardware sales. For the next fiscal year, it will be important to release titles that are different from the ones we have released this fiscal year, so we will make efforts to provide a strong lineup.

The question asked about issues that we have had. One of our endeavors this fiscal year has been to release multiple titles for young consumers and women. There was some variance in the response to these endeavors across different countries. For example, each of the European markets has different characteristics, but we were able to achieve a great response with our promotions and advertisements aimed at women in France and Spain. Going forward, we will also focus on promoting sales in regions where we did not meet expectations for this period so that Nintendo 3DS will be well-received there, too.

Outline | Presentation by the President | Q & A

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