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2010 E3 Expo Analyst Q & A Session - June 16, 2010
Q & A
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Q 10   My question is regarding the Wii platform. Reggie discussed the very impressive hardware sales that continue for the Wii, but I think that the software tie ratios are a bit less impressive. And the question for you is twofold. First, you hear any number of reasons for why software sales are a bit light around the Wii platform, in spite of aggressive bundling. There are various reasons like third-party support. Do you have your own thoughts on the current velocity of sales and whether you think they’re good, bad and why?

  And then the second question is, as you think about the next home console platform, the next Wii hardware cycle, is it solely based on the velocity of hardware sales or does a slowing software volume, and a lessening of the momentum of that platform, start to drive the timing of the next Wii console?
A 10

Reggie Fils-Aime, President & COO Nintendo of America Inc.:

  Let me first address software sales from a U.S. perspective. We could have just as easily put a chart that shows that life-to-date software sales for the Wii, which are dramatically higher than a similar point in time for the PS2, as well as where we stand versus the other two home consoles, which again is dramatically higher in life-to-date sales so far.

  I would ask what is the right measure in looking at what software sales should be for a platform. Certainly, we are at a high-water-mark in the absolute. If you look at the number of million-unit-sellers, it is quite impressive. If you look at how we’ve had longevity in sales for titles like Wii Fit, Wii Fit Plus, New Super Mario Bros. Wii, and Mario Kart Wii, these are titles that launched multiple years ago that continue to sell exceptionally well today.

  I think the bigger challenge is how we enable our third party developers to have similar performance on the platform, have similar long-tail performance, have similar high absolute levels of sales. And we’re beginning to see that trend. You look at a title like Just Dance that started -- and I think they would even say quite modestly initially, but has now gone on to sell multiple million units across the world. It’s those types of initiatives that will continue to drive overall software sales for the platform.

  In terms of whether we should be looking at software sales or hardware momentum, I’ll let Mr. Iwata speak to it in terms of how we think about hardware transitions and when is the right time to transition. As we look at the platform, the Wii business certainly has a tremendous amount of life left. And we will see that with titles like Donkey Kong Country Returns, GoldenEye 007, Disney Epic Mickey, and certainly the new Zelda coming in 2011.


  I do not think that there is an immediate need to replace the Wii console, but of course, at some point in the future, that need will arise. So I will answer your question from the perspective that we currently do not have an answer as to what point in the future that need will come.
  This is something that I mentioned yesterday on stage as well, but when we first launched Nintendo DS and Wii, very few people in the industry thought that we would achieve the results that we have so far. Because of that, with those two platforms in particular, we had no choice but to try and create the market for those platforms by ourselves with the first party software.

  However, if you recall our Nintendo 3DS announcement yesterday, we were able to announce the lineup that we did yesterday because the third party developers felt the possibility of a particular platform and came ready to support it from the launch time.

  So when the time comes for us to release a new platform on the home console side, the question becomes how do we convince and demonstrate to those third parties that the next platform is going to be a success? And if we are able to do that, then the third parties will come to the table with their content, and to that, we’ll be able to add our own first-party content.

  I think when that time comes and we are able to garner that type of support from the third parties, coupled with our own software contents, then naturally, we will be able to create a situation where many software become available and various types of people start to participate. We will also be able to create a good cycle for that new platform, which encourages consumers to buy software. When we’re able to do that, then I believe some of the challenges that you pointed out will start to move in a positive direction.

Q 11   Obviously, one of the things that we’re seeing as we look towards the holiday season of this year and into Q1 next calendar year is an enormous range of new devices and games hitting the market. What are your thoughts on how this is going to impact catalogue sales and price stability, as retailers have to deal with the fact that they just don’t have enough space to merchandise new games and catalogues side by side?
A 11

Reggie Fils-Aime:

  Let me answer this from America’s perspective. In terms of catalogue sales, we continue to see exceptional sales on our key evergreen titles, the ones that I mentioned before, such as Mario Kart Wii and the original Super Mario Galaxy. Obviously, New Super Mario Bros. Wii is now performing like an evergreen title.

  Our expectation is that those evergreen titles will continue to have a very strong shelf presence and very strong sales through the holiday timeframe. Similarly, what we also see from a third-party perspective is that those titles with strong velocity will be able to maintain their shelf presence.

  We are fortunate with both Wii and Nintendo DS that we’ve been aggressive in getting more shelving dedicated to our platforms. What that allows is for more titles to be displayed and more titles to have the opportunity to create that velocity to then maintain the shelf space. So as we anticipate the holiday season, we think the evergreens will do quite well. We think that our new titles will get distribution and also do quite well.

  I think the challenge will actually be for those platforms that don’t similarly have strong velocity and haven’t similarly been able to expand shelf space. I think that’s where there will be a crunch at retail and there will be some winners and there will be some losers.

Q 12   The question is about your online strategy and the observation that there are some titles like New Super Mario Bros. that don’t have an online component. How are you thinking about the online portion for your first-party content moving forward?
A 12


  When Shigeru Miyamoto created New Super Mario Bros. Wii, he ultimately made the decision as to whether or not it would have an online functionality. So I’d like to talk about why he chose not to include online functionality in that game.

  Anytime you’re developing a game, there are limits to elements of development, like time, manpower and resources. What we’re always considering is what we can do with limited resources to maximize the appeal and entertainment value of a particular product. And this is something that Mr. Miyamoto is of course also constantly thinking about. I think that his decision on whether or not to include online functionality with New Super Mario Bros. Wii was based on the idea that the true value of that product was going to be determined not by online functionality, but on how compelling and unique the experience would be for two, three or four people to be able to play that game together in the same room.

  Of course, I have heard commentary that people feel that Nintendo’s online functionality is behind the others or is lacking in some ways. And I can say that we are not currently satisfied with the online efforts that we have made so far, and we are working at ways to improve those. On the other hand, I do not think that online functionality is something that we should be devoting resources to for every single product. Instead, I think that Nintendo’s ability to create an offline experience that feels incredibly unique and compelling is a particular strength that we have.

  Going forward, what we will continue to do is to evaluate the individual products and experience that we’re creating on a product-by-product basis, and make a decision as to whether or not it’s more important to devote resources to making that offline experience more fun and compelling for products where that is going to be the most important element of the game play; and then for products where it is going to be more important, to add online functionality and make that online functionality robust and compelling. We will continue to focus our efforts there when it’s appropriate, but it’s going to be a product-by-product decision.

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