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Financial Results Briefing for Fiscal Year Ended March 2011
Q & A - Apr. 26, 2011
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Q 7

  I would like to ask your opinion on the diversification of handheld devices. I believe Nintendo 3DS is hardware which Nintendo focused its efforts on, but it might not be as accessible as Nintendo DS, and also the environment might be a little different from four or five years ago when everybody purchased Nintendo DS. If you are aiming at one device for each person, I think you should diversify your handheld devices. Can I hear your opinion on this point?

  In relation to this, I assume there are many people who think the existing Nintendo DS devices are enough for them. In fact, the cumulative sales of Nintendo DS hardware are 140 million units, and I think it is a waste to let these devices become obsolete. I think the software titles launched this year are mostly Nintendo 3DS exclusive, but how about making it possible for some of those titles to work also on Nintendo DS? For example, if the next iteration of "Pokémon" was Nintendo 3DS exclusive, I suppose there is a possibility that the number of sales would decrease a little. Don't you think that how you take advantage of the current huge installed-base software market of Nintendo DS will have a big effect on Nintendo's short-term performance?

  As for diversification, I think Nintendo may want to go further, such as creating a device with multimedia functions which adults would want to carry or, for example, introducing a device which is not a Nintendo stand-alone type, the main function of which is not games but other uses, and gaming is just an additional function. I would like to hear your opinion on this point also.

A 7


You just mentioned that the accessibility of Nintendo 3DS is limited, but my task is to make people expect things from Nintendo 3DS, so when I receive such comments, I feel that this is one of the challenges that we must tackle. At the same time, however, we also have to consider whether everybody said that Nintendo DS was widely accessible when it was launched. That is, when we propose new things to society, people do not think about whether something will really become widely accepted until it is already accepted by that society. On the contrary, if everyone thought that something would definitely be widely accepted from the beginning, it must be just an extension of our existing products, which everyone can easily envision, so such products would not have a big impact. Therefore, I have renewed my resolve, and I will make much more effort so that, in one or two years later, people in the game industry will no longer say, "Nintendo 3DS's accessibility is limited."

Also, if we think only about Nintendo's short-term performance, the profits would increase for this fiscal year if, for example, we focused all of our efforts on developing top-quality software for the Nintendo DS devices that are already in wide use. As you might already know, it is much more efficient if software sells well even without selling a lot of hardware if we think simply from the perspective of profit. However, we have repeatedly experienced that consumers get bored with the same framework after some time, so if we just continue to do that, we will reach a dead-end, and it will be too late to say, "Oh no, we are in trouble!"

If I were only responsible for this year's performance and were not planning to be in the same position two years later, I would be able to choose that option. There is no knowing when the shareholders will tell me to leave, but my dream is to take on more challenges as long as I am physically and mentally able, and if I think about continuing my job, I  want to make the most of the next 5 or 10 years, instead of making the most of this year only, which naturally makes Nintendo put its efforts on new challenges. On the other hand, as Mr. Mori has explained today, our sales estimates for this fiscal year state that we will sell 67 million units of Nintendo DS software and 62 million units of Nintendo 3DS software. I assume that the allocation of Nintendo 3DS and Nintendo DS software will differ by each country or market. In countries where consumers quickly respond to and accept new products, such as Japan, the ratio of Nintendo 3DS software will naturally be larger, but in countries where some of the consumers are quick in responding but the majority is rather slow, such as the U.S., I think that more Nintendo DS software will sell than Nintendo 3DS software this year. And, such markets (like the U.S.) are not always where we can introduce new kinds of software, but these markets will consist of already released software becoming evergreen titles, or of software from third-party software developers that aim to run their businesses using the huge installed-base. Which means that by utilizing the potential of the 140 million units (of installed Nintendo DS hardware), even without focusing our development resources on it, this amount of software can still be sold. As a result, it will contribute to Nintendo's performance, and new software shall be proposed to consumers.

On your question on diversification, if Nintendo had unlimited resources, we might be able to generate different demand by introducing 20 different designs of Nintendo DS and giving consumers a choice, like the way we choose mobile phones. However, on the other hand, if we did something like that, we could not maintain our current level of quality, price or the mass-production effect. Therefore, I understand that our mid-term challenge is how to balance quality, which we are proud of, and the mass-production effect and how to meet the various preferences of consumers.

Q 8

  Please let me confirm your plans for Nintendo 3DS and Wii. You told us about some of the titles with fixed launch dates. However, I think the real sales momentum will be created if the titles with unfixed launch dates, such as "Animal Crossing," "Mario Kart" or "Super Mario," are released. Is it better for me to understand that these titles will be released in the next fiscal year, not this fiscal year? Or, can we understand that, as I see that the budget is designed in a way that Nintendo will work actively later this year, these titles will be released in the latter half of this fiscal year?

  Also, for Wii, you mentioned the next-generation system while Vitality Sensor has not yet come up on the sales plan list. Will this never be introduced? If it is going to be released, will it be released in the next fiscal year, or are you thinking of using it as a drawing card for Wii?

A 8


First, I would like to comment on the titles for Nintendo 3DS. If any one of the titles you mentioned right now is not released within this fiscal year, I do not believe that we will sell 16 million units of Nintendo 3DS hardware this fiscal year. Therefore, I cannot tell if all of them will be released in the current fiscal year, but at least some of these anticipated titles will be launched in this fiscal year. On the other hand, the reason why we have not yet set the launch dates is not only because of our development status, but to create an environment in which third-party titles will also sell well, which is the aim we set when we announced Nintendo 3DS. If we fail to create such an environment, we will not be able to maintain the momentum of the platform continuously. We don't believe Nintendo can do everything by itself. Of course, we are strongly aware of the fact that Nintendo's titles are obliged to drive the sales of the hardware, but we are not as arrogant as to think that Nintendo can maintain the market on its own. We want the other companies to be successful. In order to accomplish this goal, we would like to decide on the dates after we know the release plans of other companies' games so that we are able to consider how we can maximize the sales of our titles without affecting the sales of other companies in the short term. However, especially for the two titles I introduced today, which are the new iterations of "Mario Kart" and "Super Mario," I did not talk about them with the image of launching them in the next fiscal year or thereafter, so please understand it in that way.

Also, concerning Wii Vitality Sensor, I imagine that you are worried about that because it hasn't been put on the market even though a long time has passed since it was initially announced. This is a totally new type of entertainment, and there are large individual differences in the biological information of humans. For example, if it was acceptable that only 80% of the users thought the result was natural, then we could propose this to consumers right now. However, we are aiming for a level of quality in which 99% of consumers feel comfortable, and that is why this project is taking time to complete. I feel that this project has a lot of interesting potential, and we would like to continue this project without giving up, but it is difficult to overcome this hurdle, so please understand that now I cannot clearly say when we will be ready to put this on the market.

Q 9

  My question is about the U.S. market. I assume that Kinect is contributing to Xbox 360's good sales in the U.S. market, but please let me know if it is having an effect on the sales of Wii.

  In addition, please tell me how you will work on expanding the game development resources for the launch of Wii's successor.

A 9


I think the image of Microsoft's Xbox 360 is largely different between Japanese citizens and U.S. citizens. I think I can say that the Xbox 360 business has been in a good condition since last summer. On the other hand, when we talk about whether Kinect contributed to significantly expanding the number of Xbox users, as I have previously shown you the data on the graph, the number of Wii users has grown to about 10 million, but the growth in the number of Microsoft users is much smaller. Therefore, we feel that it would be rather unusual if Nintendo's Wii market was taken over by the launch of Kinect, or if the users who were playing with Wii quit playing with it and started to play with other consoles. Of course, many users in the U.S. have multiple consoles at their homes. Many Wii users also have Xbox 360 and vice versa, so I am not saying that there is completely no effect in terms of use rate. However, hit titles are not being released continually every month for Kinect software, so we don't believe Wii sales are being seriously affected.

Next, regarding the subject of overseas, there was an era in the past, which was until the time of PlayStation 2, when games made in Japan sold well all over the world. However, I think that, over the past three or four years, the presence of Japanese software developers has become relatively small. Nintendo is doing what overseas software developers do not do, so Nintendo's software is selling relatively well also in foreign countries, but for the software oriented to enthusiastic game players, such as "Call of Duty," the ones created by overseas developers are more mainstream in the overseas markets. In addition, because the expressions in games are becoming more and more photo-realistic, I imagine that the cultural differences in acceptance have started to be reflected more clearly. I think this is the reason why western users tend to prefer software created overseas than software from Japanese software developers.<

Of course, Nintendo will continue to run a business by creating Nintendo-like games, but we will not be able to meet the various tastes of consumers by only doing this, so I feel that it will become necessary to reinforce the development resources in the foreign countries. Therefore, I hope we will be able to show you something like that at E3.

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