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2012 E3 Analyst Q & A Session - June 6, 2012
Q & A

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(These Q&As were conducted in English. Answers by Satoru Iwata are translated answers from Japanese by his interpreter.)
Q 1

I have a question about pricing for the Wii U: I know you haven’t announced the price yet, but after the Nintendo 3DS came out, we saw a very quick price drop. And while you mentioned wonderful statistics for the Nintendo 3DS relative to the original Nintendo DS in the same timeframe of its lifecycle, some of that may be due to the price drop of the Nintendo 3DS that was implemented much earlier than for previous gaming systems. So my question on the Wii U is, given the other home entertainment options that are available and the way people are starting to spend $500.00 on an iPad instead of a gaming system, what are your thoughts about pricing? Do you think that you can continue to charge a premium on gaming systems, or will you try to make money on the software only?

A 1

Satoru Iwata (President):

One point I’d like to make is that in the sales comparison of the Nintendo DS and the Nintendo 3DS, the price of the Nintendo 3DS hardware ($169.99) after the markdown is still higher than the original price of the Nintendo DS ($149.99) at the launch in the U.S. So, I don’t think that the price cut is the reason that the hardware is selling better than the Nintendo DS.

Next I’d like to talk about what we have learned from our experience with the Nintendo 3DS. I think the largest challenge we had with the Nintendo 3DS initially at its launch time, which goes beyond the price, was the number and timing of appealing software titles (which motivated consumers to purchase the hardware) we were able to provide at an early stage after the launch to drive the hardware sales. Because the value of the Nintendo 3DS hardware did not match consumers’ expectations at the initial price and the sales pace slowed down, we took the measure of reducing the price to help revitalize the hardware sales.

For the launch of the Wii U, we are putting a strong focus on how we can avoid a similar situation. As you can see from our software lineup at E3, we have a number of titles which will help drive the hardware sales. While some titles were able to showcase their unique appeals to the audience, people do not yet fully understand the appeal of some of the other titles. Between now and the launch, we’ll continue to work to make sure that people clearly understand the appealing elements of that software. So what I can say here today is that we’re doing our utmost to avoid a situation where we have to cut the price of the Wii U hardware shortly after its launch, as we had to do for the Nintendo 3DS. We are going to ensure that consumers will consider the Wii U price reasonable for what they are able to do with the system and will not expect a price drop very early in its life cycle.

Q 2

Regarding the parallel sales of existing packaged software and its digital version, what kind of feedback have you been receiving from concerned retailers?

A 2


All of the retailers have different positions and so we are not seeing the exact same answer from every retailer. We have some retailers who are very focused on and good at providing careful customer service in the store. We have other retailers whose in-store staff may not be as knowledgeable about the products and they may not be as able to answer questions about the products from consumers. I am not going to share the names of any of our particular retailers, but those in the former case are looking very positive towards the digital distribution options. And some of the retailers that I described in that latter case say that the digital offering is not so suitable for their in-store environment so they may only be offering digital versions through their online web shops.

Overall, I can say that retailers were first worried that they would be ignored in digital offerings, but they are now taking a forward-looking stance to our proposal of digital distribution with retailer involvement. We’re finding that they’re very positive about our digital distribution structure and view it as a “win-win” situation.

Q 3

Evaluations in interactive entertainment have come down significantly. Nintendo has the strongest balance sheet of any of the companies directly involved in interactive entertainment. Is there an opportunity today to employ that balance sheet? I know asking about share buybacks is not a popular question, but if not for share buybacks there’s an opportunity strategically for other acquisitions or, as Microsoft has done with their balance sheet, co-promotions with third-party publishers, with buying exclusive rights. Is there a way to creatively leverage your balance sheet strength in the interactive entertainment industry, which is a relatively depressed environment?

A 3


First of all, I do see that there are a variety of possibilities in which we could use our financial resources. Having said that, please understand that due to fair disclosure rules I can’t go into detail on any of those possibilities today.

Then the question becomes some of the specific examples that you raised such as the question of obtaining exclusive rights. While Nintendo is not entirely opposed to exploring that option, I don’t think it would be an appropriate course of action for Nintendo to get into a battle with a company like Microsoft over the cost or the expense of trying to go head to head in a situation to try to obtain exclusive rights. However, now we have a totally new device, the Wii U GamePad. If a third-party developer or publisher has come up with an idea of a potentially very unique use of the Wii U functionality with such a device, there is a high possibility that Nintendo will be a partner with that third party in an unprecedented manner (thereby reducing their development risk significantly). I do intend to work hard so that next year you will not criticize Nintendo’s use of its resources.

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