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Corporate Management Policy Briefing/
Third Quarter Financial Results Briefing
for Fiscal Year Ending March 2014
Jan. 30, 2014

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Thank you for attending our Corporate Management Policy Briefing despite your busy schedules. I am Satoru Iwata, president of Nintendo.

Tatsumi Kimishima has just explained the financial figures.

I began our past briefings by discussing the global video game market. However, I understand that under the current circumstances our future prospects now draw far more attention from our shareholders and investors, so please allow me to focus on our outlook for the future in this briefing today.

Before getting to the main point, I would like to apologize to our shareholders for having announced a steep downward revision to our financial forecast for the full fiscal year due to unexpectedly weak sales particularly in the overseas markets in the last year-end sales season.

I am here to tell you about our future, and to begin with, I would like to mention what Nintendo will not change.

Since the revision to our full-year financial forecast, there have been various reports and comments about us. However, we do not hold a pessimistic view of the future of dedicated video game platforms.

We therefore believe that dedicated video game platforms which integrate hardware and software will remain our core business. Naturally, we are moving ahead with research and development efforts for future hardware as we have done before and we are not planning to give up our own hardware systems and shift our axis toward other platforms.

We believe we can capitalize the most on our strength in platforms which integrate hardware and software. It is clear that, since we have developed products which integrate hardware and software, we were able to offer such devices as dual-screen Nintendo DS with one touch screen, and Wii Remote and Wii Balance Board for Wii.
On the other hand, the popularization of the Internet and smart devices shows that people’s lifestyles are changing dramatically. Just as video games once needed a TV screen and then later handheld devices with built-in screens emerged with the shift in people’s lifestyles, we must once again change our definition of video games to keep up with the times.

Nintendo’s history definitely suggests that Nintendo has always flexibly innovated itself in line with the times.
After Nintendo started the manufacture and sale of Hanafuda (traditional Japanese playing cards) 125 years ago, it has innovated itself from a playing card company to a toy company, a toy company to an electronic toy company and an electronic toy company to a company running video game platforms. What has remained the same, however, was we always tried to create something new from materials and technologies available at that time and to position entertainment as our core business. Furthermore, even after we established the business structure of video game platforms, we did not stop innovating ourselves. For instance, home video game consoles were born to play coin-operated arcade games at home, but we have evolved them into something uniquely appealing. Another example is the games to expand the gaming population that we have offered with Nintendo DS and Wii in the last decade, which were clearly foreign to the mainstream video games at that time but were accepted by a great variety of consumers. In this way, we will continue to value self-innovation in the future.
In addition to self-innovation, we have shaped our future by collaborating with various outside partners which we saw as appropriate at the time in order to adapt to environmental changes. Such collaboration has been a part of all our operations from research and development to manufacture and sales. In addition to our own efforts, collaborating with good partners will be one important way to adapt to the recent dynamic changes surrounding video games.

Given this background, in expanding our dedicated video game platforms in the future, we hope to firmly decide what aspects from the past should be kept and what should be dramatically changed in order to leverage our core competency.

One more thing, we will continue to value the motto which we inherited from the company’s former president, Mr. Yamauchi: The True Value of Entertainment lies in Individuality.
Nintendo is not a resource-rich company, with only a little more than 5,000 employees on a consolidated basis. We cannot achieve a strong presence by imitating others and simply competing in terms of size. We have often received advice on overcoming our weaknesses in comparison with other companies and have been questioned about why Nintendo doesn’t follow suit when something is already booming. From a medium- to long-term standpoint, however, we don’t believe that following trends will lead to a positive outcome for Nintendo as an entertainment company. Instead, we should continue to make our best efforts to seek a blue ocean with no rivals and create a new market with innovative offerings as a medium- to long-term goal.

Before explaining Nintendo’s medium- to long-term outlook, I would like to start with our short-term outlook.

Naturally, we, as the managers of the company, need to make efforts to balance revenue with expenses to post operating income for the next fiscal year. Only with cost-saving efforts, however, we cannot help falling into what is called balanced contraction. I would like to give you our view on expanding our business with existing platforms.

As a platform in its second year, Wii U is currently in a very difficult position. I would like to begin with what we are going to do with Wii U.

Obviously, under the current situation where the company has to report an operating loss, simply executing a price reduction as a way to defuse the situation is not an option. In the short-term, Nintendo will focus on thoroughly enriching the value of the most significant feature of Wii U, the Wii U GamePad.

Unfortunately, as the current situation of Wii U shows, we have not been able to fully communicate the value of the GamePad. We also realize that we have not been successful in answering consumers’ questions such as, “What is the difference between Wii U and the previous platform, Wii, and what is the benefit of upgrading it?” By looking at the current sales situation, I am aware that this is due to our lack of effort. What’s even worse is that there even appear to be not a small number of consumers who think the GamePad is one of the accessories for the previous platform, Wii.
It is more challenging to convey the appeal of the GamePad to consumers who do not engage with video games that often since they do not actively gather information about video games. Therefore, we intend to take on this challenge, and I would like to have this solved before the year-end sales season.

In order to do this, it is obvious that

Our top priority task this year is to offer software titles that are made possible because of the GamePad.
We have managed to offer several of such software titles for occasions when many people gather in one place to play, but we have not been able to offer a decisive software title that enriches the user’s gameplay experience when playing alone with the GamePad. This will be one of the top priorities of Mr. Miyamoto’s software development department this year.


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