IR Information

Financial Results Briefing for the 74th Fiscal Term Ended March 2014
Q & A

Q 3

I would like to know when Nintendo will launch its next-generation video game systems. Should we expect Nintendo not to introduce new hardware in the next three years? It appears that financial analysts and investors are now expecting Nintendo to make a real comeback with its next-generation hardware, but given the competitive environment that surrounds the company, should we perhaps think that it is now becoming more likely that Nintendo’s next-generation hardware will be introduced earlier than Nintendo expected? Also, although I suppose the answer to this question will be that your next-generation hardware will have to adopt a groundbreaking design concept that has never been seen before, I would like Mr. Iwata to tell me, to the extent possible, what kinds of ideas he has at the moment in terms of bringing out something that we have never experienced before.

A 3


Once we launch a new platform, we naturally start to prepare for the next one. As it takes several years to develop a single platform, if you ask us whether we are preparing for our next system, then the correct response will be that we are always developing new hardware. On the other hand, the most difficult question for us to answer in public in concrete terms is when we are going to launch our new hardware and what kind of hardware we are going to launch, and I am afraid that I cannot talk about this in more detail. However, I can certainly assure you that we are not at a dead end of any kind in which we are out of ideas for developing new hardware. I of course believe that launching new hardware will not produce good results unless we first make sure that those who have already purchased our platforms are satisfied. We will continue to work hard to ensure that consumers who already own our platforms are satisfied, and make sure that people will continue to see great value in our software, but I would like to say that we are preparing for our next hardware system, and in fact, we already have a clear idea to some extent about the direction our next hardware is going to take.

Q 4

I would like to ask you about your mid-to-long term corporate strategy from a macro perspective. Mr. Iwata, what do you think will be the keywords for the entertainment market from now on? When I think of keywords from your various explanations at the Corporate Management Policy Briefing in January, “non-wearable” or “hardware-software integrated business model” are candidates, and when I think in terms of the figurine project that you mentioned in your presentation today, something like “from virtual to real” could also be one of the candidates. On the other hand, when I look at other companies’ ideas such as “SmartGlass” and, as Google is now attempting to realize automated driving, the current trend appears to tell me that other companies too are trying to redefine the meaning of entertainment in their own ways and to improve people’s QOL by taking a systematic approach to the functionality of their devices. Considering my interpretation of the situation, I would like to hear Mr. Iwata’s opinion on what the keyword(s) will be for Nintendo from now on.

A 4


I think that many utility products in the world have been designed and produced with the purpose of improving people’s QOL. Nintendo has added “in enjoyable ways” to the definition of entertainment. By defining entertainment as activities that “improve people’s QOL in enjoyable ways,” we are trying to expand the definition of entertainment as much as possible. Nintendo has a history of approximately 125 years, but when it comes to video games, the company has been engaged in that business for 31 years since the Japanese launch of the Family Computer System (Nintendo Entertainment System). In other words, Nintendo has been known as a video game company only for one-quarter of our history, but people around the world, even including many at Nintendo, tend to believe that Nintendo is a video game company and even think that Nintendo should not or must not do anything other than making video games. This, I believe shows that over the past 30 years or so, the video game business has been running smoothly. However, whether we have a narrow or broad definition of video games can make a huge difference. I suppose people caught a glimpse of the potential with “Brain Age” and “nintendogs” for Nintendo DS, and “Wii Sports” and “Wii Fit” for Wii, which Nintendo developed by expanding the definition of video games and these titles were eventually well-received by many people around the world. In video games, players interact with a computer and receive output as the result of their input. If players realize that they will be able to receive greater rewards in the form of computer output than the amount of effort they put in, they will be tempted to repeat that process. Because that process makes players feel comfortable, there is a great sense of excitement and achievement. I think that this is the kind of know-how you need to make video games, but it can be applied to much wider fields than you might imagine today. When I said that health is going to be a theme of our QOL initiative, I referred to it as an example of one of these fields. More specifically, talking in general about health, many people are well aware of what we should do for their health, but at the same time, many people find it difficult to commit themselves to it. So, the questions I posed back then were, “What do you think will happen if we can apply our know-how on keeping consumers engaged and entertained on a continual basis, and make it fun to complete such endeavors?” Back to your original question, “not defining our business fields narrowly” is key for us.

Not to change the subject, but many years ago, people used to connect with video games only when they were sitting in front of a TV set. Other than that, people did not have any relationship with video games back in those days. Then, handheld video game systems were introduced, and people started to carry around their video game experiences outside the home. And today, many people carry around smart devices and use them in their free time. We have been studying how we can best incorporate our video games into the time that people use their smart devices. I introduced our “Mario Kart TV” as an example during my presentation today. Although this is just the beginning of our initial approach with that concept, players of “Mario Kart 8” can spend a portion of the time they interact with their smart devices to connect with the Mario Kart game. In the future, it is possible we will decide that certain elements of our video games should be enjoyed when players use their smart devices. In other words, we will try to ensure that there is more than one device, more than one location or more than one environment where users can access our products and make sure those users can interact with our products in various environments. I also mentioned in January (at the Corporate Management Policy Briefing) that we would change the definition of our platforms from being device-based to NNID-account-based. When our platforms are account-based, we can expand the number of applicable devices. In order to have rich and high-quality game experiences, we always want our users to play with our dedicated game systems that are specifically designed to provide such unique experiences, while at the same time, we may be able to select some portions of these games and make them available on other devices. Also, by encouraging users to interact with the physical figurines that I mentioned today, we may be able to create brand-new entertainment. In these ways, another critical point for us to carefully consider, or another key point for us, is how we can and should incorporate our entertainment offerings into the more fragmented time and opportunities of different consumers.

Q 5

At the Corporate Management Policy Briefing that the company held in January, you talked about several new ways to change how you conduct business. I understand that there will be new businesses for the company, such as QOL, but how does the company intend to change its organizational structure and development processes in order to adapt in line with the times and deploy these new businesses? I hope to hear some specific examples in this regard.

A 5


To answer your question, I think I should explain what we have been doing about our internal organization in response to our core management policy. For one thing, as previously announced, we have integrated our hardware development divisions and established the “Integrated Research & Development Division.” Until this change took place, we used to develop our handheld video game devices and home video game consoles in separate divisions. Of course, we did not simply merge two divisions into one. We know that we need to change how we manage this new division as well as how we create and manage new projects, and we are currently making progress on this. Also, the new R&D Development Center was built earlier this year, and our developers will move to their new offices in mid-June, after E3. After settling in, the developers who are now working at different buildings will be able to work together in the same building. As a result, our development of hardware and software can be done in a more unified fashion with individual developers being able to communicate directly with others more closely, and the different R&D teams that are currently working in separate rooms can work as one team in the same room. Of course, even now, our hardware development teams and software development teams work closely with each other, but because they belong to different departments under our current organizational structure, they are not necessarily able to visit others’ rooms freely. In the Development Center, we will create a space where developers from the four different R&D divisions can get together with others. This is another concrete example of what we are doing in order to establish an environment where unique and fun hardware-software integrated entertainment can be developed more smoothly.

In addition to these changes to the R&D divisions, in March we established a new department called the “Business Development Department.” Since the company released Family Computer System (Nintendo Entertainment System) in Japan and put it on the right track for sales growth, Nintendo has not needed to implement significant changes to its principle business structure. In other words, in comparison to many other companies, Nintendo used to have a smaller need for business development because, by maintaining a similar business structure, it was able to conduct its business and grow rather steadily. However, because the environment has greatly changed and Nintendo must create a new business structure and execute a variety of new endeavors that I have been addressing recently, we have established this new department that reports directly to me. We have gathered experts from a variety of different fields for this department. By working with others in the R&D divisions, these members have already been acting as contacts for a variety of different business partners, and have been making proposals and planting the seeds for discussion. The Business Development Department will play an important role in our company producing tangible outcomes for the topics we have been discussing recently: the active use of our character IP, future approach for the new markets, future of the new business fields, how we are going to change the definition of our future platforms and how we will take advantage of smart devices. These are the concrete examples that I can mention today to respond to your question.


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