IR Information

Third Quarter Financial Results Briefing
for Fiscal Year Ending March 2015
Feb. 17, 2015

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Thank you for attending our Financial Results Briefing despite your busy schedules. I am Satoru Iwata, president of Nintendo.

First of all, allow me to use this occasion to apologize that, although this Financial Results Briefing was originally scheduled for January 29, we had to contact you on that very morning to postpone it until today because I suffered from a sudden and very high fever from the early morning of that day. I am very sorry for the inconvenience that I caused all of you.
Today, since this is not a Corporate Management Policy Briefing but a Financial Results Briefing after the year-end sales season, which is the biggest sales season of the year, please allow me to focus on the results of the sales season and update you on our most recent business status. While we will further our endeavors to increase our Nintendo 3DS and Wii U businesses in the next fiscal year, we intend to simultaneously challenge ourselves with new endeavors which include our plan to take advantage of smart devices, more aggressive use of Nintendo’s character IP and our new QOL improvement platform business. I am limited in what I can discuss about these efforts now, and I do not think I can successfully convey a big and comprehensive picture of our projects just by sharing with you some fragmented information on these multiple challenges. At the time when we hold the next Financial Results Briefing to discuss the annual results of the current fiscal year, I am hopeful that I will be able to share with you any relevant information, as well as about our financial forecasts, in as much detail as I can. Accordingly, please note that this information is not included in my presentation today.

For three consecutive years, we were not able to balance revenue and expenses, and posted an operating loss for the nine-month period. For this fiscal year, the total net sales decreased in comparison with the previous year, but we were able to restore balance and return to an operating profit. I would now like to tell you about the sales transitions of Nintendo 3DS and Wii U.

Let me begin with Nintendo 3DS.

One of the highlights of the financial results is that the total sales of the Nintendo 3DS family hardware have reached 50.41 million units, crossing the 50-million-unit mark.
Various products that can produce 3D images have appeared, but Nintendo 3DS now has an overwhelmingly large presence as a platform with a 3D-projection function.

It is hard to say that, however, Nintendo 3DS hardware has sold in this fiscal year as we originally anticipated. Please let me tell you about the differences in the Japanese market and the overseas markets.

This shows the percentage of change found in the sell-through data of Nintendo 3DS hardware and software in each market for the first half of the term compared to the corresponding first half of the previous year.
During this period, there were intervals between the releases of key titles since the release of "Pokémon X" and "Pokémon Y" in October 2013. This slowed down the pace of the global Nintendo 3DS hardware sales. It was most clear in Japan where the device had been sold at a record-breaking rapid pace since its launch and the number of sales had already surpassed that of Game Boy Advance. The sales in the Japanese market were slower moving in comparison to the previous year than any other market.
In contrast, as you can see, we kept our software business for Nintendo 3DS at a certain size compared to our hardware business, thanks to the releases of "YOKAI WATCH2 GANSO" and "YOKAI WATCH2 HONKE" (Japanese titles) in July and "Super Smash Bros. for Nintendo 3DS" in September in Japan and the steady sales of "Pokémon X" and "Pokémon Y" in overseas markets.

This is the sell-through data in each market for the third quarter of this fiscal year compared to that of a year ago.
We launched New Nintendo 3DS on October 11 in Japan, which boosted the hardware sales again. The new device was also made available on November 21 in Australia, but there seems to be no rise in the sales in this graph. This is because, while the launch of "Pokémon X" and "Pokémon Y" and Nintendo 2DS in early October gave momentum to the hardware sales for the full quarter in 2013, the release of New Nintendo 3DS was in late November and therefore did not contribute to the full quarter of last year. Focusing on the single month of December, however, the year-on-year sales were 94 percent of sales one year ago, which was the same level as the Japanese market. In the U.S. and Europe, on the other hand, we were unable to take full advantage of the year-end sales season in selling Nintendo 3DS hardware, despite some hit titles, as some consumers decided to wait for the New Nintendo 3DS, whose launch date was set on February 13, 2015. It is said that the basic principle in the video game industry is good game titles boost hardware sales. In this case, however, New Nintendo 3DS, which has been highly acclaimed by consumers in the markets where it is available, worked to shift consumer demand for the year-end sales season to the next year or to steer it toward other products.
Software sales cannot reach their full potential if a significant amount of the hardware is not newly purchased. As a result, although we released several smash hit titles, the total software sales fell short of the previous year in the U.S. and European markets.
The U.S. data shown here does not include the digital sales, but when we consider only first-party titles for the 2014 calendar year, the combined packaged and digital sales remained almost the same as the previous year, with a 2-percent decline. Since the sales of Nintendo titles for Wii U grew dramatically, which I will tell you about later in this presentation, the sales of first-party titles for Nintendo 3DS and Wii U showed a year-on-year increase of 15 percent.

As explained, Nintendo 3DS did not clear all the hurdles with hardware sales, but when it comes to software sales,

First of all, in the Japanese market, Nintendo 3DS software achieved a solid sales result as there were five double-million sellers for Nintendo 3DS in the six months from July to December. At our Corporate Management Policy Briefing last October, we stated that we expected four double-million sellers, and we actually achieved a better result. As I have mentioned before, this is the first time for software for dedicated video game platforms to achieve this record since 2000, when we started to receive precise video game sell-through data in the Japanese market from independent research companies. Considering the size of the video game market before that, we can even say that this is the first time in the history of the Japanese video game market. We did not have so many double-million sellers in such a short period even in the heyday of Nintendo DS, the most pervasive video game system in Japan.

Here are the double-million sellers. Three of the five titles are third-party software. Some think that the popularity of smartphones will shrink the business of software for dedicated video game platforms. On the other hand, the market potential of Nintendo 3DS seems to interest developers who are working on games for smartphones, and there have recently been some hit titles for Nintendo 3DS which were originally designed for smartphones, including "Puzzle & Dragons Z" released at the end of 2013. We continue to receive inquiries from various developers.

"Super Smash Bros. for Nintendo 3DS" was released last September in Japan and last October overseas. We announced at the last Briefing that the number of sales was 3.22 million units by the end of last September and it reached 6.19 million units by the end of the last year.
Before the release, some were skeptical of the sales potential of "Super Smash Bros." for handheld devices because the series had been popular for home consoles, but the steady sales of the title even today have proven it untrue. The quality of the title has also been highly praised.
The "Super Smash Bros." series is not as popular or well-known in Europe as in Japan and the U.S. This is why the initial sales of "Super Smash Bros. for Nintendo 3DS" were not strong in Europe. As the time goes by after the release, however, the sales have picked up thanks to word-of-mouth.

We have sold 9.35 million units of "Pokémon Omega Ruby" and "Pokémon Alpha Sapphire," which were released worldwide last November. The sales total is smaller than that of "Pokémon X" and "Pokémon Y," released in the previous year, as the release date was more than one month later in the year. We are confident that we have a chance to continuously sell "Pokémon Omega Ruby" and "Pokémon Alpha Sapphire" even this year. We will try to have as many people as possible choose them as a standard title. Before the release, some said that these titles were nothing but remakes and that their sales potential was smaller than completely new titles. We hope to produce results that surpass such expectations.


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