IR Information

The 75th Annual General Meeting of Shareholders
Q & A
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Q 10

The treasury shares of the company account for 16.44 percent of the total number of shares outstanding, which strikes me as a pretty high proportion. Treasury shares can be used for various purposes, including an MBO (management buyout), which you once ruled out in a newspaper interview for Nikkei, but I think they could be used for that purpose and they could also be used for a business alliance, M&A (merger and acquisition) and employee compensation. As a shareholder, I would welcome a cancellation of the treasury shares because it would enhance shareholder value. Please let me know your thoughts on utilizing the treasury shares.

A 10


Regarding your question about whether the proportion of treasury shares to the total number of shares outstanding is higher than the general level, I would agree that it is higher than average. And as it was further increased after the stock buyback last year, we have discussed how to deal with the treasury shares in the company. This year marks the 32nd anniversary of the launch of Famicom (Nintendo Entertainment System) in Japan and, over the past two to three years, our business has gone through changes in business environment, a transition period, which we had never experienced before. It has been rapidly caused by several factors, including the popularization of the Internet and smart devices, innovative marketing methods and changes in purchasing behaviors of consumers. Now is the time we need to adapt well to these changes. Since we used the treasury shares for the capital alliance with DeNA at the beginning of this fiscal year ending March 2016, the current number of treasury shares is less than that described on the convocation notice for the general meeting of shareholders, but is not a dramatic decrease.

As I have mentioned in other Financial Results Briefings and Corporate Management Policy Briefings, we would like to continue to hold as many treasury shares as we do now over these few years while our business is in this transition stage. After we get through these changes in business environment and produce results from various new trials, we should start considering how to handle the treasury shares, including the retirement of the shares. Some say that a cancellation of treasury shares would boost the stock price, and there are also some examples in which it did not affect the stock price at all. Please allow us to continue to hold the current number of treasury shares until the end of this transition stage, as we might be able to make effective use of the shares for an M&A or business alliance during this time.

Q 11

Do you plan to be more proactive in releasing character-related merchandise or figures? For instance, Pokémon characters like Ash, May, Misty, Iris, Serena and Dawn are very popular all around the world, and they would surely be profitable for Nintendo as merchandise or figures. Or even if you don’t make the merchandise or figures yourself, you could collaborate with external companies to make new discoveries or growth.

A 11


This answer overlaps with what I discussed in my answer about IP utilization earlier, but it would be a stretch to say that Nintendo was proactive in making merchandise in the past. We have been discussing internally that we should be more proactive, and it is imperative that we establish a global structure to deploy such business all around the world. As a large proportion of our sales come from outside Japan, we have various ideas in mind for collaboration on the character licensing business across Japan, North America and Europe. And this expansion won’t be limited to merchandise; it may take various forms including, for example, images or even movies or TV programs. Even though I am not sure of the actual forms, it is safe to say that in addition to profitable licensing businesses, Nintendo will take risks we believe are worthwhile. On the other hand, not a small number of businesses have ended up with a pile of leftover stock after a particular product’s short-lived period of popularity. It would surely ruin the value of Nintendo IP and would not enhance corporate value over the long term if we chose this path. Therefore, I would like to recap that our current plan is not to simply increase the number of proposals but to be more proactive than in the past by making appropriate decisions that will enhance our overall corporate value over the long term.

Q 12

I am happy to hear that “Splatoon” for Wii U, a new software title that is not part of a series, was so well-received that it reached 1 million units in sales. I would like to ask how big the Virtual Console business sales are. Also, I would like to request that you make all titles available for purchase at any time. Sometimes there are titles which go out of service, and I would like to know if a system in which all titles are available for purchase at any time can continue or not.

A 12


As some of you may have seen the TV commercials we have been airing recently, “Splatoon” is a brand-new title and not a title from an established series. It has a very unique and fantasy-like setting. This game, inspired by squid squirting out ink, is played by human-shaped characters with squid-like features shooting, instead of squirting, ink at each other, and the team that paints the widest area in its team color wins. Having received high recognition from our consumers for its novelty, this title’s sell-through sales reached 1 million units in less than a month from its release. We feel very grateful for this, since our view was not so optimistic prior to release, for it being a non-series title.

Regarding your question on the scale of Virtual Console title sales, the download sales as a whole for this (75th) fiscal year are 31.3 billion yen, and I have shared publicly that this is a 30 percent increase from the last fiscal year, but we have not disclosed the individual sales of Virtual Console titles only.

Virtual Console itself is a service that began when we developed Wii so that consumers can play past titles on new platforms, and we continue to distribute various titles now. However, back when we started this service, there were some points that we could not sufficiently foresee about how big this business would grow to be and how the business would expand. For example, Virtual Console titles are generally developed based on the original game software, but this does not mean that we can develop numerous Virtual Console titles simply if we have the original game software. Development of Virtual Console titles require detailed manual work, such as testing if the software runs smoothly on each platform, or making sure the content is appropriate under the various standards currently in place. Thus, we occasionally receive opinions that our pace of releasing new Virtual Console titles is slow, but if we use much of our human resources on such detailed manual work, we would not be able to develop new titles, so we are currently researching how we can efficiently develop Virtual Console titles with limited human resources. One of the big issues for our system development is how to resolve the situation in which we can only release a few Virtual Console titles at a time when we release new platforms.

In addition, regarding the possibility of making all titles available on Virtual Console, I can say that it is possible for Nintendo titles with a few exceptions, since we generally have the intellectual property rights for such titles. However, as to third-party software publishers’ titles, if they are producing the software based on a license from another copyright holder, for example, we may not be able to easily use the same title for the system that exists now because we do not have a license from the copyright holder at the time. This often becomes a problem with reruns of TV shows or Internet broadcasting. Therefore, since we can only release Virtual Console titles of third-party software publishers if they come to an agreement with the copyrights holders upon negotiating terms and conditions that were not included in their original contract, please understand that there are some titles that we cannot easily release despite many requests. We will make our best efforts to satisfy our consumers with our Virtual Console title lineup.

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