Nintendo held their semi-annual financial presentation to investors were Mr. Iwata handled a lot of questions concerning Nintendo and their future. There is a TON of information here but it’s a very good, interesting, read.

Iwata talks on advertising 3DS

First of all, as far as the current term, ending in March 2012, is concerned, we have decided that driving the sales of Nintendo 3DS hardware is our main priority, and in a sense, we can say that by doing this, we have sacrificed our profitability for this fiscal year. We came to the conclusion that we needed to make that bold investment, instead of focusing just on this term’s profitability, so that we would be able to make the Nintendo 3DS an important foundation for Nintendo for years to come. During the fiscal year ending March 2013, we are expecting the profitability of Nintendo 3DS hardware to improve significantly. In other words, we are not anticipating a situation where we must expand the hardware by generating a large loss on the sales of the hardware. As long as we can create sufficient momentum, I think we will be able to come close to our usual course of business operations in the next fiscal year.

I’d like to take this opportunity to explain one more thing here. The advertising expenses that Nintendo has forecasted in this fiscal year are five billion yen less than our previous advertising expense forecast amount. Some of you may interpret it as though the company is cutting ad costs in order to secure annual operating income by any means, and such an assumption may be the background to the type of question I just received. Let me explain a bit about it: We disclose our advertising expenses in Japanese yen, and among the total advertising expenses, expenses denominated in foreign currencies decrease in Japanese yen value when the Japanese yen appreciates. This is one factor. Also, there are always the ad expenses that are linked to the sales, which are used for promotions. For example, a pre-determined percentage of the sales by an overseas retailer is invested into a fund created by Nintendo and the retailer, and this fund is used for promotional activities which are done in accordance with some pre-determined conditions. Because we made a downward revision to our annual sales forecast, the ad expenses linked to the sales decreased accordingly. In other words, we have not taken a conservative attitude towards advertising and promotion expenditures, which are needed to realize 16 million units of Nintendo 3DS hardware sales in this fiscal year. As a matter of fact, we are making rather aggressive investments in this field, and we have not changed our attitude. Of course, more investment in advertising does not necessarily mean more sales. We are taking cost efficiencies into consideration, and we are trying to spend money at appropriate times and on appropriate promotional activities such as when a strong software title is launched.

Iwata on the changing landscape of gaming

When we talk about “charging for items” and “add-on content,” the structure will be the same. More specifically, with the update of the Nintendo eShop scheduled for the end of November, a mechanism, with which the users can separately purchase inexpensive add-on items and content for a game they have purchased, will be incorporated. Maybe I needed to explain in more detail at the end of July this year, but what will be done by the end of this year is not only the publishers’ ability to provide consumers with add-on content but they will also be able to charge for such items.

I have already shared with you Nintendo’s position on this kind of activity. (During the Q&A session of the last Financial Briefing, I said, for one thing, that add-on stages and content, for which the developers have poured a significant amount of their creative resources into, should be offered for the consumers to purchase separately.) Nintendo will also offer something like this for the titles Nintendo publishes next year, in a way that should be appreciated by our consumers. I also hear that some of the software publishers are intending to launch titles that incorporate this new structure of the Nintendo eShop from early next year. I would like to wait for each publisher to make their relevant announcements as to such details as what each of their software titles will do specifically, but I just wanted you to be aware of the general schedule.
(Some have reported that Nintendo is intending to launch software for which the company will charge consumers for “add-on items” in exactly the same way as other social game providers, but it is not true.)

About our intention to make use of smartphones and social networking services, we have, for example, already notified the public of Nintendo Direct by using SNS. More specifically, we made an announcement through Twitter two days before the broadcast of Nintendo Direct on the Internet and, as a result, hundreds of thousands of people watched it. So, we have already started using SNS. When it comes to experiencing Nintendo software, we want people to do so only on our platforms. On the other hand, I explained about our plan to make Nintendo eShop available on the Internet too. When it comes to the ways people can access our software information, it used to be that we were solely dependent upon TV ads and print ads. Now that social media plays a new role in spreading information, it would be a shame if we could not make use of them. Smartphones are quickly spreading as a means used mainly by the younger generations. In Japan, we may feel that this is the year that smartphones are starting to expand significantly, but in the United States, that trend was already seen before this year. Making use of them is one example of how we would like to take advantage of SNS. For the launch of the Wii U, we will be able to do even more. Today, so many companies are trying to attract the public to a broad variety of different products. We are all fighting to grab people’s attention. So, our idea is that, in such a circumstance, the company should try to use SNS vigorously so that it can help to remind people about our products, or we should offer people a situation where they can more easily find out about our products that suit their lifestyle, tastes and values.

As for your second question, just as you pointed out, offering software one after another is a never-ending challenge we have to try to overcome. We failed to offer strong software titles without long intervals in the first half of this year, but it was not because we did not place importance on offering them one after another. Even when we understand the significance of this, we are sometimes unable to do so. We should have prepared a more thorough backup plan. We were planning to launch software in the first half of this year without too many intervals. However, we ended up delaying the launches of multiple software titles, and we could not make up for it. Around the same time, the third-party titles did not become huge hits, either.

For us to provide software titles one after another, one idea is, “Isn’t it possible for Nintendo to stock some of its software titles instead of launching them as soon as the development is completed?” Video games need to stay fresh, so it is not practical for us to put them on hold for too long, but we think that some of them may be held for a certain amount of time so that there will be a short interval between when they are completed and when they are launched. We are taking on this sort of challenge for the Nintendo 3DS. For example, when we look at the software lineup for the year-end sales season, it is so dense that, if we added any more software, the total sales would not increase. Accordingly, we have intentionally delayed the launch of some software titles to early next year.

Another idea is for us to further intensify our collaborations with the software developers and the third-party publishers. When we launched the Nintendo DS and the Wii, Nintendo made some very unique proposals which were not in alliance with the mainstream concepts held in the video game industry at that time. As a result, there was no choice but for us to invigorate these platforms through Nintendo’s own efforts so that they could be up and running. And, the initial purchasers of the products were mainly Nintendo fans. Particularly in Japan, for the Wii, we struggled to create the circumstance early on where third-party Wii titles sold in huge volumes. Because we could not show a good sales record for third-party Wii titles, third-party developers did not sustain their passion to create software for the Wii. In the overseas markets, there have been a number of third-party hit titles on the Wii. However, there was also a challenge that the Wii was not fully capable of catering to the needs of, for example, first person shooter games, the users of which prefer platforms compatible with HD TVs. For these challenges, we will be able to improve the situation with the Wii U and the Nintendo 3DS. In fact, a number of software publishers and developers have recognized this fact and have started working on their software in a variety of ways. Overall, I think that we will be able to establish an environment where we will not repeat the same mistake that strong titles were not released until about six months after the launch of the hardware.

Iwata on 3DS software shortages

Let me first explain the reason for the software shortage. As you just pointed out, the period when we needed to shift from the Nintendo DS to the Nintendo 3DS overlapped with the period when we had to prepare for the Wii U. If there had been no overlap, or if there had been a three or four year interval, Nintendo could have focused upon just one new hardware system while also taking care of two existing platforms. However, as we have had to take care of two existing platforms and two new ones, it has been more of a challenge. We need to face these hardware transitions from time to time, but the intervals between these transitions are not fixed. The Nintendo DS, for example, has been able to maintain a large presence in the market for a relatively long period of time, which has resulted in a huge installed base of the hardware and an unprecedented number of software sales in the history of portable video games. So, it is not a good idea that we stick with past product cycles. But we think it is true that the longevity of the Nintendo DS has created this challenging aspect for us today.

In such a circumstance, we are more conscious that we must once again re-think how we can create a good balance between what we do internally at Nintendo and what can be done externally. Looking back, certain experiences enabled by the Nintendo DS and the Wii were created just because Nintendo took on these challenges internally, and these experiences were able to drive the overall sales of these platforms. Nintendo was fortunate to have that kind of successful experience. Although I try not to use the term “success” at all, and particularly for this kind of opportunity, but this time I’d like to use this expression. With the experience of success, we tended to have the mindset that it would be the safest and most secure if we took care of everything by ourselves. As I said, however, the time always comes when we must prepare for the next platform. When that time comes, rather than trying to do everything by ourselves, we must try to narrow down what we really have to do inside the company and think of how we can best collaborate with people from other companies. For example, the teams led by Shigeru Miyamoto of Nintendo’s Entertainment Analysis & Development Division have already been cooperating with external developers in order to create titles which would have been developed internally at Nintendo in the past. Now that we realize there may be times when we need to take care of four platforms at once, we are initiating these new challenges, and I believe that such a fixed notion as, “we have to do everything by ourselves,” has faded inside the company to a large degree. So, I am expecting the situation to further improve from now. On a similar note, we often receive criticism that Nintendo is not good at deploying its services on the Internet. We are also internally discussing whether it is the best use of our development resources if those developers who are capable of making hit video game titles have to devote themselves to Nintendo’s Net-related services. Our basic idea today is that our internal game developers should focus on making new, unique and fun software while we collaborate with outside resources, especially in the fields for which Nintendo is not specialized in.

As for our direct communications with consumers, there aren’t many things I can discuss other than what I confirmed at the beginning of my presentation today, but, in a few words, we believe that, depending on the information, we have to separate the places where we communicate our messages. For example, as for the information and details of the game contents that we shared during Nintendo Direct we held last week, it does not make sense for us to explain this information to those who do not play video games and ask them to report about it. Now that we have the means to deliver this kind of information directly to our consumers, we believe we should take that approach. On the other hand, we are not saying that any and all information should be delivered by us directly to consumers. After all, there is always a certain limit in the number of people who are willing to access our messages through such media. When it comes to messages which we wish to spread as widely as possible, we must depend upon the mass media. For us to deliver our messages to our investors, we have to ask for help from those who are attending meetings like this one. We have no notion that we will be all right in directly dispatching any and all the information. We are trying to change the way we communicate, depending on the nature of the information. Depending on the recipients of the message, we identify the information that is relevant to them, and we will structure our messages so that these recipients will be able to receive information they want to know and deliver it to them at the most appropriate opportunities, such as at our events or through various other methods.

Iwata on expanding the gamer userbase

First of all, we would like to keep pursuing “gaming population expansion” as our fundamental goal for the future because we believe that it is worth continuously aiming at and that it will grow the market, expand our business and improve our financial results, which could give our shareholders much return.

On the other hand, we do not think that developing video games for casual or light users is the only way to expand the gaming population. There was a misunderstanding that Nintendo was dedicated to such games at some stage of the lifespans of the Wii and the Nintendo DS. We have made efforts to develop video games that are in tune with various consumer tastes; however, we have not been able to gain adequate consumer understanding regarding our intentions, while in the common perception there are no or few core users playing Nintendo platforms, which is not the case.

To explain again about the consumer base we are trying to reach out to, our efforts for gaming population expansion are aimed at offering software that can be accepted by a wide variety of consumers, irrespective of age, gender or past gaming experience. As it is natural that Nintendo alone cannot provide every kind of software, we would like to achieve our goal in cooperation with various developers. A more important point we believe is, among other things, that a consumer’s tastes are not permanent at all, and they will vary over time. Every avid game player was once a beginner, or in other words, there are no born advanced player. Unless we create a flow from beginner to expert by offering an entrance for beginners and the processes for a beginner to become an intermediate user and from an intermediate to an advanced player, the video game industry will gradually shrink. We must therefore consider how we can create such a flow. However, the symbolic stories of how “Wii Fit” and “Brain Training” made non-users start playing video games were overemphasized, and many other cases that such beginner players tried the “Dr. Mario” series next and eventually reached “New Super Mario Bros. Wii” attracted little attention. We hope to improve our efforts to explain that even though such titles initially triggered beginners’ interest to play video games, they will possibly try various kinds of games as their tastes change.

This issue is linked to the question on the utilization of social media, which I received from another person a short while ago. Since we are simply a developer and seller of products, some consumers are skeptical about our product recommendations no matter how much effort we make. In order to attract their attention to the new potential of our products and break down the barriers of gaming preferences or skill level among various video game players, a relationship among users where they can exchange information and learn from one another is vital. At the same time, we feel that such a relationship could be more easily established if we could improve the coordination between video game systems and social media. When we say “gaming population expansion,” we bring a variety of consumers, or even everyone, into view. Our challenge is how to periodically produce software that can satisfy each one of them.

Iwata on the success of Mario, 3DS big-name software in Japan/EU/NA

First, just as you pointed out, it is true that the consumer demographic of the Nintendo 3DS has changed since the hardware markdown. To be more specific, at the beginning, the main consumers were those who could afford to purchase a 25,000 yen (the MSRP in Japan) hardware system at times other than Christmas, or namely, a number of avid male game players, who are earning a living and have relatively more disposal income, were making these purchases. Of course, many Nintendo supporters, regardless of age or gender, also responded to our offers from the beginning.

After the markdown, the first thing we noticed was the increase in the number of purchases by children, followed by female consumers. Such changes can be clearly seen through our Club Nintendo data. Also, we launched the new “Misty Pink” hardware in Japan the other day, which must have been awaited by many female consumers. When it comes to the composition of the Club Nintendo registrants, there are more male consumers than female consumers to some extent. Yet, those who have registered with the Misty Pink hardware are predominantly female. Perhaps, more than three-quarters of all the purchasers (of the Misty Pink colored Nintendo 3DS hardware) are female. When it comes to the software which was most commonly purchased with the other colors of the Nintendo 3DS hardware, “Legend of Zelda: Ocarina of Time 3D” is ranked number one. As for the Misty Pink hardware, “nintendogs+cats” is the software which was most often purchased with that hardware. So, the trend for this color is very different. Also for example, “Professor Layton and the Mask of Miracle,” is ranked highly, too. So, the consumer preferences have started to expand in wider directions. The same trend that the product is starting to be purchased by female consumers and a younger demographic can also be found in Europe and in the U.S. Having said that, however, there are typically only a few opportunities for (the majority of) children to be able to obtain a video game system such as birthdays and holiday gift-giving seasons, and as for Japan, the Japanese New Year holidays, when parents and relatives give money to children. Therefore, we have yet to see a massive purchase movement by that age demographic. However, we have come to know through various kinds of qualitative and quantitative research, that the number of children who would like a Nintendo 3DS system as a Christmas gift is rapidly increasing, and this is one of the factors with which we can now look forward to strong year-end sales.

As for your next question, I can understand the sentiment that, while the Japanese market can look forward to “Monster Hunter 3(Tri)G,” the overseas markets do not have such a title and the two Mario software titles alone may not be able to appeal to a sufficiently wide consumer base. On the other hand, I feel that this sort of question is often asked only in Japan.

To give you some background information, I understand that Mario had a rather childish image in Japan. I recall that it was my second year as the president of Nintendo, when we did research on Japanese consumers which showed us the result that they have this childish image of Mario. Of course, we really appreciate the fact that our characters are loved by children. On the other hand, it does not make us happy if adult consumers say that Mario is childish. They felt that our products were too childish to be relevant, which was the issue we needed to work on. I believe that the situation surrounding this image has largely changed. Initially, our research in Japan suggested that 3D Mario was childish but that the original 2D Mario, who was drawn in the NES era as a group of pixels, was cool. The company tackled this issue in various ways at such occasions as the 20th anniversary campaigns for the Japanese launch of NES and by the reintroduction of the original “Super Mario Bros.” game for Game Boy Advance. Such efforts led to the smash hit of “New Super Mario Bros.” for the Nintendo DS. This title became the first huge-hit Mario game in a while in Japan since the original “Super Mario Bros.” game. From this sales result, we can say that Mario has become a franchise which can be accepted by both adults and children.

These graphs are from the slides used at the Financial Results Briefing on May 8, 2009.
However, there still is an age group which shows less support for our offers in Japan, and they are male junior-high, high-school and college students. So, when you look at the age-demographic charts of our consumers in Japan, it looks like the back of a two-humped camel. Namely, there is a significant number of users in the children’s age demographic but a dint in the high-school and college student age groups and then the number of our consumers increases once again in the adult demographic. “Monster Hunter 3(Tri)G” must appeal with great affinity to that group of consumers, and I believe you can appreciate that. Now to your question of, “Will Nintendo be ok without a title that is the equivalent of Monster Hunter in the overseas markets?”, I should first confirm that there is not such a dent in the U.S. and Europe.

In other words, the phenomena that consumers show less interest in Mario during their junior-high, high-school and college years can be observed only in Japan. Of course, adding software which is inherently different from Mario games must add to the solid software lineup for the Nintendo 3DS in the upcoming year-end sales season, but since Mario action games and the Mario Kart series have been welcomed by most age demographics there without the similar dents as in Japan, I do not think that the overseas sales will not go well because of the absence of a software title like the Monster Hunter software. In Japan, regarding the age demographic (to which Nintendo has attracted less attention than other demographics), Nintendo software and Capcom’s “Monster Hunter 3(Tri)G” will supplement each other in order to generate strong appeal overall, while in overseas markets it’s our expectation that the two titles of “Super Mario 3D Land” and “Mario Kart 7″ will be widely accepted in terms of age demographics. Needless to say, we are making efforts to prepare a wider software lineup, including software with a charm not typically provided by Nintendo, in order to satisfy the needs of many different consumers. Please understand, however, that if anyone has the notion that the absence of Monster Hunter will create a less enthusiastic market condition in the overseas markets than in Japan, it is different from my belief.

 

Iwata on the lack of third party support for 3DS and how that is changing.

As a matter of course, it requires more time to develop such titles. Since in Japan, the importance of software for handheld systems among the entire video game business is larger than that for home console software, handheld software is the main battlefield for Japanese publishers. On the contrary, for the U.S. and European publishers, software for home console game systems is the main arena. Therefore, putting a higher priority on spending development resources and allocating teams to the development of software for handheld game systems can be decided only after a decent market is created for the handheld hardware. If the Nintendo 3DS had been able to sell a lot more in the beginning, third-party publishers would have announced by now which software they would launch. But due to the slower-than-expected sales start, everyone was in a wait-and-see mode. The situation is starting to change, and (after they see the results of the year-end sales season,) there will be more changes from next year and beyond.

If I may add one more remark in this regard, about the quality Nintendo 3DS software made by Japanese software publishers, this is the great opportunity for them to expand their market to outside Japan. Nintendo has been creating its software in Japan but these software titles have received strong support in various markets around the world. I think one of the very important jobs of Nintendo is to identify the third-party software made in Japan which, we believe, will have a strong affinity with the tastes in the overseas markets and, thus, have a strong market potential there, and we will collaborate with them to make these titles into hits. So, with these different efforts, we would like to enrich the software lineup for the markets outside Japan as well from next year, which will become one of the contributing factors for our improved profitability in the next fiscal year.

 

Iwata on proving 3D is great for games

First, regarding your question on the compatibility of games and 3D, please first play “Super Mario 3D Land” and “Mario Kart 7.” I am looking forward to hearing your impression after playing these games. Of course, not 100 players out of 100 will say that 3D is wonderful. But we have confidence in these two titles, and we believe that majority of people will realize how 3D viewing can be used in video games.

Having said that, however, if anyone asks, “Shouldn’t these titles have been at the hardware launch?,” we cannot disagree at all. I mean, since we were offering the world such unprecedented things as 3D gaming, we needed at least one of such titles at the launch of the hardware. But we failed to offer such a software title at the launch, and as a result, because it (the attractions of 3D) cannot be understood unless people have hands-on experiences, such comments as “I hear it is tiring on your eyes,” “I hear it gives you a headache” or “it is said to be bad on your eyes” prevailed more than the real appeal of the products (among those who had not played the Nintendo 3DS yet). We could have done a better job in this regard. However, now that such software titles will be launched in the year-end and New Year seasons, we believe the value of 3D will be appreciated more. Also, since 3D viewing varies for each individual, the existence of the 3D Depth Slider will enable them to adjust the intensity of the 3D settings to their liking.

Being able to anticipate future technologies and trends is, in a sense, a “lifeline” for Nintendo. If the company actually lacked this ability, Nintendo would not survive. We would like to make further efforts so that we will be able to receive a positive response from the public.

And, when someone says, “Nintendo must have been late in riding on the trends because it was unable to foresee the emergence of the social gaming era,” there must have been a mixture of several different things in their minds, such as, “”Nintendo is not producing so-called social games” and “dedicated gaming devices may or may not be necessary now that smartphones have this huge installed base” and “Nintendo appears to have been unable to take advantage of social networking services so far.” Taking this opportunity, I would like to explain what kind of stance Nintendo is taking regarding these questions.

One impression we have as a result of reading articles on Nintendo recently is that these articles are confusing the effect of social games and the effect of smartphones and discussing them together although they are two different subjects which must be discussed separately. For example, the majority of social games, which have expanded in Japan, are not available on smartphones today. The fact is, the majority of such games are played on multi-functional cell phones that we Japanese often and uniquely call “Galapagos Cell Phones” or, more recently, “Feature Phones.” It appears these two different devices are mixed together in their arguments.

Regarding the effect of so-called “social games,” it seems that so many people believe in the causal relationship between the decline in Nintendo’s business performance and the rapid expansion of social games just because these two events have happened simultaneously. On the contrary, we do not believe that they are a big factor in our slower performance today. Since I have repeatedly explained about this in this type of opportunity (*), I do not intend to repeat the same explanations but, as we continue our research even after making such an explanation, we have never found any research data which show any meaningful differences in the attitude towards or in the frequency of playing with the Nintendo’s handheld game systems as a result of playing with social games. Accordingly, we have to think that there are no causal relationships. Game businesses are largely affected by the availability of a hit title. At the upcoming year-end sales season, where we have multiple software titles which have the potential to become hits one after another, we believe that we can pull the trend to our side. We really want to show a year-end sales result that can more effectively communicate to a number of people that the growth of social games has no causal relation with Nintendo’s performance.

Next, about smartphones. Smartphones in Japan have entered into a cycle of rapid expansion this year. In the U.S. such a trend was found earlier. Among younger generations in particular, smartphones have become the contemporary must-have items, and it has become rather common for us to switch to smartphones at the time we need to exchange our existing cell phone for another. With smartphones, you can play games without purchasing a dedicated game system, and these games are offered either free of charge or at extremely low prices. In this regard, there is no doubt that the bar has been raised higher than before for us to encourage consumers to spend several thousands of yen for a video game in Japan.

However, approximately a decade ago, a number of people used to say exactly the same thing. Namely, they said that, with the ability of cell phones back then being able to run a variety of software applications, dedicated handheld game systems would not be purchased any more. The fact is, their forecast has not become a reality. This time, the basic structure is the same. Nintendo has been recognizing that video game systems are something that consumers are obliged to buy in order to play with the software they want to enjoy. Therefore, the most critical thing for us is to periodically propose software that can encourage people to have the mindset of, “I really want to play it.” The circumstance surrounding us has not changed in this regard. On the contrary, we now have a means to communicate our information rather effectively to our consumers directly. So, as I said today, we are currently considering how we can best take advantage of this media, and our attempt to put Nintendo eShop on the Web is one of such efforts.

As for the opinion that game dedicated handheld devices are not needed any more as long as you have a smartphone, I cannot say that no one holds such a belief; however, the results of our research have not shown any meaningful differences between the game play attitudes of consumers that do own smartphones from those who do not. Accordingly, as long as the Nintendo 3DS can offer gaming experiences that can not be realized on smartphones, and if they are attractive enough, we can ask our consumers to purchase the Nintendo 3DS. The important thing for us is to make these proposals by taking advantage of our position of being able to make unique offers based upon the integration of both hardware and software as we are making both.

So far, as I have made these explanations based upon Nintendo’s own research, I was concerned that you might not feel that they have strong credibility. Accordingly, I would like to introduce you to some different data (which was reported to us from Nintendo of America) today. In the United States, there is an organization called the Entertainment Software Association or ESA for short, which is similar to what CESA (Computer Entertainment Supplier’s Association) is in Japan. They are the industry body for a group of entertainment software developers. Every year, ESA conducts a survey regarding interactive entertainment hardware and software. What you can see now is some of their research results of this past April, showing whether or not people are playing more video games in comparison to three years ago. The darker blue represent the people who play more than three years ago, and the consumers represented by the lighter blue answered that they play less than before. The top bar labeled “Total” indicates the total number of people who answered this survey. There were about 1,300 people. The second bar, “Dedicated Console” means such home console game systems as the Wii, PlayStation 3 and Xbox 360, and about two-thirds of the total respondents fall into this category. The next bar is “PC” which most of the respondents own. The next one, “Dedicated Handheld,” means such portable game systems as the Nintendo DS. The “Wireless Device” beneath it includes iPad and iPod touch (with which you can play video games by connecting the device to Wi-Fi networks.) The bar at the bottom, “Smartphones,” are such devices as iPhone and Android. (Approximately one-third of the total respondents are included in each of “Dedicated Handheld,” “Wireless Device,” and “Smartphone” categories. Answers from the owners of multiple devices are reflected in each of the applicable groups.)

Here, I’d like you to note that, when it comes to the percentage of people who play with games more than three years ago, the biggest increase is found among the owners of dedicated handheld game systems. Isn’t this reality rather different from the impression you had? For your information, in this survey, the question was about whether or not the respondents played games on the subject device more. Please note that a number of the owners of systems in the “Dedicated Handheld” bar must also own home console game systems because, in the United States, more home console games, which are played in front of large TV screens, are played than handheld games. (In the U.S., where the expansion of smartphones is taking place more rapidly than in Japan,) survey results which oppose the generally-conceived idea that “there will be no more demand for dedicated handheld game systems” are found here.

In the same survey, another question, “how many software titles are you planning to purchase this year?” (as of April this year) was asked. Those who answered “three to five” are identified with light blue, while the dark blue answered “six or more.” Once again, the owners of the “Dedicated Handheld” group intended to purchase the largest number of software titles. As I said, a number of dedicated handheld owners must also be the owners of home consoles. They are actively playing with both kinds of dedicated game systems. The survey result does not support the generally-conceived notions that, now that the digital age has come, people are buying less packaged software for dedicated video game systems and that they will be willing to buy less of them from now on. Overall, there is no doubt that the importance of digital business is increasing in the industry. However, the situation is not as simple as that the packaged software sales will decrease and digital distribution will increase or that the lifespans of dedicated game systems are coming to an end and general-purpose devices are the future. Our consumers are not showing such a trend. What the industry will look like 20 years from today may be a different story. But as far as the ongoing trend is concerned, I do not think that our understanding of the overall game industry and consumer attitudes is greatly different from the reality. I thought that the survey results I have just shown you could prove our point, so I used this opportunity to share them with you.

Iwata talks lacks of 3G on 3DS

Since Japan is a highly-populated small country and Tag Mode for Nintendo DS caused quite a stir several times here, many people have had a chance to experience StreetPass. You can let up to 12 software titles use StreetPass simultaneously with the Nintendo 3DS, unlike Tag Mode of the Nintendo DS, where it had to be in sleep mode with a compatible software title activated, and therefore you can enjoy StreetPass with a variety of software titles. In our recent Nintendo Direct presentation, I introduced a downloadable software title “Hu-Stone” (Japanese title) by POISOFT, a development company with only four staff members, and they said that even small developers now have a chance to take advantage of StreetPass. StreetPass is already taking place even for the software without established franchises in Japan, which is what we have been eager for. As the Nintendo 3DS will have a more substantial installed base after the upcoming sales season, the chances for StreetPass will increase at an accelerated pace. On the other hand, we know there are some concerns that StreetPass communications could be rare in the U.S., which has vast national territories and is dependent on automobiles, because less people use public transportation services, like trains or buses, than in Japan. Since we understand that people usually become greatly interested in StreetPass once they have experienced it, we need to somehow let as many people as possible try it. So we have to actively hold promotional events where people can gather and experience StreetPass. When we published “Dragon Quest IX: Sentinels of the Starry Skies” for Nintendo DS overseas, some events were voluntarily held by fans and others were organized by Nintendo, and people who got together there were very impressed when they experienced the Tag Mode communications for the first time. There will be more opportunities for StreetPass with the increasing installed base of the Nintendo 3DS, and a fairly significant number of people will probably experience StreetPass in shopping malls in the year-end sales season. Just one encounter will make people more frequently go out with their Nintendo 3DS systems, and we hope it will create a virtuous cycle.

It is true that, unlike a 3G function, StreetPass is limited in that it cannot happen without someone being nearby. However, the limitation and the charm of StreetPass are inextricably linked, and I think that users feel some excitement by realizing the fact that they have shared the same time and place with another person. Therefore, we do not see it (the fact that you must be in close contact with others) as a disadvantage when StreetPass is compared to 3G (which can be done anywhere). Rather, we would like to promote this unique advantage and excitement that StreetPass provides to users.

Iwata talks digital content

We see digital content from two different views, as a platform holder and a software publisher. As a platform holder, each publisher or content owner should be responsible for the quality of its own content. For example, evaluating the quality of each video provided by Netflix or Hulu is not realistic for us. We believe that they are more specialized in such a field than Nintendo. We will supply content distributors with a platform, and we will provide consumers opportunities to access various content. And among the content-distribution services, it is natural that the ones where consumers can most easily find the content they want will become the most popular and the others will gradually fade out. Therefore, we should entrust the quality control of content to each distributor or content holder.

As a software publisher, on the other hand, we are naturally so particular about the quality of the software published under the Nintendo name that we are making our best efforts not to offer disappointing software to consumers. As there is no accounting for tastes, it is not realistic to promise that all of our products will completely satisfy everyone, but we strictly control our products anyway so that none of them fall far short of consumers’ expectations.

At the same time, we have the player reviews at the Nintendo eShop that I referred to in my presentation. One of the unavoidable challenges with video game reviews on the Internet is that you cannot easily tell ones posted by people who actually played the game from other ones which were written by people who did not play the game. In contrast, player reviews combined with a platform, like the system at the Nintendo eShop where only those who have played the subject software for one hour or more are eligible to cast one vote and some titles receive tens of thousands of reviews (per title), so they are likely to reflect an overall consensus of the actual players of the game. We would like to make these reviews more visible to consumers and, as I mentioned in my presentation, we would like to also make Nintendo eShop accessible on the Internet through various web-browsing devices, not exclusive to the Nintendo 3DS. By heightening the retrieval performance and recognition of this sound review system, in a different way, we hope to respond to your opinion that the quality of content must be strictly controlled.

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