Nintendo of Japan has translated the full Q&A from Nintendo’s investor meeting. There are a lot of cool stuff in here and I will pull out as much as I can.

All comments come from Mr. Iwata

Nintendo willing to spend to make third-party support happen

We think it very important to make several hits from the third-party software publishers within the first year from the release of the platform, while offering Nintendo software seamlessly. In order to achieve this goal, we have shared information about the new hardware with the software publishers earlier than we did previously and built a cooperative structure, and we are developing several titles in collaboration with these publishers. I cannot talk in detail about the names of the titles, or with which publishers we are currently collaborating, because we have not announced this information yet, but what we are aiming for with the Nintendo 3DS and the Wii U is, platforms which have much more software and a wider variety of software than the former Nintendo DS or Wii. Therefore, we are thinking of creating an environment where software from other companies will become hits. Please understand that Nintendo is prepared to invest in order to make this a reality.

Nintendo creates family friendly content but welcome mature content.

CERO is a Japanese organization, the official name of which is the Computer Entertainment Rating Organization. There is a rating system for movies which provides advice such as “People younger than a certain age should not watch this movie,” “This movie should be watched in the company of your parents” or “This movie is only for adults,” and we have a similar rating system also for games, which rates the games based on facts such as “Are there any violent expressions?,” “Is too much blood spilled?” or “Are there any sexual expressions?” Specifically, there are five categories in the CERO rating system: “A” is for all ages; “B” is for ages 12 and older; “C” is for ages 15 and older”; “D” is for ages 17 and older and “Z” is for ages 18 and older. The “Z” rated games can be sometimes restricted under law or regulation, and cannot be sold at retailers. There is a similar organization in the U.S., called ESRB, which is a rating system ran by an industry group, and in this organization, there is a category called “M” which stands for “Mature,” or “AO” which stands for “Adults Only.” The games that fall under these categories are also restricted in the same way when game elements are too extreme and may be regarded as not suitable for children.

I have understood your question as, “how will Nintendo cope with games rated higher than “C” from now on?” Of course, it is natural that Nintendo will mainly offer games rated “A” or “B” or, in other words, games which can be enjoyed by many people in society, and some good examples of such games are “Super Mario Bros.” or “Pokémon.” If we do not develop such software, Nintendo will not be Nintendo anymore. But it is also true that if only such software is provided for Nintendo platforms, adult users may think it is “childish” or “something we cannot enjoy.” As a result, we are clearly distinguishing the products which are rated higher than “C” in the retail stores. From the beginning, CERO rating marks, such as “A,” “B” or “C,” have been displayed on the cover of the packaging, but it is only a small part of the overall packaging. What we are currently doing with the Wii and some other consoles is changing the base color of the packaging from white to black for games rated higher than “C,” and by doing so, we are announcing “these titles are clearly different.” At the same time, by asking the retailers to completely separate the selling spaces, we would like to avoid a situation in which such products cannot be released for Nintendo platforms.

Core gamer to accept motion controls. Talk about 3rd parties on Wii U.

Putting aside whether people who enthusiastically play games are definitely conservative or not, it is true that such people are used to playing games with a controller with many buttons and sticks, so I can imagine there was a psychological barrier for them to “shake the remote” or to “move the controller itself,” because they had to play the games without using their former skills. We analyzed that this might be one of the differences which existed between the users who accepted the Wii console and those who did not really accept it overall.

We can divide the reasons why we could not satisfy some consumers (who did not really accept the Wii overall) concerning the Wii, into two points. One was the image quality. At the time when we released the new gaming console back in 2006, HD, or high-definition TVs, was not so widely accepted in society, and we judged that the balance between the cost we would have had to pay in order to realize beautiful high-definition images and the merits we could gain from doing so was not worth it. That is why the Wii was developed based on the resolutions of old TVs, which made it inferior in terms of quality of the graphics or resolutions compared to other gaming consoles. Instead, Nintendo allocated its resources to other points and renovated the user interface. By providing entertainment products such as the Wii Remote or Wii Balance Board, we were able to make many people (who did not previously play games) game players.

It is not that our decisions were wrong, but it is just that we made these choices. So, one point was the graphics, and the other point was that this new method of game control was not welcomed by the users who were used to the conventional controllers. One of the concepts for the Wii U is “Deeper and Wider,” and for “deeper,” we mean that we would like to comply with the request of the users who feel that they want to enjoy the games in more depth, and also feel like “The more beautiful the images are, the better,” or “I want to play games in a way that I am used to,” which means “I prefer controlling the games using many buttons and sticks.” Because we wanted to make it possible for such users to utilize their experience with the conventional controllers, there are many sticks and buttons on the Wii U controller, which I have shown you several times today. On the other hand, although it is not as big, bulky or heavy as it may look at first sight, there still might be people who feel psychological barriers to actually holding this controller, so we are currently discussing what we should offer such people.

In addition, you indicated that Nintendo might not have HD video game know-how because we have never developed such games. However, there was a scene from “Zelda” included in the latter half of the Wii U introduction video. This scene is from demo software we, in cooperation with a development company, created in a relatively short time before the E3 show, but a person from another Japanese software development company saw this video at E3 and commented, “These kinds of images cannot be easily produced on the gaming machines of other companies,” and so we believe we have been able to prepare something, and the quality of which can be appreciated to some extent or more. Because we did this in a relatively short timeframe, we could show that we are not completely behind other companies, so I think you do not have to feel anxious about it.

However, I do not think that the Wii U will be in widespread use all over the world only with Nintendo software. Currently, in the western countries especially, war-themed gun-shooting games, which are not well-received in Japan, are very popular. It is a reality that some of these games sell 10 million units per year in those markets, and this is one valid type of video game genre. I would personally feel sad if all video games became something like that, but on the other hand, I do not think such games should disappear. Both (Nintendo software for everyone and gun-shooting games) are video games, so our aim for the Wii U is for it to be a console where various people can enjoy what they want to enjoy at their own discretion. Therefore, we have been talking to major overseas software publishers who are good at developing such games, and through our communication, we have received very positive comments from them (on the development on the Wii U). So we believe such software publishers will proactively develop software for the Wii U, and we think we can dispel the concerns you mentioned earlier by the time of its launch.

Making Wii U and 3DS hits – More Software for 3DS would of helped with that.

Regarding your question, “What will we do if the Wii U does not become a hit product,” we will put in our best effort to increase our overall hit product rate, but because this is something done by humans, so I cannot say, “All of the things that Nintendo create will 100% become hits.” If I say that, it might become a lie, and I do not want to lie to you, so I would like to answer your question by saying that we will do our best to improve the hit product rate. Also, it would be appreciated if you could trust us in a way like “The hit product rate of Nintendo is relatively high,” by looking at the past achievements of Nintendo’s top management. However, I think you are absolutely correct by saying, “It is difficult to recover if it fails to sell in the first place” and “When an understanding of something is commonly shared, it is hard to change it,” which you mentioned earlier. We are recognizing that these are very important points.

Therefore, we believe that there were also external factors, but if we had have launched the Nintendo 3DS after we had prepared more software by which the users felt “I want the Nintendo 3DS right away!,” the transition of the sales of the Nintendo 3DS would have been better. You pointed out that our preparation was lacking in that regard, and we ourselves understand that is a point we have to reflect on.

On the other hand, ideas such as “If we develop a product in the way we initially planned, it will certainly be an enjoyable product” cannot be said for entertainment products. Only after developing the product to some degree and actually touching it, we can notice that “This would be more enjoyable if we made it in this way,” or “The fun element of this part is somewhat interrupted by other things.” A part of this is known as Mr. Miyamoto’s “upending the tea table,” but we sometimes request changes in the specifications at the very end of the development stage. This does not mean that we do not care about the schedule, but the most important thing for us is that majority of the people who have bought and experienced Nintendo products feel, “This is actually fun.” If this does not happen, our brand will quickly fall apart, so we are doing this in order to maintain our brand. But because we are doing this, we cannot constantly provide the market with big hit titles. We also must reflect on the fact that we were not able to launch Nintendo 3DS at a time when a sufficient number of strong software titles were ready. In order to avoid the same thing from happening to the Wii U, we are considering details, such as what software is suitable for the launch, more carefully than ever before.

Talk about the reaction to the Wii U – Similar reaction happend with Wii and DS.

When we announced the Wii U, I felt that the reaction from the crowd was very good. It seems that the excitement in the venue did not fully transmit to people in Japan who saw the presentation via webcast, but I think our presentation was one of the best presentations we have ever done in terms of receiving a solid response from the audience. In addition, I was interviewed by many foreign media there and about half congratulated us at the beginning or the end of the interview. Every year, for 11 years, I have attended E3 but I class being congratulated by half of the reporters as an extremely good result. On the other hand, recently, many of the media outside of the U.S., do not send reporters to E3 as they had done before. For Europe, I felt the same tone from Japanese articles too, and there was a great difference (in tone) between articles written by media where a reporter had come to the show, and articles written by media where a reporter was not sent there, and the articles were written using other information such as from the Internet. There seems to be a great difference in understanding between a person who saw the product with their own eyes, experienced the excitement around, touched the product and thought “Wow,” and a person who only saw the presentation on the Internet and thought “hmm.” From this difference in understanding, people in the stock market responded with, “Wii U doesn’t seem innovative” or “I don’t think Wii U will sell as well as the Wii,” and that caused the decline in the stock price.

Also, people at the event have commented very positively, and even many members from our industry commented, “We would like to develop games actively because this platform has great potential.” So to speak, it was highly appreciated at the E3 show, but the value was not correctly transmitted to places far away. The fact that we were not able to fully transmit this positive appreciation is something we need to improve on. If there were no value (in the Wii U itself) we would need to re-develop it so that it had value, but people who actually saw it recognized the value and, therefore, I think “how to transmit the value” and “whether we can meet the expectations” are the real challenges we are facing.

Having said that, however, I would like everyone to recall the reactions right after we announced the Nintendo DS, or the reaction right after we announced the Wii. I do not think many people praised the Wii or the Nintendo DS right after their respective announcements. Especially with the Nintendo DS, I felt that the dominant reactions were just like, “It seems like Nintendo is saying they will have two screens on a handheld console! Are they all right?” and “What are they going to do with this way out stuff?” Even for the Wii, the responses were, “The remote can be used for new gameplay, but what else can you make with this?” or “Is this going to sell in the home console market at all?” This time, I heard a very interesting comment from a Japanese analyst. “Actually, it (the reaction to the Wii U) was mixed, but I don’t think having pros and cons is a bad thing. When there is something new, the pros and cons are always debated.” I understand from a stock price standpoint that the current situation is not satisfactory and I am also unhappy with the situation as a shareholder that has 5,100 stocks. I sincerely understand that many shareholders are attending this meeting today to express the feeling “Do something.” On the other hand, what we should be doing, and my main responsibility is to complete the development of the good value of Wii U, which has been appreciated by those who have had hands-on experience, launch the product next year and make it a product that sells even better than the Wii.”

I understand you are very much concerned about the situation, but I would like to ask for your understanding that, as for the Wii U, I am proceeding with confidence that we can shape it so that many people will enjoy the product.

Creating software that everyone enjoys. Using Nintendo tech for education and 3DS for museum tours.

There are two aspects of the suggestion “there should be software which adults can enjoy further” that I would like to touch on. One is that even though such software titles already exist, we have failed to make them widely known. And second, because games were originally entertainment mainly enjoyed by children or young men, even though we have been working hard to expand the age range and offer entertainment which can be enjoyed by a wide range of people, we still have more work to do. If I understand your request correctly, you want Nintendo to develop games which fulfill people’s intellectual curiosity by combining culture and entertainment in a clever way, so I would like to consider it as a future challenge for us.

I understand that your second question was, “By using the technologies of Nintendo in a good way, is it possible for you to eliminate the need to carry around many heavy books, by making textbooks electronic?” Or, it was probably more of a suggestion that, if we go one step further in the computerization of textbooks, “Isn’t it possible for Nintendo to make study itself more fun by using its technologies?” Nintendo is involved in a project called “DS Classroom,” which uses the Nintendo DS system. With this system, the teacher uses a PC while each student has a Nintendo DS. Tasks are sent from the teacher’s PC to each Nintendo DS, enabling each student to tackle tasks at his/her own pace and interact with the teacher. Each student’s results are automatically calculated in the teacher’s PC, which makes it easier for the teacher to evaluate the progress of each child. This system has been very well-received by the teachers who have started using it. However, it can be difficult to use gaming devices in places of education because some educators believe that video games are things that children play with that interrupt their studies, so there is a certain hurdle for us to overcome in order to work cooperatively in the educational fields. Therefore, keeping in mind that some people who believed that “video games = a waste of time” changed their minds when they played software such as “Brain Age” or “Wii Fit,” we would like to increase the number of people in the field of education who can think of ways of utilizing our technologies or know-how by combining education and entertainment in a beneficial way. To that end, I think the most important thing is to produce good examples, so we would like to work towards that.

In addition, you referred to a “universe” theme. I interpreted it that you are asking for the possibility for us to create more things that “fulfill people’s intellectual curiosity,” but not only their curiosity about the universe. Now this is just an example, but we have been discussing internally in the company how we could make use of Nintendo 3DS to offer the realistic experiences of visiting various museums worldwide. I believe that if we could offer something like this in the future, I would be able to answer your request to a certain degree.

On 3DS acceptance

First, talking about “3D images,” various 3D images exist in our world beyond those of the Nintendo 3DS. If you visit an electronics store, there are TVs which offer 3D images by using special glasses, and it is very popular to enjoy 3D movies by wearing glasses at the movie theatre. The variety of stuff that can be seen in 3D will continue to increase beyond what is possible today. Regarding these 3D images, the technology used in the Nintendo 3DS, the technology used in movies, which requires glasses, and the technology used in TVs are all slightly different, but the basic principle is very similar. The users can experience a stereoscopic effect because different images are able to be delivered to the left and the right eyes. It is not our eyes but our brains which make us feel the stereoscopic images. Accordingly, the topic of discussion about 3D viewing is not a possible effect on our eyes but on our brains. Such comments as, “It’s bad for your eyes” or “your eyes get tired” have wings, so much so that some people appear to have the impression that viewing a 3D image is not good for their eyes, but what has been discussed here is whether there are any negative effects on the development of the brain.”

Until now, a number of movies have been viewed in 3D, and I have heard such comments as, “My eyes got tired” or “I experienced a headache.” I suppose you have also heard the same stories, but there are no studies saying that these symptoms have any negative effect whatsoever on children’s eyes. Also, taking into regard the fact that 3D movies are widespread in the U.S., which is a country well-known for litigation, any such negative effects would have had caused a huge debate over there but, as I see it, it is not happening.

In the case of a nine-year-old child (who was mentioned in the question), the stereoscopic view function in the brain has been said to be already matured, and as for even younger children who are in the development stage, the well-accepted academic theory is that in many cases the functionality of stereoscopic viewing will mature in the brain when a child is about five years old or younger. We have carefully taken the individual differences in a child’s maturation into consideration and, because nobody appears to have the information to declare that it is definitely safe to show 3D images to young children aged six and under, we decided to proactively encourage consumers to take care when children aged six and under are using the device. I understand that not very many companies make statements such as, “Our products have these features, so please be careful,” but we thought we should do this. Also, since video games are a type of entertainment which can be played by children for a long period of time without their parents’ supervision, we have decided to communicate the message that “we do not recommend the viewing of 3D images for users who are aged six and under.” However, this recommendation was somewhat blown out of proportion, and there are some consumers who think, “3D images are not good for children’s eyes” and as in the shareholder’s example, “even a nine-year-old child shouldn’t see 3D images.”

Also, there seems to be large individual differences when it comes to the most comfortable parallax and viewing distance for 3D viewing. Even with a very large stereoscopic depth effect, some users say, “I do not feel tired at all. In fact, I feel it is more dynamic at this depth, and I like it.” On the other hand, some say, “I get tired when I see intense depth effects.” We considered these differences at the development stage of the Nintendo 3DS, and implemented the “3D Depth Slider” in the right-hand side of the screen. By using this feature, the users will be able to adjust the 3D depth at anytime to a level that is most comfortable for them, and we have also been communicating the message, “Please adjust the 3D effect to your most comfortable level by using this function” to the public, but I believe there is more room for this communication effort.

So far, only 1.2 or 1.3 million Nintendo 3DS systems have spread throughout Japanese society, which means that this product is yet to be sufficiently recognized in this country. We have been trying to communicate to the public to increase the awareness of such functions as the 3D Depth Slider and, also, Parental Controls, by which parents can disable the 3D effect for younger children unless they enter a PIN code, so that even if a child moves the 3D Depth Slider to the strongest level, he or she cannot see the 3D images. Hearing this comment from a shareholder right now emphasizes the importance of our continued communication efforts. By widely communicating these two points: one, “In most cases, regarding 3D viewing, users can maximize comfort by using the 3D Depth Slider,” and two, “Parents who have a concern over any possible effect on the growth of their children’s eyes, which is more accurately the growth of their brain, should use the Parental Controls feature to restrict their children’s access to 3D images,” I think we will be able to dispel the harmful rumors, such as “you cannot buy this or play with this because 3D is not good for your eyes,” which was raised in this question. We are also aware that the Nintendo 3DS will not become widespread unless we dispel such rumors. We are trying hard to communicate these messages to help people have an accurate understanding.

Why it takes some long to get a system from announcment to release.

The situation, “Even if a person thought it was amazing at the time of announcement, the excitement fades six or nine months later,” may also be felt for the Wii U. If Nintendo could maintain the platform without anyone else’s help or use past assets without any change, for example, enhanced graphics along with 3D view when Nintendo DS software is played on the Nintendo 3DS, then we could keep silent in the preparation of the platform and then announce, “We will launch it tomorrow, please buy one.” However, unfortunately, we needed to have software newly developed for software that uses 3D, beautiful graphics or new communication functionality on the Nintendo 3DS. This applies not just internally within Nintendo but outside of the company also.

In the past, when Nintendo did not receive as much attention as we do now, we did not have to worry about the spread of our confidential information since it did not have any value in society, but since the Nintendo DS and the Wii created a social phenomenon, “Nintendo’s next move” commands great attention and extreme news value. Therefore, although we go to great lengths to ensure that this will not happen, there are cases where, even if a person receives information under a Non-Disclosure Agreement, the information is leaked because there is great temptation. Even for the Wii U, some people may be aware, if they had been checking the Internet, that information with true and false rumors mixed together was spread on the Internet before the announcement. Therefore, as for new hardware, even if we wanted to, it is extremely challenging to realize a situation where a product is announced and then launched the next day.

On the other hand, as for software, it is often the case where the time between its announcement and launch is very short, but we sometimes receive complaints from our consumers such as “I don’t have enough time to consider whether I should buy one.” I would like to ask for your understanding that there is a great difference in the time span from announcement to launch between things that we need many people to be involved in, such as hardware, and things that Nintendo can do on its own (such as software made internally).

Nintendo recognizes the business opportunities in Asia

If you look at the global population, Japan’s population is declining, and Europe and the U.S. are increasing but not as much as Asia. In addition, Asia has higher economic growth and, considering that consumers categorized as middle class and above, or the people who have enough food and clothing, desire entertainment to enrich their lives, and the number of such consumers will be increasing on a large scale, I think it is necessary to expand our business in Asia. On the other hand, regarding conducting business in Asia, there are many discussions about whether what we have done in Japan, U.S. or Europe will really work in this market, or as you pointed out, to what degree consumers will accept our products in the current “copy heaven” environment. Therefore, that gives us more reasons to localize to the local language, understand the local culture and recognize what things the local people value and will pay money for. If we were selling daily necessities, it would be acceptable to make and provide cheaper and better things, but that is not the case for entertainment, and we would like to show our results after we research what entertainment local people will really enjoy. We are proceeding with investment, organizing teams and product plans to develop business in Asia since I think that this will be one of the most important fields in the next few years, and I believe I will be able to explain more about it in places such as business reports when we have specific details.

Comments on social/mobile gaming

In my previous answer today, I explained about such market concerns over Nintendo as, “Can Nintendo 3DS recover its momentum?” and “Is Wii U really a revolutionary product?” I think that there are two additional points to cover. One is the exchange rates, in which the yen’s rapid appreciation could have an adverse impact on the results of Nintendo because it has large sales in foreign currencies. The other is just what you have inquired about: how many people in the future will dare to buy Nintendo’s systems when they can play video games with high-performance mobile phones or smartphones? Also, how are the free games under the brands of Mobage and GREE by DeNA and GREE respectively in Japan affecting Nintendo’s business? I understand that they have adopted the system with which you can start their social games free of charge in the beginning, but you are required to make payments to play more conveniently or to advance in them. So, the concerns in the market in this regard are that there may be an adverse effect on Nintendo’s software sales due to such social games that can be played free of charge at the beginning and that Nintendo’s business model may eventually become outmoded.

It is a fact that Nintendo’s results once peaked and then started to decline at the same time that social games started to gather interest and win over many users. Therefore, a lot of people assume that there is a causal correlation between the two, and about 80 percent of economic articles on Nintendo seem to say that Nintendo is having a hard time due to social games. However, two things can happen by cause or by coincidence, and I think it very important to find out which is true. If there is a causal correlation, those playing both Nintendo DS and social games will play with Nintendo DS less frequently or become less likely to purchase Nintendo DS software. Because they will spend more of their disposable time and income on social games, there must be a meaningful gap of active use ratios of Nintendo DS if they also play games on their smartphones or play with the social games.

We conduct a semi-annual extensive consumer survey both in Japan and in the U.S. Because Nintendo’s basic strategy is to expand the gaming population, for us to make appropriate decisions it is necessary to know how large the gaming population is and how many people are playing with Nintendo DS, Wii or other platforms. During the survey, we have recently investigated the number of social game players and the influence of social games on the active use ratios of Nintendo DS. Please take a look at this graph. The top bar shows the entire number of Nintendo DS owners. As no less than 30 million units have been shipped to consumers in Japan, naturally some of them are not actively playing with it these days. You can see that about three-quarters of the total number of owners are still actively playing with Nintendo DS but the rest are not. The second bar represents those playing both Nintendo DS and Mobage or GREE, in which, as you can see, the active use ratio of Nintendo DS is, in fact, higher than that of the average Nintendo DS owner. This is a totally converse phenomenon to what many newspaper reporters and analysts are saying. I feel that the fact that, these days, Nintendo has not released software products on Nintendo DS that are as attractive to consumers as before has lowered the overall active user ratios and made Nintendo DS less represented in society and, just incidentally, Mobage and GREE have increased their number of users at the same time. The third bar is the paying users of Mobage and GREE, who represent only a small part of all users of them but pay for additional items and more convenience after starting free games. The active user ratio of Nintendo DS of such users is much higher than that of the average Nintendo DS owner. I understand that this situation is also contrary to the public perception. The only explanation I can find is that these users love games. They are spending more time both on Mobage or GREE and Nintendo DS. Then, those who play only free games are playing with Nintendo DS as much as the average Nintendo DS owners. What surprised me was the result that the active user ratio of Nintendo DS of those who do not play Mobage and GREE is a little lower than the average Nintendo DS owners. After all, it is not true that consumers are moving from Nintendo DS to Mobage or GREE as a kind of crucial social change. In addition, players of paid social games purchase more Nintendo DS games than average: 1.2 per year for an average Nintendo DS owner and 1.5 per year for a paying social game player. This is the situation in Japan.

Looking at the U.S. situation, Mobage and GREE have little presence there. It is said, however, that more and more people are playing games on Facebook, the world’s largest social networking service. Some analysts insist that those who once played “Wii Fit” are now playing with social games on Facebook, making Nintendo outdated, but I would like to show you data which negates this assumption. Let’s focus on the users 19 years old and over, as social networking services are basically for adults. The active user ratio of Nintendo DS is just short of 70 percent, a little lower than that in Japan, because this data does not include children, who are in fact more intensively playing with Nintendo DS. No difference is shown with Facebook users. In fact, the active use ratio of Nintendo DS is even higher among the Facebook users. The next bar represents iPhone, which is much more popular in the U.S. than in Japan, but there is no meaningful gap between those who have an iPhone or play games on iPhone and those who do not. The bar on the bottom represents smartphones, which means high-performance mobile phones other than iPhone, including Android, Windows Mobile and BlackBerry, but there is almost no gap either. In summary, I would like you to understand that, so far, consumers have not stopped playing with Nintendo DS because they are using these services or playing social games.

However, my intention of sharing all these data is not to say that we will be all right forever. Today, there are an increasing number of opportunities where people can see video games as entertainment which we can start free of charge. A free start is a powerful means of attracting many consumers, but it could be a drastic medicine with side effects. You mentioned “going too far” in your question, and what could simultaneously happen is the destruction of the value of video games. That is to say, consumers have thought that the money they pay equals the value extracted from, for example, “Super Mario,” which has helped the growth of the video game industry and made it possible for companies to develop elaborate games with rich user experiences for tens or hundreds of millions of people worldwide who are willing to pay for such games. Therefore, the concept “video games are basically free” could have a big impact on the industry. In the keynote presentation I was privileged to make at the GDC (Game Developers Conference) held in San Francisco in the U.S. in March, I said that video game developers should be increasingly conscious of trying to preserve the high value of the games they develop, or otherwise the value could easily be dragged down by low-priced or free ones, so all of us must be careful. Despite the complete text of the presentation being available on our website, unfortunately, many reported that Nintendo got angry about social games or criticized free games, and we have not been able to fully correct such distorted reports yet. Under these circumstances, anyway, the important points are how to innovate our business model and how to continue to develop games, and the value of which shall be appreciated by consumers. Naturally, for our core products like “Pokémon,” “Super Mario” and “The Legend of Zelda,” Mr. Miyamoto and I have to dedicate ourselves to leading our company and to continuing efforts to have consumers appreciate the value of these products. On the other hand, we understand that the current packaged form is not necessarily suited for any and all the entertainment products we will be making. As an example, Nintendo therefore built Nintendo eShop for Nintendo 3DS. At a past shareholders’ meeting, we received the opinion that Nintendo should improve the design of its digital software distribution shop, and I think that we made measurable progress with Nintendo eShop. Additionally, when Nintendo would like to ask users to try a specific new game, we should deliver it to their Nintendo 3DS, and possibly Wii U, with their prior consent and recommend that they just try it and, if they like it, they can pay for it. In this way, we need to introduce users to unknown products. Consumers are likely to be convinced to pay about 5,000 yen for a well-established franchise product, but not all the people are willing to pay a certain amount of money for an innovative but unknown product. Now is the time to prepare for these situations. We would like to respond to some of the concerns surrounding our business in this manner.

Connecting 3DS to Wii and Wii U blocks internet connectivity.

First, I would like to answer from the perspective of whether it is technically possible or not. I will say that it is technically possible. However, there are some limitations: While the Nintendo 3DS is communicating with the Wii or the Wii U, the Wii or the Wii U will not be able to access the Internet, and this technical restriction will remain unless we add some special hardware.

Also, as a second point, of course if we decide that using the Nintendo 3DS as a controller for the Wii U is the most obvious choice, we will do so without hesitation but, on the other hand, if software from Nintendo for the Wii or the Wii U system could not be enjoyed without the Nintendo 3DS, some consumers might feel that Nintendo is saying that consumers must buy both systems. So that consumers will not think of Nintendo as a company that made the Nintendo 3DS a controller because it wanted consumers to buy both hardware systems, we will not adopt this idea unless connecting the two systems is the most natural thing to do. As for connecting multiple gaming devices, we actually did this in the Nintendo GameCube era. We connected the Nintendo GameCube and the Game Boy Advance and called it “Connectivity.” Over a period of more than ten years, Nintendo has proposed similar entertainment features several times, and we received a certain level of response, but we feel that something like this that has a high threshold will not really spread among consumers. At that time, there were other problems, like a cable sold separately was necessary to do this, so we would like to think of it as a possibility now that the communication can be done wirelessly, but even if we should do this, we would like to develop this service so that we will not receive comments from consumers saying, “Why does Nintendo force us to buy both systems?”

Talking the difference between first party and 3rd party 3D visuals.

First, I would like to explain a little because not all people here own a Nintendo 3DS. The Nintendo 3DS attempts to communicate with other Nintendo 3DS systems even when the lid is shut and, when it finds another Nintendo 3DS, it will start communicating with this system. This communication is called “StreetPass.” There is a preinstalled application called “StreetPass Mii Plaza” in the Nintendo 3DS, and if you register your Mii, a portrait character which appears also in the Wii system, it will travel to other Nintendo 3DS systems. When a character from one Nintendo 3DS goes to another Nintendo 3DS, the user will be able to play two types of games using that character. One is a game to collect pieces of puzzles and complete some pictures by meeting different people. Another is an RPG-like game called “StreetPass Quest,” and in this case, by communicating through StreetPass with the same person again and again, his/her Mii gets stronger and becomes your strong ally. So if I understand what you said correctly, you have already enjoyed almost all of what can be done in these two games, so you have nothing to do now. To tell the truth, inside Nintendo is a very unique environment. Because there are so many people who have the Nintendo 3DS in the company, most of the people finished “StreetPass Quest” in such a short time and, as a result, many people are saying, “We want something new!” Even Mr. Miyamoto has been asking, “Does anyone have a plan for ‘StreetPass Quest 2’?” for several months, and several departments are currently considering such a possibility. Therefore, I cannot say when or what we can deliver, but we would like to change the minds of the people who are temporarily thinking, “I cannot see the point in carrying my Nintendo 3DS with me,” to make them think, “Oh, I want to carry it around with me again.” I believe we can proceed in a way that answers your request.

Also, concerning the difference in the quality of stereoscopic images between Nintendo games and games from other software publishers, there are actually some games from the third parties that make me feel that “This 3D is wonderful!” I feel uncomfortable about drawing a line to separate the quality level between Nintendo and non-Nintendo software because I was originally a developer (working for an outside company), but I have to admit that some stereoscopic images are high in quality but not all of them are. With that in mind, it is a fact that consumers purchase games with expectations of attractive stereoscopic effects, and to realize this, a certain level of know-how is required. Even for Nintendo games, I have heard that there was some trouble in the beginning (of the development) because the stereoscopic effect did not work well. So I have talked about this with Mr. Hatano, one of our executive directors, who is in charge of contacting our software publisher partners, and we believe that if we could provide them with effective support, we would like to do so. Providing such support will raise consumer satisfaction and, in the end, it will help the Nintendo 3DS to gain momentum, so I would like to consider it in that direction.

Nintendo 3DS Vs. Smart phones – Wanting to deliver content the smart phones can not.

Recently, many people who have been purchasing new mobile phones seem to choose smartphones over conventional mobile phones. This is a stream which mainly Apple’s iPhone created, and as a user myself, I of course understand what can be done on smartphones. I think that the reason why smartphones are highly appreciated is because they made it possible to do many things in the palm of our hands which could not be done without PCs in the past. On the other hand, if the Nintendo 3DS tries to compete with what smartphones can do or what smartphones are good at, Nintendo will have to compete head-on with the number of smartphones created and the numbers of the developers who are working on smartphones. Nintendo is not a company which has yielded results so far by directly competing with other companies in that way. On the contrary, we have made some achievements by finding new points which most people did not really pay attention to and showed that by changing only one condition, the value for consumers can change drastically, or by finding valuable things which only Nintendo can do, and by so many people all over the world accepting these ideas.

If we try to tackle every ten functions a smartphone has, our power will be split, we will be in a difficult situation in each aspect, and as a result, we might be on the back foot without pleasantly surprising our consumers. Therefore, we have to think about how we can make consumers feel that, even if they have smartphones, they still want to carry around the Nintendo 3DS with them. So, it is theoretically correct that, for example, if you added a GPS function to the Nintendo 3DS, you could create a 3D car navigation system with the Nintendo 3DS, but rather than putting effort on creating such things, we have to develop things which are “only enjoyable on the Nintendo 3DS,” things that can not be achieved on iPhone or other smartphones, and offer them. And, by the time smartphone applications take a part of the idea from, refer to or imitate such things, Nintendo will have had to have already proposed the next thing. A bright future can not be realized if things do not work in this way. I would like to strive to propose products or software which make even iPhone or other smartphone users feel that the Nintendo 3DS is worth carrying around with them.

On avoiding Wii U and 3DS software  drought.

I would like to explain about it in an organized way. First, in the first half of 2009, when the Wii lost its momentum, we could not offer new titles for a certain period of time. We ourselves have to reflect on this situation. We usually plan to release software in a way like, first we release this, then this and then that. But the development does not always proceed as it is planned. For example, if we feel that certain software will end up being boring if we continue to develop it in the same way, we will have to polish it. We sometimes change the content substantially, and in that case, the date of the release schedule has to be significantly changed.

In order to avoid such a situation, there are two points. One is “how to develop a steady stream of software internally at Nintendo,” and the other is “how to ask for the cooperation of other companies.”

As a matter of fact, at the times the Nintendo DS and the Wii were released, we could not make the software publishers appreciate our systems highly and count on them. At the time, Nintendo was driven to the edge of the ring, and it was said (in the industry), “It is a question of how long Nintendo can remain a hardware provider.” Regarding home video game consoles, the Wii was referred to by its development codename “Revolution” at that time, but it was openly written in articles that “Revolution will be the very last home video game system for Nintendo,” and reporters and analysts also said similar things to me directly. In such a situation, it is a fact that there were few developers outside of the company who were thinking “Let’s bet our business on it.” Both the Nintendo DS and the Wii were in such situations at the beginning, and the spread of the hardware proceeded mainly because of Nintendo software. After the hardware spread, in the case of the Nintendo DS, the software publishers started to move and said, “The Nintendo DS is selling well,” and “Let’s us join this stream,” which lead to several hits in the relatively early stages of the Nintendo DS. This made the software publishers believe that they could do business on the Nintendo DS, and good teams from each company started to work on Nintendo DS software. Because of this, many titles from third-party software publishers could be seen for Nintendo DS software.

Regarding the Wii, the lack of software was extreme only in Japan, and the situation is a little different in the overseas markets but, at first, we thought that time would solve the issues for the Wii just as it had done for the Nintendo DS, but this was not the case. As a result, the software publishers put some effort into creating some titles, but the sales did not reach their expectations on the Wii, which made them think that they could not have high expectations for business on the Wii. At that time, a title called “Monster Hunter Portable” was selling well on Sony’s handheld gaming device, PlayStation Portable. Only one title changed the whole momentum of that hardware, and because this all happened at the same time, the software publishers who were considering developing software for the Wii changed their minds and decided to make it for the PlayStation Portable. Because of this, when Nintendo failed to seamlessly provide software, there were no other titles to fill up the gaps.

In that sense, and this is common to both the Nintendo 3DS and the Wii U, we think that it is important to encourage the software publishers to think “This is a platform on which we can perform our business” in the very first stage of the platform. We think it very important to make several hits from the third-party software publishers within the first year from the release of the platform, while offering Nintendo software seamlessly. In order to achieve this goal, we have shared information about the new hardware with the software publishers earlier than we did previously and built a cooperative structure, and we are developing several titles in collaboration with these publishers. I cannot talk in detail about the names of the titles, or with which publishers we are currently collaborating, because we have not announced this information yet, but what we are aiming for with the Nintendo 3DS and the Wii U is, platforms which have much more software and a wider variety of software than the former Nintendo DS or Wii. Therefore, we are thinking of creating an environment where software from other companies will become hits. Please understand that Nintendo is prepared to invest in order to make this a reality.