The 74th Annual General Meeting of Shareholders Q & A

The 74th Annual General Meeting of Shareholders

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1	In Nintendo’s Annual General Meeting of Shareholders, you put meeting notices on the screens before the meeting starts. I have attended the shareholders’ meetings of other companies, and some of them have slides featuring the companies’ strengths and some show their own TV commercials. I know that the E3 show usually takes place just before the shareholders’ meeting, and if you could show the highlights of the E3 show on the screen instead of the notices, it would be very helpful. Recently, Nintendo has experienced a decline in performance, and I assume that consumers overseas are not embracing the company’s proposals. Because we are in Japan, it is hard for us to grasp the reactions of consumers overseas. So, I ask you to show shareholders on these screens reactions and responses from foreign consumers playing with trial software at E3.
1	Genyo Takeda (Senior Managing Director and General Manager of Integrated Research & Development Division, Chairperson of this Annual General Meeting of Shareholders): As you explained, the world’s biggest video game exhibition is called E3 (Electronic Entertainment Expo) and it took place in Los Angeles in the U.S. from June 10 this year. Though some of you may already know, I would like to show you a video featuring our events at the E3 show. (E3 video is shown on the screens.) Also, as this is a good opportunity, I would like to have Mr. Miyamoto, who has just come back from his business trip to attend E3, explain about the show. Shigeru Miyamoto (Senior Managing Director and General Manager of Entertainment Analysis & Development Division): The E3 show took place two weeks ago in Los Angeles, with about 50 thousand participants. Because E3 is a trade show, the participants are retailers, the media and others, not the general public. So, 50 thousand is quite a huge number. As always, Nintendo made some announcements at the show. As you have seen in the video we just showed, regarding Wii U, this year we are going to release “Super Smash Bros. for Wii U.” We have already released “Mario Kart 8” for Wii U and would like to carry on that momentum to “Super Smash Bros. for Wii U,” which is our general strategy for Wii U this year. In addition, we have announced other Wii U software titles such as “Kirby and the Rainbow Curse,” “Mario Party 10” and “Captain Toad: Treasure Tracker.” “Splatoon,” which also featured in the video, is a team-shooter game in which you fire ink. There are a number of shooting games in the U.S., but the unique thing about this game is that you are in two teams trying to cover the ground with your ink, and it surely had people’s attention. This game is under development by a team that mainly consists of our young employees. I am very happy that something new created by young people has won the admiration of fans. Regarding what I did at E3, for now I am focusing on how to make people understand the significance of the Wii U GamePad, so I introduced some titles including some prototypes which utilize the features of the GamePad. For instance, in “Project Giant Robot” (temp.), you can control a robot’s upper body by moving your arms with the GamePad in your hands and take down opponents as if you were in a sumo-wrestling match. In “Project Guard” (temp.), you beat enemies breaking into a maze while monitoring security footage of 12 security cameras shown on a screen as if you were in a security office. Also, at the event we held for children, I introduced a game called “Mario Maker” (temp.) in which you can create and play with your own Super Mario levels, as an example of taking advantage of the GamePad. In past E3 shows, the main method of communication was through the media that attended the show. However, recently we have also started to actively disclose information directly to consumers. A good example was the video we have just shown, which you can watch on our website at any time. Another example, “Treehouse Live,” is an online program featuring video game developers giving out information on the latest video games from our E3 booth. People enjoyed it through new game program channels on Twitch or YouTube. The “Nintendo Digital Event,” which we broadcast on the morning of the first day of E3, was viewed 4 to 5 million times, and the total views of our E3-related videos numbered in the tens of millions. This means that our messages reached a large number of people all over the world through the Internet, not only the people who attended E3 events. Though we designed Wii U to be a very convenient tool when connected to the TV in your living room, the appeal in that regard is not sufficiently understood. We also faced difficulties like a shortage of Wii U software titles or slow system startup. As for the system, we distributed a new network system on June 3. By updating Wii U with this new system, you can start up Wii U much more quickly than before, and we simultaneously released a new control method for “Pikmin 3”; we are doing our utmost. Both “Project Giant Robot” (temp.) and “Project Guard” (temp.) are enjoyable also for people watching the players because they can root for robot wrestlers or tell a player in which of the 12 security cameras they see enemies. In fact, our employees enjoy these games a lot. At E3, I promoted the idea that playing Wii U in your living room offers great entertainment for families because it is fun not only for the players but also for everyone around them. Every year a number of companies exhibit at E3 and Nintendo is compared with other companies, most likely with Sony and Microsoft. This year, the majority of what the other developers exhibited was bloody shooter software that was mainly set in violent surroundings or, in a different sense, realistic and cool worlds. Because so many software developers are competing in that category, it seemed like most of the titles at the show were of that kind. In such circumstances, Nintendo looked very unique and was able to receive such positive reactions as “Nintendo had a variety of different software” and “the company is offering games we can feel safe with.” From this aspect of differentiation with the other companies, we had a great E3 show this year. Shinya Takahashi (Director and General Manager of Software Planning & Development Division): Mr. Miyamoto has outlined the general reactions from overseas consumers. We have also received a lot of responses to “amiibo,” our character figures with NFC (near field communication) functionality. In the U.S. and European countries, there is a huge market for video games compatible with character figures. This is one of the reasons why there are rather high expectations of us in the North American market. I would say that one of our major achievements (at the E3 show) was that consumers positively perceived “amiibo,” one of our character IP utilization plans.

In Nintendo’s Annual General Meeting of Shareholders, you put meeting notices on the screens before the meeting starts. I have attended the shareholders’ meetings of other companies, and some of them have slides featuring the companies’ strengths and some show their own TV commercials. I know that the E3 show usually takes place just before the shareholders’ meeting, and if you could show the highlights of the E3 show on the screen instead of the notices, it would be very helpful. Recently, Nintendo has experienced a decline in performance, and I assume that consumers overseas are not embracing the company’s proposals. Because we are in Japan, it is hard for us to grasp the reactions of consumers overseas. So, I ask you to show shareholders on these screens reactions and responses from foreign consumers playing with trial software at E3.

Genyo Takeda (Senior Managing Director and General Manager of Integrated Research & Development Division, Chairperson of this Annual General Meeting of Shareholders):

As you explained, the world’s biggest video game exhibition is called E3 (Electronic Entertainment Expo) and it took place in Los Angeles in the U.S. from June 10 this year. Though some of you may already know, I would like to show you a video featuring our events at the E3 show. (E3 video is shown on the screens.)

Also, as this is a good opportunity, I would like to have Mr. Miyamoto, who has just come back from his business trip to attend E3, explain about the show.

Shigeru Miyamoto (Senior Managing Director and General Manager of Entertainment Analysis & Development Division):

The E3 show took place two weeks ago in Los Angeles, with about 50 thousand participants. Because E3 is a trade show, the participants are retailers, the media and others, not the general public. So, 50 thousand is quite a huge number. As always, Nintendo made some announcements at the show.

As you have seen in the video we just showed, regarding Wii U, this year we are going to release “Super Smash Bros. for Wii U.” We have already released “Mario Kart 8” for Wii U and would like to carry on that momentum to “Super Smash Bros. for Wii U,” which is our general strategy for Wii U this year. In addition, we have announced other Wii U software titles such as “Kirby and the Rainbow Curse,” “Mario Party 10” and “Captain Toad: Treasure Tracker.” “Splatoon,” which also featured in the video, is a team-shooter game in which you fire ink. There are a number of shooting games in the U.S., but the unique thing about this game is that you are in two teams trying to cover the ground with your ink, and it surely had people’s attention. This game is under development by a team that mainly consists of our young employees. I am very happy that something new created by young people has won the admiration of fans.

Regarding what I did at E3, for now I am focusing on how to make people understand the significance of the Wii U GamePad, so I introduced some titles including some prototypes which utilize the features of the GamePad. For instance, in “Project Giant Robot” (temp.), you can control a robot’s upper body by moving your arms with the GamePad in your hands and take down opponents as if you were in a sumo-wrestling match. In “Project Guard” (temp.), you beat enemies breaking into a maze while monitoring security footage of 12 security cameras shown on a screen as if you were in a security office. Also, at the event we held for children, I introduced a game called “Mario Maker” (temp.) in which you can create and play with your own Super Mario levels, as an example of taking advantage of the GamePad.

In past E3 shows, the main method of communication was through the media that attended the show. However, recently we have also started to actively disclose information directly to consumers. A good example was the video we have just shown, which you can watch on our website at any time. Another example, “Treehouse Live,” is an online program featuring video game developers giving out information on the latest video games from our E3 booth. People enjoyed it through new game program channels on Twitch or YouTube. The “Nintendo Digital Event,” which we broadcast on the morning of the first day of E3, was viewed 4 to 5 million times, and the total views of our E3-related videos numbered in the tens of millions. This means that our messages reached a large number of people all over the world through the Internet, not only the people who attended E3 events.

Though we designed Wii U to be a very convenient tool when connected to the TV in your living room, the appeal in that regard is not sufficiently understood. We also faced difficulties like a shortage of Wii U software titles or slow system startup. As for the system, we distributed a new network system on June 3. By updating Wii U with this new system, you can start up Wii U much more quickly than before, and we simultaneously released a new control method for “Pikmin 3”; we are doing our utmost.

Both “Project Giant Robot” (temp.) and “Project Guard” (temp.) are enjoyable also for people watching the players because they can root for robot wrestlers or tell a player in which of the 12 security cameras they see enemies. In fact, our employees enjoy these games a lot. At E3, I promoted the idea that playing Wii U in your living room offers great entertainment for families because it is fun not only for the players but also for everyone around them. Every year a number of companies exhibit at E3 and Nintendo is compared with other companies, most likely with Sony and Microsoft. This year, the majority of what the other developers exhibited was bloody shooter software that was mainly set in violent surroundings or, in a different sense, realistic and cool worlds. Because so many software developers are competing in that category, it seemed like most of the titles at the show were of that kind. In such circumstances, Nintendo looked very unique and was able to receive such positive reactions as “Nintendo had a variety of different software” and “the company is offering games we can feel safe with.” From this aspect of differentiation with the other companies, we had a great E3 show this year.

Shinya Takahashi (Director and General Manager of Software Planning & Development Division):

Mr. Miyamoto has outlined the general reactions from overseas consumers. We have also received a lot of responses to “amiibo,” our character figures with NFC (near field communication) functionality. In the U.S. and European countries, there is a huge market for video games compatible with character figures. This is one of the reasons why there are rather high expectations of us in the North American market. I would say that one of our major achievements (at the E3 show) was that consumers positively perceived “amiibo,” one of our character IP utilization plans.

2	Shareholder special benefit plans are very popular in Japan these days. As most of the individual shareholders hold Nintendo’s stock because they are fans of this company, would you please give us something related to Nintendo as a shareholder perk? I do not think hardware systems should be given to shareholders due to their high costs, but games like “Tingle’s Balloon Fight DS” and “GAME & WATCH COLLECTION,” which were presents to Club Nintendo members, could be good options.
2	Tatsumi Kimishima (Managing Director and General Manager of Corporate Analysis & Administration Division and General Affairs Division): I am afraid we have no plans to introduce shareholder benefit schemes for now. We have been studying the best method of shareholder returns and our current policy is to pay out dividends. Since we are marketing hardware and software that everyone can enjoy, it is certainly possible for us to consider providing some of them as our shareholders’ special benefits. However, such offerings require certain costs. Also, for example, some individual shareholders might have already bought the same thing we provide, and institutional shareholders are not comfortable with these offerings. There are actually shareholders who have asked us to increase the dividend instead of offering special benefits to shareholders. For these reasons, we believe dividends are the most suitable option at present. However, we will continue to consider the best method of returns to our shareholders.

Shareholder special benefit plans are very popular in Japan these days. As most of the individual shareholders hold Nintendo’s stock because they are fans of this company, would you please give us something related to Nintendo as a shareholder perk? I do not think hardware systems should be given to shareholders due to their high costs, but games like “Tingle’s Balloon Fight DS” and “GAME & WATCH COLLECTION,” which were presents to Club Nintendo members, could be good options.

Tatsumi Kimishima (Managing Director and General Manager of Corporate Analysis & Administration Division and General Affairs Division):

I am afraid we have no plans to introduce shareholder benefit schemes for now. We have been studying the best method of shareholder returns and our current policy is to pay out dividends. Since we are marketing hardware and software that everyone can enjoy, it is certainly possible for us to consider providing some of them as our shareholders’ special benefits. However, such offerings require certain costs. Also, for example, some individual shareholders might have already bought the same thing we provide, and institutional shareholders are not comfortable with these offerings. There are actually shareholders who have asked us to increase the dividend instead of offering special benefits to shareholders. For these reasons, we believe dividends are the most suitable option at present. However, we will continue to consider the best method of returns to our shareholders.

3	When will you announce more information about the new Legend of Zelda game for Wii U? Will it be before E3 next year?
3	Miyamoto: Although this Annual General Meeting of Shareholders is a special opportunity, I am afraid I cannot give you any information other than what has been officially announced. At this point, there are a few titles under development in “The Legend of Zelda” series, so please look forward to their completion. “Hyrule Warriors,” a tie-up with another company’s “Dynasty Warriors” series that we have shown at E3, is more or less an action game in which you cut down enemies, and it received very positive reviews at E3 for enabling players to choose from a variety of characters and for offering exhilarating action. In addition, we have already announced that we are now developing the next title for the orthodox “The Legend of Zelda” series for Wii U, and that it will be an “open world,” as announced at E3. I prefer not to use the generally used term “open world” when developing software, but we used this term in order to make it easier for consumers to understand. This term means that there is a large world in which players can do numerous things daily. In the traditional “The Legend of Zelda” series, the player would play one dungeon at a time. For example, if there are eight dungeons, at the fourth dungeon, some players may think, “I’m already halfway through the game,” while other players may think, “I still have half of the game to play.” We are trying to gradually break down such mechanism and develop a game style in which you can enjoy “The Legend of Zelda” freely in a vast world, whenever you find the time to do so. At the halfway point to achieving this goal, we released “The Legend of Zelda: A Link Between Worlds” for Nintendo 3DS last year. We created the games in the traditional “The Legend of Zelda” series in steps that players could easily understand and follow; the player would obtain a new item in each dungeon, use the item to clear that dungeon and be able to enjoy applying the items in different ways after acquiring about eight items. However, in “The Legend of Zelda: A Link Between Worlds,” we broke that down and let the player rent different items from the beginning, so the player could use different combinations of items. In this way, we are gradually changing the structure of “The Legend of Zelda” series, and we are preparing to newly evolve the series for Wii U. In addition to that, we have ideas for Nintendo 3DS which we have not announced yet, so I hope you will look forward to them.

When will you announce more information about the new Legend of Zelda game for Wii U? Will it be before E3 next year?

Miyamoto:

Although this Annual General Meeting of Shareholders is a special opportunity, I am afraid I cannot give you any information other than what has been officially announced. At this point, there are a few titles under development in “The Legend of Zelda” series, so please look forward to their completion.

“Hyrule Warriors,” a tie-up with another company’s “Dynasty Warriors” series that we have shown at E3, is more or less an action game in which you cut down enemies, and it received very positive reviews at E3 for enabling players to choose from a variety of characters and for offering exhilarating action.

In addition, we have already announced that we are now developing the next title for the orthodox “The Legend of Zelda” series for Wii U, and that it will be an “open world,” as announced at E3. I prefer not to use the generally used term “open world” when developing software, but we used this term in order to make it easier for consumers to understand. This term means that there is a large world in which players can do numerous things daily. In the traditional “The Legend of Zelda” series, the player would play one dungeon at a time. For example, if there are eight dungeons, at the fourth dungeon, some players may think, “I’m already halfway through the game,” while other players may think, “I still have half of the game to play.” We are trying to gradually break down such mechanism and develop a game style in which you can enjoy “The Legend of Zelda” freely in a vast world, whenever you find the time to do so.

At the halfway point to achieving this goal, we released “The Legend of Zelda: A Link Between Worlds” for Nintendo 3DS last year. We created the games in the traditional “The Legend of Zelda” series in steps that players could easily understand and follow; the player would obtain a new item in each dungeon, use the item to clear that dungeon and be able to enjoy applying the items in different ways after acquiring about eight items. However, in “The Legend of Zelda: A Link Between Worlds,” we broke that down and let the player rent different items from the beginning, so the player could use different combinations of items. In this way, we are gradually changing the structure of “The Legend of Zelda” series, and we are preparing to newly evolve the series for Wii U. In addition to that, we have ideas for Nintendo 3DS which we have not announced yet, so I hope you will look forward to them.

4	As a fan of this company, I was reminded once again that Nintendo is, after all, a great company and still alive after seeing “Splatoon,” a new game announced at E3 that has been well-received by video game fans. The current stock price of Nintendo is, however, far from satisfactory, so I hope you will work hard to make an improvement. I would like Nintendo to maintain its solid business policy and not to turn to businesses such as the business of today’s social games, but I am concerned about the fact that young children today often use smartphones handed down from their family members to enjoy free games without additional payments. I do not think even Nintendo will be able to ignore iOS, Android or games playable on web browsers in the future. How much have you studied these factors, and how will you make use of them?
4	Takahashi: Please allow me to tell you about how we are responding to the advancement and penetration of smart devices. We have provided unique entertainment experiences using dedicated handheld devices and TV monitors at home in the field of video games. We will also actively utilize the smart devices that are now a part of people’s daily lives. More specifically, we are currently developing an application for smart devices. Through such an application, we would like to connect with many consumers around the world, including those who do not own Nintendo’s video game systems, and communicate the value of our entertainment offerings.

As a fan of this company, I was reminded once again that Nintendo is, after all, a great company and still alive after seeing “Splatoon,” a new game announced at E3 that has been well-received by video game fans. The current stock price of Nintendo is, however, far from satisfactory, so I hope you will work hard to make an improvement. I would like Nintendo to maintain its solid business policy and not to turn to businesses such as the business of today’s social games, but I am concerned about the fact that young children today often use smartphones handed down from their family members to enjoy free games without additional payments. I do not think even Nintendo will be able to ignore iOS, Android or games playable on web browsers in the future. How much have you studied these factors, and how will you make use of them?

Takahashi:

Please allow me to tell you about how we are responding to the advancement and penetration of smart devices. We have provided unique entertainment experiences using dedicated handheld devices and TV monitors at home in the field of video games. We will also actively utilize the smart devices that are now a part of people’s daily lives. More specifically, we are currently developing an application for smart devices. Through such an application, we would like to connect with many consumers around the world, including those who do not own Nintendo’s video game systems, and communicate the value of our entertainment offerings.

5	After a PTA meeting the other day, someone told me that they wished the size of the screen of Nintendo’s current handheld device could have been manually extended to become twice the size both horizontally and vertically. It would be more impressive to children playing with it and reduce their parents’ concerns about the impact on their eyes. In addition, the Japanese government is planning to have special zones for casinos for the Tokyo Olympic Games in 2020, but it is said that many people are unfamiliar with casino games. I think it a good idea to create an application in which users can learn how to play and practice these games.
5	Takeda: Many thanks for your useful proposals. Our development team always discusses various things, including the best screen size for children and screens that people dream about, such as the enlargeable one you just mentioned. Apart from casino application games, we think it is possible to take advantage of our strength of offering things to consumers in an easy-to-understand and approachable manner in a variety of fields. Thank you again for your comment.

After a PTA meeting the other day, someone told me that they wished the size of the screen of Nintendo’s current handheld device could have been manually extended to become twice the size both horizontally and vertically. It would be more impressive to children playing with it and reduce their parents’ concerns about the impact on their eyes. In addition, the Japanese government is planning to have special zones for casinos for the Tokyo Olympic Games in 2020, but it is said that many people are unfamiliar with casino games. I think it a good idea to create an application in which users can learn how to play and practice these games.

Takeda:

Many thanks for your useful proposals. Our development team always discusses various things, including the best screen size for children and screens that people dream about, such as the enlargeable one you just mentioned.
Apart from casino application games, we think it is possible to take advantage of our strength of offering things to consumers in an easy-to-understand and approachable manner in a variety of fields. Thank you again for your comment.