Financial Results Briefing Q & A

Financial Results Briefing for Fiscal Year Ended March 2010

- May 7, 2010

Presentation by the President (Text) | Q & A

4	I think it was during the last Financial Briefing of the company (Third Quarter Financial Results Briefing for the 70th Fiscal Term Ending March 2010 held on January 29, 2010), when you told us that you would like to speed up your operations by various ways, including, for example, collaborating with the other companies. When it comes to the possibility of such alliances, I think there must be many ways, including advancing into the field of SNS, encircling the contents, adaptation to the network and securing the devices. In this current fiscal year to end March 2011, is there any specific area or business field that you can confirm today where you would like to intensify, such as advancing into new overseas markets or intensifying your network operations. Of course, I understand that the focus in your main business this year will be Nintendo 3DS and/or selling the number of existing hardware units that you ought to sell. My question is, what kind of efforts can be contemplated in this fiscal year that can contribute to the speed-up in your operations in the longer term.
4	Iwata: When I spoke in January, I said that we should not think that we have to do everything with only internal resources and that I’d like to realize more speedy operations by smartly cooperating with people outside the company. My thought has not changed at all, and it is true that we are starting to share such an idea with various people, but I cannot share any concrete example here today because such a talk always involve someone outside the company and because we should publicly confirm any such alliance only after the necessary preparations are done. Hopefully, we will be able to share with you some ideas in a year or two, when you will be able to understand that it is something I was referring to today. We are making some progresses as time goes by.

I think it was during the last Financial Briefing of the company (Third Quarter Financial Results Briefing for the 70th Fiscal Term Ending March 2010 held on January 29, 2010), when you told us that you would like to speed up your operations by various ways, including, for example, collaborating with the other companies. When it comes to the possibility of such alliances, I think there must be many ways, including advancing into the field of SNS, encircling the contents, adaptation to the network and securing the devices. In this current fiscal year to end March 2011, is there any specific area or business field that you can confirm today where you would like to intensify, such as advancing into new overseas markets or intensifying your network operations. Of course, I understand that the focus in your main business this year will be Nintendo 3DS and/or selling the number of existing hardware units that you ought to sell. My question is, what kind of efforts can be contemplated in this fiscal year that can contribute to the speed-up in your operations in the longer term.

Iwata:

When I spoke in January, I said that we should not think that we have to do everything with only internal resources and that I’d like to realize more speedy operations by smartly cooperating with people outside the company. My thought has not changed at all, and it is true that we are starting to share such an idea with various people, but I cannot share any concrete example here today because such a talk always involve someone outside the company and because we should publicly confirm any such alliance only after the necessary preparations are done. Hopefully, we will be able to share with you some ideas in a year or two, when you will be able to understand that it is something I was referring to today. We are making some progresses as time goes by.

5	I have a question about your unit sales forecast of Wii hardware and software. Because this is just the beginning of the fiscal term, I thought you could have shared with us a bigger and more ambitious target. Yet, you announced decreased unit sales compared to the last term. What is Mr. Iwata’s analysis on the current condition?
5	Iwata: When I looked at this morning’s newspapers, I came across such headlines as “Wii hardware has reached its limit” or “in sales slump.” I think that annual sales of 20 million units is rather a high hurdle to clear and, even after realizing those sales, I feel that it is tough if the company is thought to be in a “sales slump.” We have announced 18 million units as our sales plan (for Wii hardware for this fiscal year). Given the fact that 4 years have passed since the launch of this console, this is a relatively ambitious target. Please also note that those who immediately respond to our proposals of unique entertainment and plays have already purchased a Wii. From now, we’ll have to sell our products to potential customers to whom our messages do not easily reach and who are more difficult to be persuaded. If, for example, one of the software that we will launch this year shall become extremely popular and achieve unexpected explosive sales, there is, of course, a possibility for us to be able to outnumber last year’s results. However, it would be too irresponsible for the head of a public company to announce a forecast that is based on unexpected explosive sales. What we have actually been doing is to share with you the best estimate we can make, which may not be perfectly precise in the end due in part to the external elements that we cannot control, and which, we believe, can be achieved to a certain degree or very close to it in the end. This is how we came to our 18 million unit shipment estimate. I do not have any pessimistic view towards our future. Actually, these numbers are not pessimistic for our financial forecasts at all. The key here is, we will be executing our marketing activities in this fiscal year with the understanding that it will be more challenging to sell the same hardware products than before. Please understand that our unit sales forecasts are made with such backgrounds.

I have a question about your unit sales forecast of Wii hardware and software. Because this is just the beginning of the fiscal term, I thought you could have shared with us a bigger and more ambitious target. Yet, you announced decreased unit sales compared to the last term. What is Mr. Iwata’s analysis on the current condition?

Iwata:

When I looked at this morning’s newspapers, I came across such headlines as “Wii hardware has reached its limit” or “in sales slump.” I think that annual sales of 20 million units is rather a high hurdle to clear and, even after realizing those sales, I feel that it is tough if the company is thought to be in a “sales slump.”

We have announced 18 million units as our sales plan (for Wii hardware for this fiscal year). Given the fact that 4 years have passed since the launch of this console, this is a relatively ambitious target. Please also note that those who immediately respond to our proposals of unique entertainment and plays have already purchased a Wii. From now, we’ll have to sell our products to potential customers to whom our messages do not easily reach and who are more difficult to be persuaded. If, for example, one of the software that we will launch this year shall become extremely popular and achieve unexpected explosive sales, there is, of course, a possibility for us to be able to outnumber last year’s results. However, it would be too irresponsible for the head of a public company to announce a forecast that is based on unexpected explosive sales. What we have actually been doing is to share with you the best estimate we can make, which may not be perfectly precise in the end due in part to the external elements that we cannot control, and which, we believe, can be achieved to a certain degree or very close to it in the end. This is how we came to our 18 million unit shipment estimate. I do not have any pessimistic view towards our future. Actually, these numbers are not pessimistic for our financial forecasts at all. The key here is, we will be executing our marketing activities in this fiscal year with the understanding that it will be more challenging to sell the same hardware products than before. Please understand that our unit sales forecasts are made with such backgrounds.

6	While there is a macro recognition that the game cycle has entered into its second half, I assume you are operating upon the premise that Wii can still increase its sales as long as you can offer new types of play or new software. I feel that it has become more challenging to make a brand new entertainment proposal in the first place in terms of the current hardware specifications and configurations, and I have the impression that you may be limiting new entertainment proposals and number of game developments, especially for Wii, in this fiscal year, and that you are looking to the move on to the next console. What is your comment on my observation?
6	Iwata: We have not announced all the software that are going to be launched within this fiscal year, and will make further relevant announcements in the future, so it is not true that we are limiting the software developments for Wii now. There have not been many examples of game hardware that surged with momentum after it once peaked, but there are actually a few. The typical of such examples must be Game Boy. It had once been said that Game Boy’s days were numbered. However, Game Boy actually saw its real biggest sales period after the arrival of a new Game Boy software called “Pokémon.” In the world of video games, one software can change the entire situation of a hardware, but it is not something that can be calculated. In the case of Nintendo, we are identifying and pouring our resources into the limited number of projects that have a certain potential to be able to make that happen. I think I have talked about this before, but at Nintendo, Mr. Miyamoto, who is responsible for Nintendo’s software, and I have been judging the future possibilities of such prospective titles. As a result, the sales of our software have been kept at a certain level and Nintendo has been able to introduce several titles each year that can sell internationally. Even when Wii will eventually enter its final stages, this attitude of ours will not change, and we will not decrease our investments to Wii software developments.

While there is a macro recognition that the game cycle has entered into its second half, I assume you are operating upon the premise that Wii can still increase its sales as long as you can offer new types of play or new software. I feel that it has become more challenging to make a brand new entertainment proposal in the first place in terms of the current hardware specifications and configurations, and I have the impression that you may be limiting new entertainment proposals and number of game developments, especially for Wii, in this fiscal year, and that you are looking to the move on to the next console. What is your comment on my observation?

Iwata:

We have not announced all the software that are going to be launched within this fiscal year, and will make further relevant announcements in the future, so it is not true that we are limiting the software developments for Wii now.

There have not been many examples of game hardware that surged with momentum after it once peaked, but there are actually a few. The typical of such examples must be Game Boy. It had once been said that Game Boy’s days were numbered. However, Game Boy actually saw its real biggest sales period after the arrival of a new Game Boy software called “Pokémon.” In the world of video games, one software can change the entire situation of a hardware, but it is not something that can be calculated. In the case of Nintendo, we are identifying and pouring our resources into the limited number of projects that have a certain potential to be able to make that happen. I think I have talked about this before, but at Nintendo, Mr. Miyamoto, who is responsible for Nintendo’s software, and I have been judging the future possibilities of such prospective titles. As a result, the sales of our software have been kept at a certain level and Nintendo has been able to introduce several titles each year that can sell internationally. Even when Wii will eventually enter its final stages, this attitude of ours will not change, and we will not decrease our investments to Wii software developments.

Presentation by the President (Text) | Q & A

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