Financial Results Briefing Q & A

Financial Results Briefing for Fiscal Year Ended March 2010

- May 7, 2010

Presentation by the President (Text) | Q & A

7	You attached “(tentative)” to the name, “Nintendo 3DS.” Will Nintendo 3DS be the final product name? If you change the name, when will it be?
7	Iwata: As we have announced that we will launch the product in this fiscal year, the final product name shall be announced in the not-so-far-away future.

You attached “(tentative)” to the name, “Nintendo 3DS.” Will Nintendo 3DS be the final product name? If you change the name, when will it be?

Iwata:

As we have announced that we will launch the product in this fiscal year, the final product name shall be announced in the not-so-far-away future.

8	As I see it, when the CPU changed, a new name for the hardware series was applied to the hardware in the past. From that perspective, I have some uneasiness about the name “Nintendo 3DS,” and feel like, “that’s it?” Can I understand that you will announce the final product name at or around E3?
8	Iwata: The only thing that I can say today is that we will show more detailed picture of Nintendo 3DS at E3.

As I see it, when the CPU changed, a new name for the hardware series was applied to the hardware in the past. From that perspective, I have some uneasiness about the name “Nintendo 3DS,” and feel like, “that’s it?” Can I understand that you will announce the final product name at or around E3?

Iwata:

The only thing that I can say today is that we will show more detailed picture of Nintendo 3DS at E3.

9	I’d like to ask about your company’s future announcement schedule. When we look back the schedules in 2005 and 2006 when you were launching new products, you used to hold a Nintendo Conference or Nintendo DS Conference in the fall. How will we be able to receive such information in the future?
9	Iwata: The only thing we have announced so far was that we will launch (Nintendo 3DS) during this fiscal year. If we will hold a conference, the timing can vary depending on the actual launch timing. After we can announce the launch timing, there is a good possibility that we will hold some event sometime in advance of the launch where a near-complete product will be shown to many people. If you ask me when it will be, however, I cannot answer today.

I’d like to ask about your company’s future announcement schedule. When we look back the schedules in 2005 and 2006 when you were launching new products, you used to hold a Nintendo Conference or Nintendo DS Conference in the fall. How will we be able to receive such information in the future?

Iwata:

The only thing we have announced so far was that we will launch (Nintendo 3DS) during this fiscal year. If we will hold a conference, the timing can vary depending on the actual launch timing. After we can announce the launch timing, there is a good possibility that we will hold some event sometime in advance of the launch where a near-complete product will be shown to many people. If you ask me when it will be, however, I cannot answer today.

10	I was surprised again to see the original Nintendo DS and DS Lite have sold through nearly 10 million, among your most recent annual DS-Family shipment of 27 million, which includes DSi and DSi XL. Cumulative shipment of DSi counts for little less than 18 million and it accounts for 14% of the total. It’s not necessarily disappointing considering it debuted overseas less than a year ago. What I would like to ask is your concept for DSi; “My DS.” For the DSi you added a camera, a music player, a memory card and Nintendo DSiWare functionality. Even though DSi is still competitive enough, I would like to ask if there has been anything you could not fulfill, find challenging still, or whose situation is worse than you had expected, if you already have analyzed them. Another question is, even though you haven’t announced its release date, how are you assessing the risk of consumers possibly holding off on the purchase of DS hardware before the 3DS launched, as you will surely continue to market and sell the current DS models.
10	Iwata: Firstly, I think I should explain the reason why we announced Nintendo 3DS when we did, as our PR and IR representatives have reported to me that many people seemed confused, inquisitive, unconvinced or uncomfortable to have had suddenly seen a press release on March 23rd. Originally we were planning to show Nintendo 3DS at E3 this year but did not think it was ideal to only have had Nintendo create software. This meant that we would have to disclose the core functionality to external developers. But according to our past experiences, the larger the group to whom we share the information with those outside Nintendo, the larger the risk of rumors. Then it creates a situation where information spreads more easily and rapidly, out of our control. In case of recent new hardware development – from the Nintendo DS Lite to Nintendo DSi, then to Nintendo DSi XL– we did not have to widely share the information early as their software’s technological structures did not significantly change. But this time, we needed to start sharing the information early as we have to develop new titles for Nintendo 3DS. In addition, we had to let those who are considering to attend E3 know about the new hardware announcement so that they will decide to attend. Due to such backgrounds, late March was the timing when we could no longer hold off on the announcement. Needless to say, releasing new hardware is a great opportunity for our business, so we want to realize what we have learned from the past as much as possible. On the other hand, it will not be beneficial if I comment at a place like this today on the shortcomings of our hardware products we are currently selling. As it is a developer’s nature to reflect past regrets in future products, all I can comment here is that we are willing to reflect various things kept in our minds. As for consumers holding off on purchases now, of course I cannot say that there is no impact whatsoever. Some of you might have been confused to see Nintendo 3DS announcement in the days immediately before the launch of Nintendo DSi XL in North America. Although I cannot say that there were no impact, I do not see a large risk with it because those who are eager to buy Nintendo 3DS right after the announcement generally tend to react quickly to anything new on the market, and those who are purchasing a Nintendo DS today tend to react relatively slowly. Thus we do not think that the Nintendo 3DS announcement will significantly slow down the sales of current Nintendo DS family in the market where the majority are reacting relatively slowly. Our belief is also backed by actual sales transitions. Along with that, we see differences in consumer tendency among territories, as the original Nintendo DS and Nintendo DS Lite have been selling well even after Nintendo DSi launched. Customers in Japan tend to react very quickly. I think Japan is a nation where the whole society shifts rapidly and dramatically to what is new - maybe the quickest in the world. United Kingdom is similar to Japan in a sense that its market also reacts quickly as well. On the contrary, slower tendency can be seen in nations like Germany. And the United States, whose market is often thought of as in-depth, has so many slow reacting consumers (along with rapid ones). This trend can actually be seen with the gaming population expansion. While Japan once haltered in its expansion, U.S. kept continuing to expand, due to the different tendencies of each market. Thus I believe we will see a huge difference among countries on Nintendo DS sales after we actually make new proposals with Nintendo 3DS, due to price gaps between Nintendo 3DS and existing Nintendo DS family, and consumers’ acceptance of it.

I was surprised again to see the original Nintendo DS and DS Lite have sold through nearly 10 million, among your most recent annual DS-Family shipment of 27 million, which includes DSi and DSi XL. Cumulative shipment of DSi counts for little less than 18 million and it accounts for 14% of the total. It’s not necessarily disappointing considering it debuted overseas less than a year ago. What I would like to ask is your concept for DSi; “My DS.” For the DSi you added a camera, a music player, a memory card and Nintendo DSiWare functionality. Even though DSi is still competitive enough, I would like to ask if there has been anything you could not fulfill, find challenging still, or whose situation is worse than you had expected, if you already have analyzed them. Another question is, even though you haven’t announced its release date, how are you assessing the risk of consumers possibly holding off on the purchase of DS hardware before the 3DS launched, as you will surely continue to market and sell the current DS models.

Iwata:

Firstly, I think I should explain the reason why we announced Nintendo 3DS when we did, as our PR and IR representatives have reported to me that many people seemed confused, inquisitive, unconvinced or uncomfortable to have had suddenly seen a press release on March 23rd.

Originally we were planning to show Nintendo 3DS at E3 this year but did not think it was ideal to only have had Nintendo create software. This meant that we would have to disclose the core functionality to external developers. But according to our past experiences, the larger the group to whom we share the information with those outside Nintendo, the larger the risk of rumors. Then it creates a situation where information spreads more easily and rapidly, out of our control. In case of recent new hardware development – from the Nintendo DS Lite to Nintendo DSi, then to Nintendo DSi XL– we did not have to widely share the information early as their software’s technological structures did not significantly change. But this time, we needed to start sharing the information early as we have to develop new titles for Nintendo 3DS. In addition, we had to let those who are considering to attend E3 know about the new hardware announcement so that they will decide to attend. Due to such backgrounds, late March was the timing when we could no longer hold off on the announcement.

Needless to say, releasing new hardware is a great opportunity for our business, so we want to realize what we have learned from the past as much as possible. On the other hand, it will not be beneficial if I comment at a place like this today on the shortcomings of our hardware products we are currently selling. As it is a developer’s nature to reflect past regrets in future products, all I can comment here is that we are willing to reflect various things kept in our minds.

As for consumers holding off on purchases now, of course I cannot say that there is no impact whatsoever. Some of you might have been confused to see Nintendo 3DS announcement in the days immediately before the launch of Nintendo DSi XL in North America. Although I cannot say that there were no impact, I do not see a large risk with it because those who are eager to buy Nintendo 3DS right after the announcement generally tend to react quickly to anything new on the market, and those who are purchasing a Nintendo DS today tend to react relatively slowly. Thus we do not think that the Nintendo 3DS announcement will significantly slow down the sales of current Nintendo DS family in the market where the majority are reacting relatively slowly.

Our belief is also backed by actual sales transitions. Along with that, we see differences in consumer tendency among territories, as the original Nintendo DS and Nintendo DS Lite have been selling well even after Nintendo DSi launched. Customers in Japan tend to react very quickly. I think Japan is a nation where the whole society shifts rapidly and dramatically to what is new - maybe the quickest in the world. United Kingdom is similar to Japan in a sense that its market also reacts quickly as well. On the contrary, slower tendency can be seen in nations like Germany. And the United States, whose market is often thought of as in-depth, has so many slow reacting consumers (along with rapid ones). This trend can actually be seen with the gaming population expansion. While Japan once haltered in its expansion, U.S. kept continuing to expand, due to the different tendencies of each market. Thus I believe we will see a huge difference among countries on Nintendo DS sales after we actually make new proposals with Nintendo 3DS, due to price gaps between Nintendo 3DS and existing Nintendo DS family, and consumers’ acceptance of it.

Presentation by the President (Text) | Q & A

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