Third Quarter Financial Results Briefing Q & A

Third Quarter Financial Results Briefing for Fiscal Year Ending March 2011

- Jan. 28, 2011

Outline | Presentation by the President (Text) | Q & A

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4	Let me ask you about the possible cell-phone functions of Nintendo 3DS. I assume the company has reviewed the possibility of integrating a 3G1 function into Nintendo 3DS. Is the reason for not including it because you were not able to conclude a reasonable deal with the cell-phone carriers? My personal observations of your decision not to include 3G are because it would not be possible to include a free-of-charge 3G function in Nintendo 3DS, even though Nintendo might have considered a similar business model as "Kindle,"2 because you would need to explain about that contract to each purchaser, and because the purchasers of Nintendo 3DS with a 3G function would have to show their IDs, which are all against your gaming population expansion strategy. I also guess that you took into consideration such disadvantages as you would have to have the cell-phone carriers purchase your Nintendo 3DS so therefore you would not be able to control your own hardware shipments. I’d like to know the actual reasons why the company has decided not to include a 3G function in Nintendo 3DS. (1) 3G = Third generation cell phones. By including a 3G function, video game systems can be directly connected with the Internet without wireless access points, etc. (2) A similar business model as "Kindle": A device called "Kindle" (Amazon's e-book device) includes 3G communication capability which is called "Whisper Net." The communication fees are billed as part of the overall book fee, so the users do not feel the communication costs.
4	Iwata: First of all, if we denied that we have studied anything about 3G, we would be deemed lazy, so I do not deny that the company has been reviewing that possibility. In that regard, the company has been reviewing each and any possible function. However, having studied something does not mean that we will surely adopt that technology. If someone asks me, "Now that the company has spent some time to review a technology, isn't it true that the company will surely adopt it sometime in the future?", all I can say is "I have no idea." As I have been constantly saying, the need to ask our consumers to shoulder monthly payments is not a great match for the entertainment that we are dealing with. Of course, there are people who are willing to pay monthly fees in order to enjoy certain functions. However, Nintendo is a company who wants as many consumers as possible to enjoy our proposals. Accordingly, as long as we need to ask our consumers to pay additional costs every month, it is unlikely to become one of our viable options. Of course, the cost to carry such functions (such as the manufacturing costs for the hardware) is even expected to become less and less expensive from now. But we are not only concerned about the cost the consumers have to pay for the hardware. The bigger question (or the essence of the problem that has to be solved in order for a game machine to include 3G functions) is, "Will the added experience that our consumers can expect really be worth the additional burdens which have to be shouldered by the consumers (such as communication fees) when compared with the experiences that can be realized without having to ask our consumers to do so?"

Let me ask you about the possible cell-phone functions of Nintendo 3DS. I assume the company has reviewed the possibility of integrating a 3G*1 function into Nintendo 3DS. Is the reason for not including it because you were not able to conclude a reasonable deal with the cell-phone carriers? My personal observations of your decision not to include 3G are because it would not be possible to include a free-of-charge 3G function in Nintendo 3DS, even though Nintendo might have considered a similar business model as "Kindle,"*2 because you would need to explain about that contract to each purchaser, and because the purchasers of Nintendo 3DS with a 3G function would have to show their IDs, which are all against your gaming population expansion strategy. I also guess that you took into consideration such disadvantages as you would have to have the cell-phone carriers purchase your Nintendo 3DS so therefore you would not be able to control your own hardware shipments. I’d like to know the actual reasons why the company has decided not to include a 3G function in Nintendo 3DS.

(*1) 3G = Third generation cell phones. By including a 3G function, video game systems can be directly connected with the Internet without wireless access points, etc.

(*2) A similar business model as "Kindle": A device called "Kindle" (Amazon's e-book device) includes 3G communication capability which is called "Whisper Net." The communication fees are billed as part of the overall book fee, so the users do not feel the communication costs.

Iwata:

First of all, if we denied that we have studied anything about 3G, we would be deemed lazy, so I do not deny that the company has been reviewing that possibility. In that regard, the company has been reviewing each and any possible function. However, having studied something does not mean that we will surely adopt that technology. If someone asks me, "Now that the company has spent some time to review a technology, isn't it true that the company will surely adopt it sometime in the future?", all I can say is "I have no idea."
As I have been constantly saying, the need to ask our consumers to shoulder monthly payments is not a great match for the entertainment that we are dealing with. Of course, there are people who are willing to pay monthly fees in order to enjoy certain functions. However, Nintendo is a company who wants as many consumers as possible to enjoy our proposals. Accordingly, as long as we need to ask our consumers to pay additional costs every month, it is unlikely to become one of our viable options. Of course, the cost to carry such functions (such as the manufacturing costs for the hardware) is even expected to become less and less expensive from now. But we are not only concerned about the cost the consumers have to pay for the hardware. The bigger question (or the essence of the problem that has to be solved in order for a game machine to include 3G functions) is, "Will the added experience that our consumers can expect really be worth the additional burdens which have to be shouldered by the consumers (such as communication fees) when compared with the experiences that can be realized without having to ask our consumers to do so?"

5	If data of several gigabytes or more are downloaded, perhaps several tens of thousands of yen are needed as the packet cost today. Is this one of the reasons why such a business model, to include the communication costs in the downloadable software price, probably must wait for future generations of the hardware? What is your opinion on my observation?
5	Iwata: When we just focus upon the business model of "Kindle," as it is an e-book reader and the data downloaded are mainly texts, only relatively small amounts of data need to be downloaded, which has formed the background for the "Whisper Net" model to be viable. When it comes to the downloads of content through 3G with rich graphics and a lot of sounds or movies, no answers (which can eliminate the sense of cost-shouldering by the consumers) have been presented. These factors make up part of the background as to why Nintendo has decided to put more focus on and to pour more resources into such functions as "SpotPass" and "StreetPass" for Nintendo 3DS.

If data of several gigabytes or more are downloaded, perhaps several tens of thousands of yen are needed as the packet cost today. Is this one of the reasons why such a business model, to include the communication costs in the downloadable software price, probably must wait for future generations of the hardware? What is your opinion on my observation?

Iwata:

When we just focus upon the business model of "Kindle," as it is an e-book reader and the data downloaded are mainly texts, only relatively small amounts of data need to be downloaded, which has formed the background for the "Whisper Net" model to be viable. When it comes to the downloads of content through 3G with rich graphics and a lot of sounds or movies, no answers (which can eliminate the sense of cost-shouldering by the consumers) have been presented. These factors make up part of the background as to why Nintendo has decided to put more focus on and to pour more resources into such functions as "SpotPass" and "StreetPass" for Nintendo 3DS.

Outline | Presentation by the President (Text) | Q & A

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