Financial Results Briefing for Fiscal Year Ended March 2016

Financial Results Briefing
for Fiscal Year Ended March 2016

Outline | Presentation by the President | Q & A

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7-1	About the company's KPI (Key Performance Indicator). Am I correct in understanding that in the company's smart device business, the number of daily active users, or DAU, is the most important indicator?
7-1	Kimishima: I think that there are lots of ways to evaluate it, but when a user plays continuously it supports the fact that the application has a lot of appeal. This is connected to DAU, so it is important to see how much we can raise the absolute value of DAU, but the rate of continued use is important as well. If the rate of continued use increases, naturally, the DAU will increase as well, so we are keeping a close eye on that. We believe that as this increases, though it will vary by application, revenue from in-app purchases will change as well.

7-1

About the company's KPI (Key Performance Indicator). Am I correct in understanding that in the company's smart device business, the number of daily active users, or DAU, is the most important indicator?

7-1

Kimishima:

I think that there are lots of ways to evaluate it, but when a user plays continuously it supports the fact that the application has a lot of appeal. This is connected to DAU, so it is important to see how much we can raise the absolute value of DAU, but the rate of continued use is important as well. If the rate of continued use increases, naturally, the DAU will increase as well, so we are keeping a close eye on that. We believe that as this increases, though it will vary by application, revenue from in-app purchases will change as well.

7-2	What indicators will be important when developing the same IP for both smart devices and dedicated video game systems?
7-2	Kimishima: I think that for dedicated video game systems, the number of units purchased is definitely the most important. Other than the number purchased, the other important thing is how the game is being played after it has been purchased. I do not mean this in the sense of how the game is rated, but rather that how the game is played connects to the future of the IP. Therefore, we believe that in addition to the number of units purchased, the activity numbers including hardware activity, and how much the game continues to be played are both important factors as well. I think that this is the same for both dedicated video game systems and smart devices.

7-2

What indicators will be important when developing the same IP for both smart devices and dedicated video game systems?

7-2

Kimishima:

I think that for dedicated video game systems, the number of units purchased is definitely the most important. Other than the number purchased, the other important thing is how the game is being played after it has been purchased. I do not mean this in the sense of how the game is rated, but rather that how the game is played connects to the future of the IP. Therefore, we believe that in addition to the number of units purchased, the activity numbers including hardware activity, and how much the game continues to be played are both important factors as well. I think that this is the same for both dedicated video game systems and smart devices.

8	Though enriching software has been given as a reason for launching NX in March, 2017, when thinking about how long it takes to develop software, there would not be any real objections to missing the year-end sales. I recall that at a past Corporate Management Policy Briefing, when the Nintendo GameCube launch was set for September, former President Yamauchi said that it is extremely important not to miss the year-end sales, and I think that former President Iwata also said that it was a big problem when the Nintendo 3DS launched in February and missed the Christmas sales. Since you took over, Mr. Kimishima, both Miitomo and now NX will miss the year-end, which gives the impression that Nintendo's way of thinking about the future has changed quite a bit. So why will NX launch in March? Has Nintendo's approach changed?
8	Kimishima: There has been no change in our way of thinking about launch times. We believe that when launching hardware, the amount of quality software for consumers to play that is available at launch is important, and that we ought to determine our launch dates based on this. The fact that consumers spend more money in the holiday season may be a big factor in why launching then is a good way to start. However, our hardware and software business structure does not end in that year. We want consumers to continue to play this game system for many years, so we believe that in the beginning it is most important to make sure that everything is in order at launch. In that sense, our approach is that we should wait until we can provide a fully realized experience rather than rushing to launch in the holiday season, and this approach has not changed.

Though enriching software has been given as a reason for launching NX in March, 2017, when thinking about how long it takes to develop software, there would not be any real objections to missing the year-end sales. I recall that at a past Corporate Management Policy Briefing, when the Nintendo GameCube launch was set for September, former President Yamauchi said that it is extremely important not to miss the year-end sales, and I think that former President Iwata also said that it was a big problem when the Nintendo 3DS launched in February and missed the Christmas sales. Since you took over, Mr. Kimishima, both Miitomo and now NX will miss the year-end, which gives the impression that Nintendo's way of thinking about the future has changed quite a bit. So why will NX launch in March? Has Nintendo's approach changed?

Kimishima:

There has been no change in our way of thinking about launch times. We believe that when launching hardware, the amount of quality software for consumers to play that is available at launch is important, and that we ought to determine our launch dates based on this. The fact that consumers spend more money in the holiday season may be a big factor in why launching then is a good way to start. However, our hardware and software business structure does not end in that year. We want consumers to continue to play this game system for many years, so we believe that in the beginning it is most important to make sure that everything is in order at launch. In that sense, our approach is that we should wait until we can provide a fully realized experience rather than rushing to launch in the holiday season, and this approach has not changed.

Outline | Presentation by the President | Q & A

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