The 70th Annual General Meeting of Shareholders Q & A

The 70th Annual General Meeting of Shareholders

4	The launch of Wii boosted Nintendo's stock price. I am not sure that Nintendo 3DS will boost it again, but we have expectations for the next console. Do you have a plan to release a new product comparable to Nintendo 3DS in the near future?
4	Iwata: Naturally, we are developing new products all the time. Whenever asked, our answer is yes, (we are making new products.) Our development departments are dedicated to developing new products. Once we release a product, we will soon move to the development of the next. Since the launch of the original Nintendo DS, the company has introduced you to several new models, but we have to anticipate the life span of the Nintendo DS series will eventually come to an end someday. We have been studying and developing the next product for that day. In this context, Nintendo 3DS has been under development for the six years (since the release of the original Nintendo DS.) Speaking of other products, we are of course studying and developing the next console to Wii. However, there is a big difference between studying a product and announcing what it is and when we will release it. I am afraid to say that the history of entertainment is also the history of imitation. A great idea will promptly be copied unless protected through patents. At the same time, it is really important for our business to positively surprise people. Will you be surprised by our completed product if we told you how it is surprising three years in advance? Therefore, we basically disclose information on our products as late as possible. We believe this is the best approach for the entertainment products we are developing. Again, we are planning the next products for Nintendo's continuous growth, but we cannot tell you what, when and how we will release it here. Thank you for your understanding.

The launch of Wii boosted Nintendo's stock price. I am not sure that Nintendo 3DS will boost it again, but we have expectations for the next console. Do you have a plan to release a new product comparable to Nintendo 3DS in the near future?

Iwata:

Naturally, we are developing new products all the time. Whenever asked, our answer is yes, (we are making new products.) Our development departments are dedicated to developing new products. Once we release a product, we will soon move to the development of the next. Since the launch of the original Nintendo DS, the company has introduced you to several new models, but we have to anticipate the life span of the Nintendo DS series will eventually come to an end someday. We have been studying and developing the next product for that day. In this context, Nintendo 3DS has been under development for the six years (since the release of the original Nintendo DS.) Speaking of other products, we are of course studying and developing the next console to Wii. However, there is a big difference between studying a product and announcing what it is and when we will release it. I am afraid to say that the history of entertainment is also the history of imitation. A great idea will promptly be copied unless protected through patents. At the same time, it is really important for our business to positively surprise people. Will you be surprised by our completed product if we told you how it is surprising three years in advance? Therefore, we basically disclose information on our products as late as possible. We believe this is the best approach for the entertainment products we are developing. Again, we are planning the next products for Nintendo's continuous growth, but we cannot tell you what, when and how we will release it here. Thank you for your understanding.

5	I'd like to ask you about your potential rivals. Do you consider cloud computing, which has been talked about a lot lately, as a rival or as a partner that you can cooperate with?
5	Iwata: Talking about rivals in general, we used to be interviewed by the media about the competition with Sony and Microsoft. Recently, media reporters have often interviewed me with their own belief that Apple is Nintendo's rival and have written articles accordingly. On the contrary, we ourselves, assume that our rival is everything consuming people's interest, time and energy. If we were to consider one specific thing as our rival, we would do nothing but think of how to beat it. Thinking this way could allow us to fall into the trap of shortsighted business philosophies, saying, "how do we spoil the rival's strength," or "how do we do what the rival cannot do." If Nintendo manufactured commodities of daily necessity and if there were some established methodology to have our products appreciated by the consumers, such approaches could make some sense. However, for Nintendo's products, it is quite uncertain what is amazing and amusing to people. Even if we ask customers what kind of games they want to play and develop one game as they requested, it may not always greatly excite them. Instead, we should develop what is beyond their imagination and let them say, "This is unexpectedly interesting," or "This is the very thing I have been wanting." We can say that our business is very unique. Therefore, rather than trying to identify a specific rival and to think about how to fight against it, it is more important for our unique business to always ask ourselves, and try to answer, such questions like "What does it mean to make people interested in something?", "What is worth spending people's time and energy on?", or "What do people find amusement in?" We would be glad if you understand that, as the basis, we are not conscious of any certain rivals. Specifically about the "Cloud Computing" that you referred to, the term is often seen in the newspapers these days. Please let me briefly explain about the term first. Now that the Internet and other telecommunication networks have been highly developed, you can have computers process complex transactions online and return the results quickly through fixed-lines and cell-phones. The cluster of computers online is called the "Cloud." With the Cloud, you do not need an expensive computer on hand anymore even for the most complicated information processing. All you need is an input and display device. This is the concept of Cloud Computing. One of the advantages of Cloud Computing is the flexibility of the allocation of computers installed. It is said to be a very efficient technology for a business with volatile demand, for example, the demand of a service increasing ten times suddenly in a day and decreasing to only a fraction in three months again. On the other hand, in the world of (interactive) entertainment that we create, it is pretty true that what comes first is a quick response to players from the computer. The technologies we use in our video game consoles actually include some elements which are very suitable but others which will never be suited to Cloud Computing. With Cloud Computing, for example, customers would be irritated even by a slight delay in response after pressing a button. So, for what is suitable for Cloud Computing, we will take advantage of the technology in the future. It is also natural that we will align with a service provider of Cloud Computing, and not going through the trouble to develop our own facilities. Having said that, however, Cloud Computing would not conquer every field of entertainment because present telecommunication technologies inevitably involve a certain delay and limitation of transmission speed. We would employ Cloud Computing as far as it is useful.

I'd like to ask you about your potential rivals. Do you consider cloud computing, which has been talked about a lot lately, as a rival or as a partner that you can cooperate with?

Iwata:

Talking about rivals in general, we used to be interviewed by the media about the competition with Sony and Microsoft. Recently, media reporters have often interviewed me with their own belief that Apple is Nintendo's rival and have written articles accordingly. On the contrary, we ourselves, assume that our rival is everything consuming people's interest, time and energy. If we were to consider one specific thing as our rival, we would do nothing but think of how to beat it. Thinking this way could allow us to fall into the trap of shortsighted business philosophies, saying, "how do we spoil the rival's strength," or "how do we do what the rival cannot do." If Nintendo manufactured commodities of daily necessity and if there were some established methodology to have our products appreciated by the consumers, such approaches could make some sense. However, for Nintendo's products, it is quite uncertain what is amazing and amusing to people. Even if we ask customers what kind of games they want to play and develop one game as they requested, it may not always greatly excite them. Instead, we should develop what is beyond their imagination and let them say, "This is unexpectedly interesting," or "This is the very thing I have been wanting." We can say that our business is very unique.

Therefore, rather than trying to identify a specific rival and to think about how to fight against it, it is more important for our unique business to always ask ourselves, and try to answer, such questions like "What does it mean to make people interested in something?", "What is worth spending people's time and energy on?", or "What do people find amusement in?" We would be glad if you understand that, as the basis, we are not conscious of any certain rivals.

Specifically about the "Cloud Computing" that you referred to, the term is often seen in the newspapers these days. Please let me briefly explain about the term first. Now that the Internet and other telecommunication networks have been highly developed, you can have computers process complex transactions online and return the results quickly through fixed-lines and cell-phones. The cluster of computers online is called the "Cloud." With the Cloud, you do not need an expensive computer on hand anymore even for the most complicated information processing. All you need is an input and display device. This is the concept of Cloud Computing. One of the advantages of Cloud Computing is the flexibility of the allocation of computers installed. It is said to be a very efficient technology for a business with volatile demand, for example, the demand of a service increasing ten times suddenly in a day and decreasing to only a fraction in three months again. On the other hand, in the world of (interactive) entertainment that we create, it is pretty true that what comes first is a quick response to players from the computer. The technologies we use in our video game consoles actually include some elements which are very suitable but others which will never be suited to Cloud Computing. With Cloud Computing, for example, customers would be irritated even by a slight delay in response after pressing a button. So, for what is suitable for Cloud Computing, we will take advantage of the technology in the future. It is also natural that we will align with a service provider of Cloud Computing, and not going through the trouble to develop our own facilities. Having said that, however, Cloud Computing would not conquer every field of entertainment because present telecommunication technologies inevitably involve a certain delay and limitation of transmission speed. We would employ Cloud Computing as far as it is useful.

6	Nintendo would like to distribute its entertainment products to people across the world. But, the fact is that Nintendo is at present doing business primarily in more industrialized and developed markets like North America, Europe and Japan. Would you tell me about your plan to enter into newly-emerging countries as well as the countries with large populations like Africa and South America? In addition to that, Nintendo would need resources to find out about people's needs in the global market, but the current board members are all Japanese. Do you have a plan to promote some staff members in North America and Europe to the board, where you already have huge markets?
6	Iwata: It is true that not only those in Japan and the other developed countries in North America and Europe but also those in several countries with rapid economic development can afford more entertainment than before. And it is vital for our basic strategy of "gaming population expansion" that more people in such countries as well as in Japan, North America and Europe, enjoy our video games and feel convinced to pay for them. Meanwhile, some in newly-emerging countries do not have an established custom of paying for software. We do wonder if the traditional business model of the video game industry will succeed in such regions. If we do totally different business there with cheaper services and software than developed countries, people in developed countries would have negative feelings toward us and say, "why do we have to pay much more than those playing video games elsewhere?" This could be one of the biggest problems for us that would need to be solved. Needless to say, popularizing our video games throughout newly-emerging countries is indispensable for Nintendo's growth in the mid-and-long term. We will take enough time to work on it. Concerning the nationality of board members, we believe that there is a crucial　difference between how many non-Japanese directors a company has and how internationally-minded a company is. If our management did not know or try to understand any countries outside Japan or travel abroad at all, this could be a problem. However, all director candidates here are very familiar with various international issues and actually go on international business trips for many purposes. Otherwise Japanese-born Nintendo DS and Wii would not have spread globally. Therefore, we are not concerned about our current management's ability to respond to globalization. We will continue our efforts to communicate with our customers around the world.

Nintendo would like to distribute its entertainment products to people across the world. But, the fact is that Nintendo is at present doing business primarily in more industrialized and developed markets like North America, Europe and Japan. Would you tell me about your plan to enter into newly-emerging countries as well as the countries with large populations like Africa and South America? In addition to that, Nintendo would need resources to find out about people's needs in the global market, but the current board members are all Japanese. Do you have a plan to promote some staff members in North America and Europe to the board, where you already have huge markets?

Iwata:

It is true that not only those in Japan and the other developed countries in North America and Europe but also those in several countries with rapid economic development can afford more entertainment than before. And it is vital for our basic strategy of "gaming population expansion" that more people in such countries as well as in Japan, North America and Europe, enjoy our video games and feel convinced to pay for them.

Meanwhile, some in newly-emerging countries do not have an established custom of paying for software. We do wonder if the traditional business model of the video game industry will succeed in such regions. If we do totally different business there with cheaper services and software than developed countries, people in developed countries would have negative feelings toward us and say, "why do we have to pay much more than those playing video games elsewhere?" This could be one of the biggest problems for us that would need to be solved. Needless to say, popularizing our video games throughout newly-emerging countries is indispensable for Nintendo's growth in the mid-and-long term. We will take enough time to work on it.

Concerning the nationality of board members, we believe that there is a crucial　difference between how many non-Japanese directors a company has and how internationally-minded a company is. If our management did not know or try to understand any countries outside Japan or travel abroad at all, this could be a problem. However, all director candidates here are very familiar with various international issues and actually go on international business trips for many purposes. Otherwise Japanese-born Nintendo DS and Wii would not have spread globally. Therefore, we are not concerned about our current management's ability to respond to globalization. We will continue our efforts to communicate with our customers around the world.

BACK | 1 2 3 4 5 6 | NEXT