Financial Results Briefing Q&A highlights

Nintendo President Satoru Iwata took some time after the Financial Briefing to answer some questions from investors. For the full English transcript, please visit:

On plans for mobile:

Next, in terms of how much the smart device business will contribute to our entire business, we announced that we will begin the service for our first gaming application by the end of the calendar year, so looking at the entire fiscal year, it will only partially contribute to our business for this period. In addition, we will not release a great number of titles one after another at the beginning. As mentioned in the presentation, we will sequentially release around five titles by the end of the next fiscal year and guide each of these titles to become hits.

On Mii's in the mobile space:

As for your second question regarding the smart device application using Mii characters, we are still working on it. We will show you it and how you can use it when it is ready. Please understand that the smart device application using Mii characters is one of the ongoing projects at Nintendo, as we are working on multiple projects simultaneously.

On choosing partners:

Nintendo is a company that, when considering possible alliances, believes that it must carefully review such factors as whether or not each company's strengths and weaknesses will smoothly complement each other and if the corporate cultures of both companies will work in harmony, rather than focusing on the potential short-term advantages. Talking about alliances in general, most of them in today's business world, as I see them, have not worked out very well. More specifically, it is often the case that the corporate cultures of the two companies just do not integrate well or that even though the top executives have agreed to work together, the people at the forefront of the actual projects are not able to establish common grounds for working together.... As a result, we spend a significant amount of time to comprehend the strengths and weaknesses of both companies and to confirm each company's corporate cultures. We not only carry out discussions with key people at the management level but also involve those who may actually work together in order to review if the alliance will be truly beneficial for both companies. We do so in order to avoid situations where we seemingly have the same interests but are in conflict behind the scenes. Because of such a thorough review process, some may say that we are slow in making alliances, but if we are going to make an alliance, we want to lay the foundations for the best possible results.

On the deal with Universal Parks & Resorts:

If I can talk a bit more about our just-announced alliance with Universal Parks & Resorts, we first met with them in April last year when I was visiting the U.S. on a business trip. We met with people from NBCUniversal who proposed the possibility of the theme park business to us. Even before then, the possibility of theme park attractions (with Nintendo IP) had become an often-discussed topic in society. Even inside Nintendo, the possibility had been discussed several times. But we had not made this a reality because, on each occasion, the time was not ripe yet or we were not able to find an appropriate partner with whom to work. In the case of our first meeting with Universal Parks & Resorts, they provided us with a very detailed proposal right from the beginning. Also, as we met right after they had opened the Harry Potter attractions, we were able to learn precisely how they had been created. We received a great deal of useful information from the first meeting for us to review if they possessed a corporate culture which would ensure us the ability to license our IP to them and to work well together. Since the proposal was so specific, as soon as I returned to Japan, I informed Mr. Miyamoto, of our company, and told him that I wanted to give positive consideration to it. Since then, we have met with them several times in Japan and in the U.S., and not only me and people who carry out our negotiations but also members from each company's creative side, namely, people who will be assigned to make the actual attractions and Nintendo's game producers who have been creating our games for many years. As a result, we confirmed that we share a lot of common ground between our corporate cultures, and because parts of the proposal made us really excited, we have decided to work together on a long-term basis.:

On the new rewards program, reducing friction, and staying flexible:

The better the system can operate, the more smoothly and frequently our consumers will be able to travel between smart devices and dedicated game systems. It will increase the number of reasons for our consumers to keep on playing games or to keep on playing with their friends and relatives, increase the opportunities where one can recommend some games to others and vice versa or where people can exchange game-related information. Today, the speed at which information can spread is extremely fast. Anything that experiences a boom in today's world is almost always riding on the wave of this information spread, so we have to construct a system which matches today's environment. In the past, TV ads and word of mouth might have been the main components of that system, but today, people argue how we should add the Internet to a system and how we should combine these efforts with smart devices, and we are aiming to construct such kind of comprehensive system. So far, we have been offering a loyalty program in which we offer corresponding points to those who have purchased our products, and we have been offering some rewards based on these points. What we are aiming to establish is not a simple extension of the existing loyalty program but a loyalty program with, say, the entertainment elements where the members feel that they have received certain rewards as a result of not only their purchases but also the history of their gameplay and how each consumer has interacted with others. Since it is impossible to define the requirements for this sort of loyalty program 100 percent in advance, we see it very advantageous that we are able to work with DeNA who will be able to flexibly deal with such requirements.

On Nintendo's IP strategy:

I have heard from our investor relations team that a lot of people appear to misunderstand Nintendo's IP strategy, here is one thing I would like to clarify. We announced that Nintendo would actively use its IP (at the Corporate Management Policy Briefing in January 2014). Some misinterpreted this "active usage of Nintendo IP" as our effort to engage in character licensing activities and to maximize the royalty revenue by exposing Nintendo IP in as many places as possible. As a result, some of you must have such questions as, "So, what is the difference with the IP usage strategies of other companies?"

The active use of Nintendo IP is our strategy for the sake of Nintendo's game software business of the dedicated game systems and, from now on, of the smart device business too. When it works well, the game software business yields high profits. For example, regardless of whether a game sells 2 million or 10 million copies, Nintendo's investments on the game development and for the initial marketing are much the same, but the revenue greatly varies depending on the unit sales, and when one software title sells well, it can significantly improve Nintendo's business performance. It happened when Nintendo was able to improve its business performance with Wii and Nintendo DS. We are trying to bring exposure to Nintendo IP in various places in order to create a situation where a wide variety of different people will have the opportunity to play with our games. Should we aim to maximize our license revenue, we would prioritize how we could increase the number of merchandising products. This is not our priority. Because the most profitable business for Nintendo is its software business, we put emphasis on considering where and how we should use and give our IP exposure so that as many people as possible will recognize and become familiar with them. In addition, we have to be careful that the way we use Nintendo IP will not end up decreasing or consuming its value but actually will increase the value in the mid-to-long term, not just for the short term.

via Nintendo Investor Relations

Posted on May 14, 2015 and filed under News.