|
|
|
|
News Highlights from Iwata's Q & A Session with InvestorsBy Jacob Mazel 05th Nov 2009
I would like Mr. Miyamoto to explain New Super Mario Bros. Wii. Also, please let me know what kind of genres or platform you are focusing on most at this moment. Also, where and how do you get your inspirations? I heard previously that you were gardening when the idea for Pikmin came to your mind. And when will you likely be releasing them? Satoru Iwata (President):
Well, thank you for your question. Now I would like to start my PR activity for the New Mario title. First, I want to ask if you already have any information on the title, New Super Mario Bros. Wii. If you have, please raise your hand! Well, how many of you...? (Looking around the raised hands of the audience) Thank you. So let me explain with the premise that there are people who do now know much about the title.
Please explain the impacts of such devices as Magic-Coms or R4 had made on DS software market. Personally I have heard that considerable impact has been taking place in Europe. I would like you to explain how large its penetration and impact are, and how you are going to deal with them. Iwata:
I recognize there is more software piracy, playing downloaded software data without purchase, than some years ago, on many of the current platforms including Nintendo DS. You have noted one of Magic-Coms (dedicated to DS), but I think I can declare that software piracy impacts ALL video game platforms today. As for the piracy itself, it is said to be hard to precisely figure out the total impact as it is done underground. Actually piracy has become more widespread in Europe than in U.S., especially in specific European nations where piracy regulation is restricted by the law. Thus we should assume that Europe is seeing a larger impact than U.S. Of course we are developing video games very hard for the sake of customers' enjoyment and so are other software companies. Thus it is our important role as a hardware manufacturer to establish the environment for healthy video game business. As for specific measures, we have two ways; technological and legal measures. They tend to become a cat-and-mouse chase; as the piracy itself is underground, someone somewhere finds out the solution to evade our measures. When we shut one hole of the mice, they have dug a new one somewhere else. We have acknowledged that this is an endless battle, and we believe the best measure is to keep fighting it technologically and legally. As for the details of specific measures, I'll refrain from disclosing them here, as this conversation will be public online and the pirates will be able to find. I will however promise to keep acting legally and technologically, with patience. Please give us an explanation of Wii and DS's Internet connection ratio including WiiWare, DSiWare and Wii no Ma (a video download service in Japan).
Iwata:
As for Internet connection ratio, there are slight gaps between regions and periods - from right after the launch of the console when eager users are the majority to when the console starts to get popular. If Nintendo takes no action at all, the ratio will gradually decrease. As the console spreads, many people will buy, including those who are not really interested in the Internet, and the ratio will decline. And so far we have taken various measures. When we announce that the Internet Connection gives you a variety of entertainment options or release a title which becomes more enjoyable with the Internet connection, the ratio actually rises. On a rough analysis basis, the connection ratio of Wii is around 35%, in the Japanese market. And that of DS is probably, 20% or so. It had increased with the measures like Nintendo Zone with McDonald's to lower the hurdle for connection, but has not reached the 30% mark. And regarding your question about the download sales including WiiWare and DSiWare, so-called digital distribution in English, there is actually a variety of views about how much it will replace retailers and package software. Most radical people even dare to say that retailers will be replaced by digital distribution in no time. But personally, I think it will still require a significant amount of time. In other words, it will require many years and months for the majority of video game purchase to become digital. In short, in 20 years or so I might say it will have probably changed. But in 5 years or so, I do not totally agree with opinions that no one will purchase titles at retailers by then. Habits of life do not change such radically and quickly. Especially for the expanded audience of various people, to whom we are and will be trying to appeal, I believe their habits will change more slowly. Personally, what I believe is the most important factor for Internet connection is expanding titles' lifespan rather than replacing the packaged software to digital distribution. With the Internet connection, players can purchase additional features or receive extra services. As a result they will play a single software for a longer time without feeling bored and will not sell it to the used-game shops, which will then contribute to more software sales. I believe such a utilization of the Internet connection is one of the major directions we should aim for and we will continue to try and raise the connection ratio. As for the future plan of our approaches such as the one with McDonald's, hopefully we can further broaden Nintendo Zone. I believe it is very important to establish an environment where Nintendo DS owners can easily connect to the Internet without having to set anything up. Actually when we ask customers to set up something in your home, many of them refuse, saying that it's too difficult for them. But when we ask them to just bring their Nintendo DS to a specified location as we actually do, they actually bring them if there are meaningful contents. Thus by broadening such an environment, we can have many Nintendo DS owners feel the value of being connected. Afterwards, we can expect more of them to want to do it at home since they now understand the value of being connected. So this is the process that I imagine (for spreading Internet connection on our platforms.) And as for WiiWare and DSiWare, they have not established a notably large market yet. The current situation on Wii Shopping Channel or Nintendo DSi Shop is like a purchase with specific intent, where customers who already know the name and information of the game they want directly seek out what they want and bring it to the register to purchase. Internally we have been discussing that we have to engage customers with less information to purchase. And as an experiment, we will be offering demo versions of specific titles next month on a trial basis to see if it can widen the customers. But I don't think that the demo version is the final solution. I believe that until customers have a reason to visit Wii Shopping Channel or Nintendo DSi Shop without purpose, digital distribution will not become popular. Our basic ideas are to add value to the hardware in order to add value to the software, rather than replacing packaged software to digital distribution. Finally as for Wii no Ma; after its launch in May, 930 thousand households or 2.48 million people have experienced it as of October 26th. I think it is a decent first step because these numbers reflect the number of views by users in front of whom we have set fairly high hurdles, from downloading the channel to watching and voting on the video. Of course this service is still in its early stages and we are still figuring out what we should have done at first. We are planning to update the Wii no Ma Channel within the year for pay contents, and thinking about some new measures for increasing the penetration rate. Wii no Ma is one of the approaches to give a wider audience an opportunity to play with the Wii console. If more customers are not playing games on the Wii but actually using the Wii console, it will contribute to the spread of video games in the future, and we will continue to work on this initiative. You mentioned the lack of strong software titles as a reason of not having been able to meet your expectation for Wii hardware unit shipment and of having lowered the annual shipment forecast. However, I understand that the company has launched titles that were originally anticipated. In spite of that, how do you analyze the reason why you were not able to increase the unit shipment? Why were you not able to launch strong software titles while you had been aware of the importance of doing so and had raised it as an important theme? What will you do to tackle with the status quo? Won't you change, or do you have different strategy? Please advise.
Iwata:
First, Nintendo's basic business structure is to have a relatively small number of titles that sells all over the world for a very long time and that each sells a large volume to drive hardware and software sales and, as the result, revitalize the market. Talking about Wii, if Wii Music and Animal Crossing: City Folk that we launched late last year had been able to sell for a long time and to build up a steady sales volume, we might not have to say that we lacked strong software in the former half of this year. One year ago, Wii Fit and Mario Kart Wii continued their strong sales. However, if they had not sold in that fashion, we might have said that Wii had lacked the software to support the hardware at that time. In other words, it is not the question of the quantity of the titles. What matters here is, whether or not we have the software that continuously sell, and whether or not we are able to construct the circumstance in which these titles can steadily make their ways into the hands of new customers. Of course, Nintendo wants to have a perfect batting average, and I believe Nintendo's developers have been trying to pick up interesting ideas and themes, polish them and to offer them as the final product. Unfortunately, since we are human beings, we cannot make every one of them a 100% hit title. That, and also other factors did not work well, either. The atmosphere toward the entire gaming industry had been cooled down for a while, more so than we had anticipated. As of spring this year, we were already anticipating the general atmosphere to cool down. Honestly speaking, I thought in summer that I didn't expect the extent to which the market had be cooled down, on that, I had misjudged. However, as I shared the data with you today, Wii Sports Resort has been functioning in order to regain the momentum in the excessively cooled-down market. I understand that it takes time to heat it up again once it has been cooled down this much. The general atmosphere in the world is not that people want to snap up a Wii, so it will take time. Thinking in this way, we came to conclude that we would not be able to reach the unit hardware and software shipment that we had originally expected, and we revised our forecasts downwardly. Next about the question of how we will prevent the situation where we are unable to prepare the strong software lineup, as a matter of course, we are preparing for our arsenals for the next year right now and, we are confident that we have a fair chance of winning. We are currently considering how we should prepare our weapons the year after rather than next year. Right now, as a marketer, we are focusing upon how we can maximize Wii Fit Plus sales around the world and how we should sell New Super Mario Bros, Wii. As a manufacturer, we are preparing for next year so that what software we will be able to sell then are already in sight to a certain extent. In other words, if we cannot be very sure right now if we will be able to sell them next year, these titles probably won't hit the market next year. As of now, we have been considering what we need to prepare in order to do our business in 2011. Of course, the fact that we were unable to put long tails to the software we had launched in late 2008 was what we regret and we would like to make efforts not to let it happen once again. Even after your presentation, I cannot completely understand how you are going to learn from the past mistakes and what you will change and how. I agree that it is impossible to make every single game you develop the great success, and I do not think that the mistake that was made was detrimental. However, when I think about the examples of Facebook application, surge of iPhone, motion sensor introduced by Sony and Microsoft at the E3 show and other changes in competitive landscape, I have the impression that you are one step behind in taking such countermeasures as the following markdown of Wii, if I can be rather blunt.
I also feel that you are a bit late in addressing changes in the industry structure such as polarization of software that can sell and that cannot sell, the cautious attitude that major retailers take toward the purchase of the stock and illegal copying of software. While I fully understand the potential room for the gaming population expansion including those in newly emerging nations that you have been explaining to us for some time, I still cannot foresee the product or the service that can trigger the expansion or re-expansion. I know I should not ask today about the details of the new proposals that will surprise us, but when I was reading the articles this morning regarding your financial announcement, I came across such expressions as the turning point. So, I would like to know if a decrease in the current financial performance is rather temporary and, with the strong software lineup, will you be able to put the company back to the growth orbit? Iwata:
Our business is to challenge something that others would think that our commonsense tells that it won't work. And when that something can make the great unexpected hit for any reason, our business has the potential to significantly grow. It is already a long time ago, but did any one of us think that Pokémon would be a global hit? Who was able to tell that "Brain Training" could sell all around the world? How many people in the world were able to foresee the actual sales number of Wii Fit before its launch? The fact that the original purchase orders for "Tomodachi Collection" from the Japanese wholesalers were 100,000 meant that the Japanese experts determined 100,000 would be enough to comply with the demand for a while. What matters is how we can create something which can destroy such a notion, but the software development does not always work out as calculated. On the other hand, since I am managing a listed company, I am responsible for realizing a certain high level of batting average and for aiming to increase sales and profits. Naturally, I understand that there are such criticisms that Nintendo was late in addressing various issues. However, I also have to analyze if the company really owns enough resources in order to take the first move in any and all the fields. Since Nintendo does not have very many employees, we have to focus upon the things which we are good at. If we had to take measures and countermeasures in any and all the possible business fields, our resources could be dispersed very quickly and easily. Rather, my job is to find out the potentials in something that others could not find a possibility, to secretly pour the resources into them and to realize the situation that the products have already become great hits before no one else know. If we can realize such a situation at or above a certain level, the company can be publicly appreciated. If not, people would look back and say, "It was certainly a turning point for the company." We are developing one product after another, and we are aiming to make each one of them an unexpected hit. Otherwise, we would not have spent more than 3 years developing "Tomodachi Collection." However, not all the software can be a hit like "Tomodachi Collection" just because we spend three or more years for their developments. Identifying such potentials is one of the most important jobs for me and for Mr. Miyamoto. The fact that we have actually been able to make them unexpected hits at a certain percentage so far has pushed Nintendo to where we are today. So, for us to be able to dispatch our messages in the market, we need to ask you to believe in our records in the past few years to identify the unknown potentials and ask you to trust the possibility that the company will continuously propose something that may eventually be unexpected hits in the future as well. Nintendo cannot afford to disclose all of our business secrets that we are preparing for you next year and two years later and still to insist to all of you that you have to be surprised when we actually launch them. So, we cannot constantly deliver the message (as to precisely what we are making now.) Also, we ourselves are finding out the seeds just while we are running. We internally exchange such conversations as, "I can feel something uniquely interesting potential with this idea." The charm of some of these ideas suddenly emerges to the surface during development, when we make the decision whether or not we will further challenge with that. Mr. Miyamoto and I often say at such an occasion, "well, with this idea at the current stage of the development, we will be able to finish the development and launch this in 8 months or 10 months." That is a kind of timescale with which we think about the developments. So, when I said earlier today that the company has already made the preparation for the arsenals for the next fiscal year and, right now, we must think about the year after, it was my real feeling. It is not that we do not have a means to reinvigorate our sales from now. Please at least understand this point. I cannot understand at all why some people come to think that Nintendo has lost its edge as soon as they hear such news that other companies are newly applying for motion sensing technology. If fun and interesting software to take advantage of the technology could be created that easily, a number of other titles which are more fun than Wii Sports must have been already launched for Wii. Why in real life are not so many? The total power factor to combine both the technologies and software at the appropriate level must be the reason why Nintendo has been appreciated in the marketplace, and when someone argues that Nintendo has lost its edge when the actual products have not been launched yet, I feel something must be wrong here. The same thing can be said about the talks over iPhone and iPod Touch. Some articles suggest that Nintendo is trying to leverage the Nintendo DS business because iPhone and other game machines are gaining momentum. As I explained to you with some data today, it is true that the current Nintendo DS business is not that heated up as it used to be sometime ago, when no one could tell how far ahead Nintendo DS might be able to grow. On the other hand, the data also showed that Nintendo DS has not lost its footing at all. Actually, it has been even increasing its footing all around the world. Under such a circumstance, I do not know why some people make such a remark. I have to feel that, probably, there are people who want to write the story that Nintendo is competing against Apple, and they are picking up fragmented information here and there and connect them to write their own stories. I cannot agree to such an argument. I want to believe that some of you who have listened to my presentation were able to understand our position. I am paying attention to such unique structures of "Wii no Ma" as where the viewers can immediately return their assessment on the program and link to the advertisers' web sites because such functions are not attached to the existing TV programs on the terrestrial channels. How are the advertisers and program creators feeling about "Wii no Ma" right now?
Iwata:
Usually, people watch TV programs only passively. In other words, except when we choose the channel, we are just watching the programs. On the other hand, video distribution is a proactive viewing activity where nothing starts unless the viewer takes the action to select the video. In case of "Wii no Ma," some people are annoyed or do not think it's a good idea when they are asked to vote after watching videos, and some people agree that this kind of proactive viewing is worthwhile. In fact, we can understand how many people in which age demographic have seen the entire program, and in case they stop watching them halfway, when they stopped. And the assessments are given to the program creators. From the video creators' viewpoint, in accordance with the degree at which they want to know the reaction from the viewers, the feedback from the viewers is stimulating, they say. In fact, I hear from those who are operating the "Wii no Ma" that some of the creators who could not receive the expected feedback are shedding bitter tears and some others who received good assessment are very happy. That reminds me of Club Nintendo. We have been able to receive direct opinions from our customers about the products they purchased. When the opinions are circulated among the development teams, they read through them very seriously. The creators always want to know how their works have been appreciated by the customers. Of course, since our job is to give pleasant surprises to the customers, we do not intend to incorporate any and all the opinions into our future products because such products cannot surprise the customers. On the other hand, we would like to know how our customers actually felt about our products. Because we are working to give some excitement to people, if our customers are not excited, we would like to know and face the truth. If you are excited, we would like to know which part of the product was able to reach that part of your mind. Doing so will increase the creative level, we believe. The video creators who share the same feeling with us are very positively reacting to this particular feature of "Wii no Ma." On the other hand, not all the video creators are very happy about the feature. I feel that the video creators are totally divided when it comes to their opinion to this feature. As for the advertisers, I heard they are feeling this is a unique and unusual media which is situated between Internet advertisements and TV ads. This is something we have been feeling since we conceived the original concept for "Wii no Ma" but it appears to have a very interesting characteristic as "a device to validate the hypothesis." More specifically, we can learn, very quickly one after another, what kinds of response are made with what kind of visual presentations. Some advertisers have realized that possibility and are now requesting that they would like to try this and that by commenting that this is very interesting because they can receive the more immediate and more direct responses than any other means they tried on the Internet. We have been trying not to blame the economical downturn when our business is not good, but as long as "Wii no Ma" is concerned, we regret having to say that the "Wii no Ma" service made the start right at the worst timing that we could possibly imagine. More specifically, "Wii no Ma" was started right when all the corporations had to cut down on advertisements and when even the companies which have been spending so much on ads had to declare that they would not try any new things for a while. In other economical situation, more number of companies would have tried "Wii no Ma" by now. Even though people in charge loved the potential, when they tried to persuade the company management, they were requested to prove the cost-benefit performance first. But they couldn't because the service itself was yet to start. They might be able to prove it as soon as they were able to start, but some companies are prohibiting to start any new project unless the cost-benefit performance can be proved. Due to this circumstance, it is true that we have not been able to create the flow in which new advertisers one after another are able to start their new trials with "Wii no Ma". Having said that, however, we already have some solid feeling about the possibility of the "device to validate the hypothesis" which no other existing media were able to provide so far. From now, when the environment changes a little bit and many corporations can start to feel that they should tackle with something like this more proactively or that they should challenge something new, "Wii no Ma" may be able to become a very unique and interesting means. This is my observation. ------------------------------------------------------------------------------------------------------------------------------------
Even more information, including Nintendo's thoughts on HD, Kindle, and FaceBook games can be seen here.
|
  |
| Graphics and Flash widgets by |  |
