Iwata on the need to take advantage of smartphones/character IP, west coast labor dispute impacting stock, more

Please tell me your thoughts on the potential of the existing businesses. You have explained that you would regain Nintendo-like profits in the fiscal year ending March 2017. I would like to know the expected balance between the existing businesses, Nintendo 3DS and Wii U, and new endeavors, such as more active utilization of character IP and QOL. Based on the latest financial results, I presume that it would be difficult to turn a stable and significant profit from the existing businesses because Nintendo 3DS has entered the latter half of its product lifecycle and Wii U is expensive to produce. Would you give me some clues about your outlook for the fiscal year ending March 2017?

First of all, we have never thought that the future of dedicated video game platforms would be bleak so we should migrate to a new business area. On the contrary, we continue to consider what more and better we can do to attract consumers to our dedicated video game platforms or to have them understand the value of our platforms.

Following the generally accepted theory on platform lifecycles, it is natural for you to presume that the sales of Nintendo 3DS will drop X percent each year or we cannot expect a huge increase in Wii U sales. On another front, we have witnessed one single software title completely change the entire picture of our business many times. I believe one of the most impressive stories was the time when people thought the Game Boy platform was virtually over. However, a software title called “Pokémon” turned things around for the platform and ended up creating the biggest annual sales for Game Boy in the latter half of the platform’s eventual lifecycle. Therefore, we do not believe that the situation so far means that there will not be a bright future. However, we should learn from our experiences of not being able to perfectly respond to certain social changes such as changes in the way consumers collect and receive information.

We recognize that we need to make changes in various areas, and consider how we can take advantage of smart devices and more actively use our character IP. Please do not take it the wrong way. It does not mean that we are going to proactively utilize smart devices and character IP because we are not making enough profits from our dedicated video game platforms. We are willing to do so for that will create a synergy effect to expand our dedicated video game platform business. Of course, we will probably make profits from our character IP business, and amiibo is already having a positive impact in its initial phase of business. Still, it is obvious that we cannot easily achieve the same sales and profit level only with amiibo as the peak times for our dedicated video game platform business. Therefore, we should consider how we can boost our core business, that is the dedicated video game platform and software business. I showed you the initial overseas sales results for New Nintendo 3DS in my presentation today. More than a few of you might have assumed that, based upon the pre-launch situation, the Nintendo 3DS business in the overseas markets could not be changed even with the launch of New Nintendo 3DS. Actually, the initial shipment units sold out quickly in stores around the world. In the presentation, I showed you the preliminary sales figures of New Nintendo 3DS for the first two days in Europe and the first three days in the U.S. More precisely, most of them were sold on the first day, and the sales did not increase much on the second and third day due to a lack of stock. In the U.S., because of an ongoing labor dispute on the west coast, the ports have been crowded and the discharge of cargo has been delayed over the past six months. As a result, not all the quantity we intended to deliver before launch had been imported and the sales figures of New Nintendo 3DS, and certain amiibo, were affected slightly although our software business has not suffered much because we have the option of exporting such lightweight products as software by air. I imagine that consumer electronics companies must have had a hard time with it. Taking this into account, the strong start for New Nintendo 3DS implies it has the potential to create a scenario that deviates from the assumption that the Nintendo 3DS business is going to shrink because it has entered the latter half of its lifecycle.

It is natural that we would like to earn an incremental profit from each new business we start. As for the QOL business, we expect it to contribute to the company’s profits in some way in the fiscal year ending March 2017. However, you cannot expect a company that has been making all of its revenue from the video game business to suddenly turn out half of its revenue through the QOL business in just one year. This kind of change requires several years. Our goal of the fiscal year ending March 2017 will be to make the video game business robust. If our software were not receiving high evaluations from both professional reviewers and consumers, our ability to create marketable products and services itself must be questioned. However, since this is not the case, and our products are receiving high scores but are still not selling as expected, there is much to be done in the way we incorporate aspects into our products that sell themselves, and in the way we communicate with consumers to promote and sell our products. And that is the area we are going to focus on. From this perspective, I give first priority to the improvement of our core business. In addition, I envision added profits from our new businesses and then eventually we will be able to achieve Nintendo-like profits. That is all I can tell you today.

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