Nintendo: "Gamers have been hungry for new and better ways to play"

Obviously, the holidays are a critical time for Nintendo and for all of our products, and we spend a lot of time preparing and planning for this time of year. For us, as we look at the holiday and try to assess what we see - first, on both our handheld and console gaming platforms, we have hardware news. That's exciting whenever you have hardware news to roll out in the marketplace to introduce and launch, it makes your holidays very bright. Certainly with Wii U, it's highly anticipated, the countdown has begun for November 18th, the pre-sells have been incredibly strong and we have a very impressive launch lineup of over 24 games on day one, including games for really gamers of all types starting with one of, if not the biggest gaming franchise of all, Mario, with the new Super Mario Bros U. This will be the first time we've launched with a Mario game on a new platform in a long time, so that game is really getting a great reception so far. And Nintendo Land - new IP - [offers] great games that a lot of young and family gamers can really enjoy.

We've got great content coming from third party publishers as well for the more avid and serious gamer, like Call of Duty: Black Ops 2, ZombiU, Assassin's Creed 3, Batman: Arkham City. For the sports fan, certainly FIFA, Madden, will be there. And then for the casual gamers that enjoy singing and dancing games there will be Just Dance 4 and Sing Party, just to name a few. So it's an incredible lineup of games right out of the gate on day one.

On the handheld side, we have news - now, it's not brand-new news - but we launched 3DS XL here in August and it's really been off to a fantastic start. So that's going through its first holiday and Nintendo 3DS, just the basic unit, is in its second holiday and that part of our business is building momentum day by day. It's incredibly strong in recent weeks and we have also an amazing lineup of new games and new content for handheld gamers. So that includes Paper Mario: Sticker Star, and robust third-party support like Disney's Epic Mickey: Power of Two, Scribblenauts Unlimited, and Skylanders Giants coming this holiday.

Just to be clear, let me give you two different numbers and two different time periods. So for day one, launch day and date, there are over 24 games. So that's what's available immediately at launch to buy and play immediately. The launch window we've defined as the four or five-month time window that's really from November 18th through the end of March, and during that time we'll have over 50 games. And so you could say that roughly half of the launch window games are going to be there on day one.

To your point, we do try to think carefully about how to sequence content and how to give gamers enough great content on day one, but also keep the lineup fresh and keep rolling out new content as they play through a game and are ready for a new experience. So it's like successive waves crashing on the shore. We want there to be layers and layers of games coming over that period. So we do try to sequence them in an intelligent way as best we can to satisfy gamers' needs and appetites for new content beyond what's available on launch day.

Yeah, it was. Mr. Iwata announced that we will be making and shipping 5.5 million units this fiscal year. That's a worldwide number. We haven't shared the breakout by region, but you're correct in saying that the US and Western Europe are the gaming markets that skews to home console gaming versus handheld gaming, whereas handheld games occupy more of a percentage of the total business in Japan; and so, we haven't given a specific breakout but I can tell you that certainly we've seen brisk pre-sales and that the phone calls have been coming into our headquarters for quite a while now asking for more and so we do expect high demand.

But I can tell you this - on opening week we will have more systems on hand for the Wii U than we did for the launch of Wii. And, second, our replenishments will be more frequent this holiday time than during the Wii launch. But, having said all that, it's impossible to exactly predict demand, and so I can't say that we won't have some shortages out there and that people won't have to be a little patient with the replenishment truckload and shipments and boatloads to arrive.

Again, demand is an unknown commodity but what I can tell you is that we will have more units to sell and to ship during that opening week than was the case for Wii.

I think the core of your question is, “Will we capture the same kind of cultural phenomenon as we did with the Wii?” So let me address that first. The world is obviously a different place than it was when Wii launched. There were no social networks. This was before the advent of tablets and smartphone penetration was much smaller. So the landscape has certainly changed. But by the same notion, Wii U is also quite different from Wii.

Wii was successful because, at its basic, fundamental level, it allowed people to have fun together gaming in ways they had not been able to do before. From that standpoint, Wii U we think is similar but maybe can do that even better. Wii U offers a step forward and a revolution in the world of gaming in that it offers, for the first time [on consoles], a second screen gaming experience and that allows you to do a lot of different things. In the world of gaming, it allows for different forms of gaming and a new, more immersive form of gaming. In the social universe, it allows for experiences like Miiverse, which is going to be a unique social community for gamers to post and share and interact across time and across space that they've never been able to before. Third, the GamePad controller and the second screen experience allows people to experience things like Nintendo TVii to enhance their TV viewing and their broader entertainment world.

And all those things mean that Wii U is quite different from Wii, and so I can't predict it will have the same explosive cultural phenomenon that Wii did but we are trying to do the same thing in that we are giving people another new proposal in an innovative way to play games. If that resonates, then we could see a duplication of what happened.

Certainly with Nintendo Land and with New Super Mario Bros U, with Nintendo-published titles, with Ninja Gaiden and Sing Party, all those titles incorporate the GamePad in really unique ways that showcase some of the possibilities of second screen gaming. I would say that most or close to all of our third-party partners have also embraced the GamePad and are imagining new and different ways to play. Certainly with ZombiU from Ubisoft, with Assassin's Creed 3, you can see how developers are starting to imagine the possibilities with the GamePad and what it can do to facilitate or enhance gameplay and make it more immersive and maybe sometimes more intuitive. So even a game like Call of Duty: Black Ops 2, you can see what Activision is doing with the GamePad. I think the possibilities are endless and we're just beginning to scratch the surface of what can be imagined.

Let me separate your question into two because I think there are two thoughts you're raising there. First is how similar is the GamePad to a tablet? Is that where the inspiration came from? Who knows where the genesis of the idea for creating a second screen for gaming came from truly, but I would say that Nintendo really was one of the first to create a second screen gaming experience with the DS back in 2004. So long before tablets were on the market, Nintendo was offering a touch screen separate input device for gaming and that certainly had to be one of the inspirations for the GamePad controller. How much of an inspiration was an iPad or the tablet computers? Those could have been a part of it as well, but I would say the inspiration more likely was derived from how we had seen the second screen input of a DS enhance gaming and it was natural to think about how those experiences could be applied to a home gaming console. And, what could you do if that was a part of a home gaming console? So that answers the first part of your question.

I think the second part of your question really is a broader question, and it's about how much will smartphones and tablets compete with our offerings this holiday season? Certainly, when we look at our 3DS results, we compare them to a very high benchmark, which is the Nintendo DS, which, as we all know, has had phenomenal acceptance by the marketplace and has gone on to sell at record levels. When we make that comparison here, 19 months into the launch, the 3DS is about a million units ahead of the sales pace of DS and at this point, DS had gone through 2 holiday seasons because it was launched before holiday in 2004, but 3DS was launched after the holiday and so we are just approaching its second holiday season. And so we are a million units ahead ,yet we are just approaching our second holiday season. That seems to indicate that even though the universe has changed, there is still strong desire and appetite for a handheld gaming system. As long as we can create unique and very enjoyable gaming experiences that are deep and immersive and that offer a great handheld gaming experience, we think that we can continue to grow that business and satisfy that demand.

With tablets, there's no doubt that the penetration is growing and that there are a lot of consumers who are finding great uses for tablets, but its a different kind of a gaming experience and our evidence suggest that it's not a zero sum game, that tablet gaming is certainly helping to expand the market and bring people into gaming who might not have been potential owners of a handheld gaming device. So it's helping to grow the market and potentially that could lead to even more purchasers for a dedicated handheld gaming device once people discover that once you have buttons and a 3D screen that a tablet does not, that enables even richer and more immersive forms of gaming that you can't get on a tablet.

And so I'm not trying to discredit anyone else's products, but there have always been hot items of the day. There are social network games, there are cheap downloadable games, games delivered only from the cloud. But maybe all those things aren't always as hot as people think they are. And we certainly believe our technology and our gaming devices have found their place in the competitive landscape and that we offer something different than what those devices offer.

There's obviously an advantage for us in providing our proposal of innovative gaming first. But the real issue is whether our technology or someone else's technology strikes a chord with more gamers. We can't predict that, but based on the brisk pre-sales, I think we have a fair chance of at least having a lot of people discover and embrace second screen gaming from Nintendo this holiday season and leading well into next year. I don't know anything more than you do about what direction some of our competitors may go into, so I really can't comment about that, but what I can tell you is that the Wii U and the GamePad represent a real innovative and unique experience for gamers that the market really needs. Gamers have been hungry for new and better ways to play and this is it.

We set the price or establish the price and the configurations for Wii U to be accessible and to provide great value to the mainstream gaming market. It would be premature to talk about any kind of a change in that approach. We've priced it where we believe we can command a fair profit for our efforts and any kind of technology that's embedded in them, but also where we can make it accessible for a large number of consumers to get them and enjoy them. So I think it would be very premature to talk about any kind of change to that. All I can say is that the response has been phenomenal and we're getting, especially in the higher priced deluxe set, that one's selling out incredibly quickly. That seems to indicate that the pricing's in a good spot and the proof is in the consumer response.

I wouldn't say we feel pressure. I would say that we want the company to return to delivering steady growth and Nintendo-like profits. We need the whole industry to grow. And we need a healthy gaming industry and we want to be a key part in restoring industry growth. As you know, the whole gaming revenue industry-wide has been down a couple of years in a row. Separating the industry health from our own, certainly a part of Nintendo's results are reflected in the strong yen, and when we repatriate profits from regions like the Americas or Europe into Japan, those are being repatriated at a different rate than they ever were before. And that is a significant chunk of the financial results you see.

When we launched 3DS, it did not sell at the levels that we were expecting, and the primary reason for that was that we did not have the game content that we needed. We also had a system at launch that wasn't fully delivering on all of its promise. What I mean by that is that eShop wasn't there. Some of the other interactive entertainment experiences weren't there. And the price was high. But I believe it's really in that order...the factors that drove the [early] results.

Had we had a stronger game lineup, I believe we would have seen stronger results at launch and through the first few months after launch. We made the impressive move of reducing the price and that has really jumpstarted sales and we are enjoying that momentum to this day. It's building incredibly strongly as we go into the holiday, still trending ahead of DS, as I said, at that point in time. But we really saw the system take off when we launched Mario Kart 7 and Super Mario 3D Land. That's when we saw explosive growth in our 3DS business and that's the reason we attribute the slower start more to the game lineup than we do to pricing or some of the non-gaming features.

Nintendo's digital offerings have been growing and expanding quite nicely over the past year. We obviously don't share eShop sales and results, but the number and quality of titles that are available through your Nintendo eShop really are impressive and it's becoming a significant part of our revenue and part of our business. A second big change and big improvement other than building out a really successful eShop is that since August 19 when we launched New Super Mario Bros. 2, we've been making games available in digital form and physical form at the same exact time. Same price, same time. You can purchase them through the retailers or you can buy them directly through our eShop.

The third thing we've been making a lot of progress on in the digital front is add-on content. So we've entered the add-on content business with New Super Mario Bros. 2, with the coin rush modes, and that's delivered nice results for us as well. Pokedex and Pokemon Dream Radar is another digital only product. So we're creating new interesting digital add-ons or services or products that are really exciting and being embraced by our consumers.

With Wii U, the consumers can expect similar progress on the digital front. There will be a similar eShop experience that will allow consumers to download games. Specifically to your question on memory, prices on memory have come way down and it's really affordable. For gamers who want and need that in their system, it's very cheap and inexpensive to add that on, so for us it didn't make a lot of sense to force all gamers to buy a system with high levels of memory when some of those gamers have no intention of downloading games or of utilizing that. So it doesn't seem to make sense to force everyone to pay for that when only some will appreciate it and enjoy it. So we chose a strategy that offered a better value to consumers, allowed us to have a price point that was really affordable and accessible and not force people to pay for something that they weren't going to use.

The short answer is that Wii has been at the center of the family living room since it was launched and since consumers began embracing the aspects of active family play. We realized that people did not use their Wii systems every day. So we really want to stay at the center of the living room and occupy that spot in the family household, but we realize that there are a couple of things that people do every day. One is that people tend to watch TV pretty frequently and people tend to interact with their social networks pretty frequently. And by offering those two kinds of services, again, that come with Wii U right out of the box, free, at no extra charge, we're encouraging people to turn on their systems, make it a part of their everyday life, and keep it at the center of their living room where the hub of their household is. That was probably some of the genesis of the thinking behind it.

What I can tell you is that our offer of Nintendo TVii is quite different from what other people have done. In essence, it allows you to find, to watch, and to engage with TV like never before. We're not asking people to cut the cord. That's what many of the other services are asking people to do. And they are asking people to get TV in a different way then they are today and to say goodbye to their cable or satellite services. Of course, to do that, you have to pay for some other service, so that's not free. What we're doing is coming at it from exactly the opposite direction. We're telling people to keep their cable or other service but to experience it in a different way and to engage with it like they've never been able to before.

So they can find things in an easier way, they can interact with them and post comments to social media and you can interact with your buddies by trash talking during a game, tell friends how they should vote on Dancing with The Stars, if that's what you're watching... But it's instantly feeding comments to your friends, but also allowing you to get information on the shows you're watching instantly, like never before. So that's how we thought about it and why we're excited about Nintendo TVii and why it's been so widely praised by folks who have seen it.