Investor Relations - E3 Analyst Session

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Nintendo Investor Relations 2010 E3 Analyst Session (Presentation and Q&A)

 

Q2 Nintendo 3DS has very advanced graphics and you have several games or content like Metal Gear Solid and Resident Evil that belong to a different market than the handheld platforms from Nintendo has historically addressed.

 

If the product is still relevant to the core audience who like to play Pokémon, Mario Kart and Zelda, is there some concern that this product may be too advanced, or perhaps too expensive for your core audience of handheld players?

A2 Iwata:

Anytime we come up with ideas for a new piece of Nintendo hardware, our objective is to find ways to entertain as broad of an audience as possible, and when we say "broad," that means regardless of age or gender or gaming skills. Yet, certain types of games have been difficult to be created with the graphic and other capabilities of the existing Nintendo DS.

 

When we took the new Nintendo 3DS hardware and showed it to (third-party) publishers and developers, their feeling was that much of their content was something they could realize on the Nintendo 3DS system, and that’s why we were able to announce the lineup that we did yesterday.

 

I surmise that the question that you’re asking is that perhaps the hardware specifications of Nintendo 3DS seem to be too sophisticated or too expensive and Nintendo 3DS may make it difficult for us to appeal to the existing audience who has been supporting us.

 

Of course, in terms of our own internal software development, we will be devoting much of our resources to support Nintendo 3DS. From our historical perspective, since we thought it is obvious that first-party software lineup needs to support the new platform to expand its installed base, we did not emphasize that in our presentation yesterday. We will of course introduce quality first-party software.

 

In this regard, our internal teams, which have created series titles supported by Nintendo fans, are now beginning their work on development, very excited about the various types of things that they’re going to be able to achieve.

 

Our goal is to have Nintendo 3DS be a platform that appeals to an even broader audience than Nintendo DS and we’ll continue to focus our efforts into achieving that as we go forward.

 

Q5 What do you think the Nintendo 3DS is going to be with respect to software development costs, both from your own first-party perspective, but also from the perspective of third-party developers?

A5 Iwata:

I would like to answer your question from two different perspectives. Given my development background, the first will be from a developer’s perspective, and then I’ll also try to answer the question from the perspective of a representative of the company that is the platform holder. First, I’d like to talk about how much development resources are required in order to take a game and create it in three dimensions.

 

As long as you are already creating a fully rendered 3D world, all you have to do in order to create the 3D visual effect is to capture the same images with two cameras, one for right eye and the other for left eye. From a development perspective, it actually does not make much of a difference in terms of development costs to create the 3D visual effect.

 

On the other hand, because the visual capabilities of Nintendo 3DS are more powerful than the existing Nintendo DS, if you are going to take full advantage of the graphics capability of Nintendo 3DS, the development cost is also expected to rise.

 

Therefore, if developers decide to try and maximize the graphical powers of the system, then the cost would be more expensive than what it is currently for Nintendo DS and may potentially approach the cost of developing Wii software.

 

Next, I would like to provide my perspective as the president of the company of the platform holder. While I do not think that you simply have to increase the cost of your development in order to create compelling software on Nintendo 3DS, it would also be a lie if I said that any software can be developed without spending a lot of money.

 

I think it’s ok to see a broad range in development costs from title to title. I believe it’s possible for developers who have great ideas to be able to find ways to develop those ideas at a relatively low cost and make the resulting game a hit due essentially to the quality of the ideas.

 

On the other hand, I believe there will be developers who will use a similar amount of resources to create games as if developing for a home console, and such games also would result in satisfaction to our consumers.

 

I see the possibility for a broad range of software development costs to increase the possibility of satisfying Nintendo 3DS owners and really appeal to a very broad audience. That would be the ideal situation for Nintendo 3DS. We intend to exemplify this with our first-party titles.

 

Q6 It is my understanding that the focus of yesterday’s presentation was the Nintendo franchises, and it was targeted towards the core audience. On the other hand, now we’re seeing a lot of competition for the casual audience from your competitors on the console side as well as on the PC side, yet the casual audience has less time and less money to spend on entertainment.

 

It seems like you’re doing quite well on the portable side of the business. However, in light of your efforts to expand the market for Wii in particular, how do you intend to come out with things in the future that are more customizable, more personalizable, or considered social community options toward the price-sensitive casual audience as other companies are doing with home console, mobile, and PC?

 

Also, is there any product that will be considered as the next Wii Fit?

A6 Iwata:

First, I think that often times when people refer to core versus casual audiences, there’s a tendency to speak with relatively stereotypical viewpoints in regards to those two audiences. I think in particular, it might be worthwhile to consider casting aside the idea that the casual audience will not spend dollars on entertainment.

 

I also think that it seems unlikely that people who are casual gamers will forever remain casual gamers, just as I think it is incorrect to assume that people are born core gamers. I think that everyone starts off at some point as a casual or a novice gamer and then becomes an expert gamer.

 

As Reggie described yesterday by using the term "bridge game," there are products that we believe are very important as it can be enjoyed by both casual and core gamers together. By experiencing those types of products together, they will help bridge the gap in understanding between those two different groups.

 

Then the next point that I would like to talk about is that lately, we have been hearing a lot that some of these casual games, or particularly some of these mobile phone games that are geared and targeted towards the casual audience, compete with our games that appeal to a similar audience. I view that our games are not necessarily only in competition with these other social games or iPhone games, but really, that we are always in competition with whatever takes people’s time, attention and energy away.

 

Therefore, we are intentionally not looking at some particular products or companies as our competitors. This is because our observation would be narrowed if we focus on some particular products or companies. In light of this, we have never thought and will never think like, "Social games have become popular, so we need to find a way to implement the same elements from social games into our own products," or "iPhone games are popular with certain people right now, so we need to figure out what we’re going to do to compete with that."

 

Instead, we’re focusing on presenting products with a combination of hardware and software that is unique and compelling in value.

To offer a couple of examples a social elements that Nintendo has worked on, Pokémon has had strong social elements for over a decade, and we gave birth to Mii characters after being developed over the last 20 years. Thus, "social elements" are not completely new to us.

 

On the other hand, I would say you do have a somewhat accurate view that what we have shown and announced here at E3 this year was geared more towards the traditional Nintendo audience. What we’ve shown this year at E3 reflects somewhat of an adjustment based on the experiences of last year and the year before to have our presentation focused on information which would be well accepted by the audience. Therefore, some analysts may have felt that the level of uniqueness in other genres was not enough, but we would like to address those in another opportunity.