One of the most interesting parts to come out of Nintendo’s financial meetings are the questions and answers that investors ask Nintendo’s upper management. Some are usually lame, while others sometimes provide insight into what Nintendo’s philosophies are. This time around most of the questions were rather thoughtful, although nothing too major was revealed with the answers.
Probably the most interesting tidbit is that Nintendo says it’s not sure what path they’ll take in the dedicated handheld market. Obviously the 3DS is still selling rather well, and most people thought they’d let that die off and just concentrate on the Switch. However, it appears Nintendo is leaving all options open and that means we could see another dedicated handheld in the future. Or not – this is Nintendo after all! They like to surprise us. Below is the full question and answer session:
Nintendo Labo is such an unexpected product. What kinds of ideas and issues formed the basis to its inception? Also, what does Nintendo hope for with this product, and what is the response inside the company (as of immediately after the product announcement)?
Shinya Takahashi (Director, Managing Executive Officer):
In our efforts to develop new forms of play, we at Nintendo always look to the integration of hardware and software. Nintendo Labo is just one of many projects under development, and it emerged from the idea of somehow setting the Nintendo Switch Joy-Con controllers, which can be considered a mass of sensors, into some form of attachment. I’m sure we surprised everyone with the use of cardboard, but it is not so far-fetched if you consider how familiar the material is at least to Japanese people who from a young age use it for play and as a material for creating things such as fancy crafts. Moreover, it was important to us that cardboard is a very suitable material for the trial-and-error process. When we started with a “robot” prototype inside the company, we realized that the trial-and-error process of attaining a finished product was itself extremely fun, in addition to playing with the product. That led to our concept for Nintendo Labo to be developed as something that people could enjoy in all of its aspects, not just in playing with the finished product, but also in making some repairs along the way and after it is complete, and in understanding the mechanics.
Ko Shiota (Director, Senior Executive Officer):
Shigeru Miyamoto (Representative Director, Fellow):
This is a question about Nintendo Switch Online. The official start of service has been significantly delayed, so has anything changed during this extended development period? Also, how do you plan to popularize the service?
Tatsumi Kimishima (President and Representative Director):
As for how we plan to popularize the service, it is less about the mechanism and more a question of what kinds of products we can offer, and the spread of the service will depend on whether consumers want what we offer. Please give us a bit more time to announce more details about the service. I think that announcement will convey to you how we plan to popularize the service.
The figures for Nintendo Switch hardware you presented during the presentation reveal a gap of some 1.8 million units between cumulative sell-through (13 million) and sell-in (14.86 million). Is that because there are many units in distribution inventory, particularly in Europe and the US? In the current revision, you have quite a large sell-in planned for the fourth quarter. Can you explain this in terms of the supply and demand situation?
Shuntaro Furukawa (Director, Managing Executive Officer):
I understand from your answers that you will continue to study business possibilities in China because it is such an incredibly huge and alluring market. But I’ve also seen observation articles in the mass media about Nintendo’s initiatives, so looking both the long-term and the next year, can you give us any hints about any activities that Nintendo might begin in the separate business areas of home consoles, handheld game devices, and smart devices?
Regarding the expansion of our smart-device business in China, it would be better to collaborate with local carriers rather than go it alone, but as of now there is nothing I can say on this topic either. That said, I hope that consumers in China in the future will be able to enjoy our games just like in other regions.
Now that Nintendo Switch has been on sale for around a year, are there any issues and risk factors now that were not considered before the launch?
Mr. Miyamoto, can you talk about your involvement in the animated Super Mario movie? Is the objective merely a cross-media marketing effect, or do you want to try making a movie to express something you cannot express in games?
As a producer, Chris Meledandri (Illumination’s CEO) is noted here for movies like Minions and Sing, but he is a veteran with a ton of experience, including the movie Ice Age and stints at companies like 20th Century Fox Animation. When I talked with Chris, he said he had read a lot of interviews with me and felt we had a similar approach to creation. Talking about our similarities, we clicked and decided maybe we should do some kind of collaboration. We started our conversation over two years ago, and finally reached the stage where we could make an announcement. Chris is extremely cost-conscious and time-conscious in his quest to make successful movies. We decided to try making a movie together, and distributing the completed movie globally through Universal Pictures.
We’ve talked together and share the feeling that if we can’t make something interesting we’ll just call it quits. But we’ve already met a number of times to hash out the screenplay, our talks together are progressing, and I hope to make an announcement once we’ve ironed out some things like the schedule.
I’d like to clarify your policy on pricing. Prices in general have been rising over the past several years, making the Nintendo hardware and software seem like a relativity good value. Under the current circumstances, where consumers have trouble comprehending the reasonable price for products amid the changing commodity prices for digital equipment, the pricing policies of companies like Nintendo can become a yardstick. Can you reflect back on the prices set for released products and describe your general pricing policy for the future?
The same goes for software, which we develop so our consumers can have fun. Whether in package form or download form, we are providing software that is fun to play, so it is important that the software contain content of value, and that the value of the content not vary even if the way it is provided changes. That same thinking forms the basis to our pricing decisions.
When I watched the announcement for Nintendo Labo, I got the feeling that Nintendo has not changed since Ultra Hand and remains a broad-minded organization open to new ideas. It is hard to imagine a product like Nintendo Labo being commercialized now if Nintendo Switch itself were not designed from the start with the idea that the remote controllers might be attached to materials like cardboard, so I wonder what the design concept was for the development of Joy-Con? Also, given the objective of broadening the Nintendo Switch user base, what effect do you expect from sales of software that support accessories like this? Finally, I’d like to ask Mr. Miyamoto how he thinks the Nintendo organization has changed when he looks at work like this from junior personnel.
We’ve had repeated discussions inside the company about how we can win approval from users for Nintendo’s uniqueness as new video game systems are released featuring the latest technologies, but there are no clear-cut answers to that either. Wii is a much-talked-about example of Nintendoʼs experience of success, but the developers began to rethink their hardware design after receiving feedback from global users of Wii Sports and Wii Fit, saying things like the Wii Remote should have had different design features, or should have been small enough to attach to the leg. Because of that rethinking, our developers thought constructively about the advantages of miniaturizing the game controller, and when the technology advanced to give controllers greater functionality in a smaller size, it was not lost on them that here was an opportunity to create a console-type game system that could be carried around like a handheld video game system. That led to the development of Joy-Con, and to the concept of combining Joy-Con with cardboard constructs.
Nintendo Labo has only just been announced, but I expect this to become a series of products once it is released and enjoyed by many people. We will work to make Nintendo Labo a new experience of success for the company.
Where do you place the Nintendo Switch business in the fiscal year ending March 2019 within the life cycle of the hardware? I imagine that other companies feel threatened by the way Nintendo Switch captured core gamers right from the launch, by the management prowess Nintendo displayed by releasing a succession of major titles, and by the fact that the video game system can be carried around. The user base may widen with the release of products like Nintendo Labo, but when you look at Wii, even though it captured casual gamers and its sales reached a stratospheric 25 million units in a single business year, its life cycle was not all that long. Assuming that the company considers it important that Nintendo Switch be a long-lived product, what do you see as critical during the coming business year, the second year for Nintendo Switch?
The main feature of Nintendo Switch is that it can be played “anytime, anywhere, with anyone,” so our focus in the second year will be to continue to release numerous software titles that provide that experience and hammer home that concept and encourage consumers to discover their own ways of having fun. We will release a series of products, including some not announced today, and continue to create games like Nintendo Labo that people look forward to playing. Things do not always go according to design in the entertainment business, no matter how much you talk about plans, so let me just say that we want to continue to create new and interesting products, and I hope you will look forward in anticipation.
I’d like to talk about the direction of your long-term business strategy for broadening the gaming population. The market for games can be divided into the three segments of games for dedicated video game platforms, for smart devices, and for computer-based online gaming. Mr. Miyamoto earlier spoke of his ultimate ambition that a Nintendo Switch be owned by every single person. But do you think that the Nintendo Switch and smart-device businesses alone can sufficiently appeal to all three market segments? Nintendo Switch (a console-type game system that can be carried around) is very similar to a handheld game system, so do you intend to not release a successor to Nintendo 3DS, or do you plan to treat the handheld game system as a kid-friendly product coexisting with Nintendo Switch?
Regarding development, we have not yet decided which direction to steer towards, but we have a variety of possibilities under consideration. The technologies that would be required (for platform development) include some that could take an extremely long time to develop and are ever-evolving, so instead of narrowing down the technologies we are widening the search. Once we have decided on the direction for (future) platforms inside the company, we will quickly begin preparations to track the (key) technologies.