You can now view the English translation here:
http://www.nintendo.co.jp/ir/en/library/events/140508qa/index.html
For the fiscal year ending in March 2015, I understand the Wii U hardware sales unit forecast is 3.60 million units. I would like to know about the relationship between this number and this fiscal year’s Wii U hardware production plan, and its impact on profit and loss. Some other things you explained today are the utilization of various network services of the Wii U platform and game-compatible figurines. In the past, I believe Nintendo’s philosophy, in principle, was that interesting and unique software drove hardware sales. I would like to confirm whether this idea remains the same.
Satoru Iwata (President):
We set the sales unit forecast of 3.60 million units of Wii U hardware as the target that we should at least reach by making the releases of two key titles for this fiscal year from the very popular, evergreen franchises that have been under development since before the launch of Wii U hardware, “Mario Kart 8” and “Super Smash Bros. for Wii U,” the pillars of our entire marketing strategy for this year. These two titles can be enjoyed alone or with others, and we believe they will encourage those who do not own Wii U hardware to purchase it. With respect to the impact of Wii U hardware sales on profit and loss, in order to sell 3.60 million units, we have to produce some more hardware units on top of our current hardware inventory. However, since the loss arising due to the hardware production costs being higher than our trade price was taken into account in the previous fiscal year, you could assume that there will be almost no loss this fiscal year for the sales of the 3.60 million hardware units.
As to whether our philosophy has changed or not, the basic idea that consumers reluctantly purchase hardware only because they want to play with appealing software remains unchanged. I only mentioned the Wii U software “Mario Kart 8” and “Super Smash Bros. for Wii U” today, but of course, we are going to talk about other Wii U titles at E3 (Electronic Entertainment Expo) in Los Angeles in June. Also, our internal software development teams directed by Shigeru Miyamoto (Senior Managing Director and General Manager of Entertainment Analysis & Development Division) are committed to developing several titles that focus on offering unique experiences only made possible with the Wii U GamePad in order for a large number of people to understand the Wii U GamePad’s significance. The titles we are preparing to show you at E3 vary from being nearly complete to still in the early phases of development but with the core of its appeal noticeable. Therefore, our strategy of focusing on software has not changed.
As for utilizing character figurines, Activision has released video game titles from the Skylanders series over the past three years and Disney Interactive released the software title, “Disney Infinity,” last year. Both video game series are compatible with character figurines and have created an extremely large market for these products. In the overseas markets especially, a huge amount of space has been allocated to those product lines at retail stores with a large market presence. Our primary focus, however, is not to develop software that is compatible with figurines. Rather, we have been developing figurines since last year because we believe there may be different approaches or ways to appeal to consumers by using them, and this could also be one way for Nintendo to utilize its character IP. At the Corporate Management Policy Briefing in January this year, we talked about our policy of actively utilizing character IP imagining that we would be able to show you the actual NFP product, which I mentioned today, at E3. However, when we talked about actively utilizing character IP, people were only focused on to whom and how licenses would be granted. So today, I decided to talk about our own project. Still nothing has changed in our belief that, for video game platforms, hardware is driven by software and our basic approach of developing new, unique and incredibly interesting software has not changed at all. We will work hard to meet your expectations.
In your presentation, you made it clear that in this fiscal year Nintendo would prioritize restoration of the balance of revenue and expenses. My question deals with the company’s mid-term prospects. I would like Mr. Iwata to tell us his current thoughts on what he would like the following two terms (the fiscal year ending March 2016 and the fiscal year ending March 2017) to mean for the company. Given that Nintendo already made a significant devaluation of inventory in the previous fiscal year, I suppose you are envisioning that the financial performance of the company is set to recover by some extent this fiscal year, but what are the key factors that will drive the business from the next fiscal year? Or, do you think that investment will expand yet again from the new businesses in and after the next fiscal year? Please tell us how you would expect the company’s financial performance to change from the next fiscal year.
Iwata:
With regard to this fiscal year, I feel that it is essential for us to restore the balance of revenue and expenses that has been lost temporarily in order to gain trust in the financial markets. On the other hand, while it is difficult to talk about the next two fiscal years using concrete figures, I feel that in the next fiscal year we will be able to be more specific about the kinds of mid-term projects that we discussed at the Corporate Management Policy Briefing in January, and in fact, we will even start to offer some of them to the public. In the following fiscal year, I expect some of these measures to start serving as a source of profits for the company. In this sense, instead of seeing a great and sudden recovery in our profitability in the next fiscal year, I am rather expecting to be able to report Nintendo-like profits from around the following fiscal year.
The company has set multiple measures for its mid-term future, but I think that sometimes it is necessary to make a big investment while maintaining a sound revenue-expenses balance. From this perspective, I would like to know whether you have set any priorities.
Iwata:
While I believe that increasing the long-term corporate value of the company is naturally our most important task, as it is impossible to make that our sole priority without regard to the short-term revenue-expenses balance on an annual basis, I think it is necessary to make investments while maintaining a certain balance of revenue and expenses. However, in terms of when we will be able to regain Nintendo-like profits, I would ask you to give us a bit more time and see how we do in the following two years.
As for our focus, we are already going to utilize, for example, our character IP from this fiscal year in ways that I described in my presentation today, so it is perhaps easier to see relatively early on the actual content of this new business endeavor and understand more clearly what we are going to do with it. Also, regarding what I mentioned at the Corporate Management Policy Briefing in January about our efforts to go into a new business area, namely our platform business that seeks to enrich people’s QOL (Quality of Life) in enjoyable ways, I would like to talk more specifically about the kind of business we have in mind within this year, and the current time frame we are working on puts the actual deployment of the initiative in the next fiscal year, with contributions to our profitability to follow in the following fiscal year. Moreover, I feel that we will be able to further stimulate our platform business by taking advantage of smart devices, and I think that we will be able to provide detailed information on this as well as some concrete results between the current and the next fiscal years. Also, the idea I mentioned about redefining the definition of video game platforms will also require approximately two years. This is how we would like to talk more about our mid-term measures and lead them to actual results. However, we will not be able to create a good environment for the company unless projects are undertaken simultaneously, so this is the kind of timeframe that we have in mind.
I would like to know when Nintendo will launch its next-generation video game systems. Should we expect Nintendo not to introduce new hardware in the next three years? It appears that financial analysts and investors are now expecting Nintendo to make a real comeback with its next-generation hardware, but given the competitive environment that surrounds the company, should we perhaps think that it is now becoming more likely that Nintendo’s next-generation hardware will be introduced earlier than Nintendo expected? Also, although I suppose the answer to this question will be that your next-generation hardware will have to adopt a groundbreaking design concept that has never been seen before, I would like Mr. Iwata to tell me, to the extent possible, what kinds of ideas he has at the moment in terms of bringing out something that we have never experienced before.
Iwata:
Once we launch a new platform, we naturally start to prepare for the next one. As it takes several years to develop a single platform, if you ask us whether we are preparing for our next system, then the correct response will be that we are always developing new hardware. On the other hand, the most difficult question for us to answer in public in concrete terms is when we are going to launch our new hardware and what kind of hardware we are going to launch, and I am afraid that I cannot talk about this in more detail. However, I can certainly assure you that we are not at a dead end of any kind in which we are out of ideas for developing new hardware. I of course believe that launching new hardware will not produce good results unless we first make sure that those who have already purchased our platforms are satisfied. We will continue to work hard to ensure that consumers who already own our platforms are satisfied, and make sure that people will continue to see great value in our software, but I would like to say that we are preparing for our next hardware system, and in fact, we already have a clear idea to some extent about the direction our next hardware is going to take.
I would like to ask you about your mid-to-long term corporate strategy from a macro perspective. Mr. Iwata, what do you think will be the keywords for the entertainment market from now on? When I think of keywords from your various explanations at the Corporate Management Policy Briefing in January, “non-wearable” or “hardware-software integrated business model” are candidates, and when I think in terms of the figurine project that you mentioned in your presentation today, something like “from virtual to real” could also be one of the candidates. On the other hand, when I look at other companies’ ideas such as “SmartGlass” and, as Google is now attempting to realize automated driving, the current trend appears to tell me that other companies too are trying to redefine the meaning of entertainment in their own ways and to improve people’s QOL by taking a systematic approach to the functionality of their devices. Considering my interpretation of the situation, I would like to hear Mr. Iwata’s opinion on what the keyword(s) will be for Nintendo from now on.
Iwata:
I think that many utility products in the world have been designed and produced with the purpose of improving people’s QOL. Nintendo has added “in enjoyable ways” to the definition of entertainment. By defining entertainment as activities that “improve people’s QOL in enjoyable ways,” we are trying to expand the definition of entertainment as much as possible. Nintendo has a history of approximately 125 years, but when it comes to video games, the company has been engaged in that business for 31 years since the Japanese launch of the Family Computer System (Nintendo Entertainment System). In other words, Nintendo has been known as a video game company only for one-quarter of our history, but people around the world, even including many at Nintendo, tend to believe that Nintendo is a video game company and even think that Nintendo should not or must not do anything other than making video games. This, I believe shows that over the past 30 years or so, the video game business has been running smoothly. However, whether we have a narrow or broad definition of video games can make a huge difference. I suppose people caught a glimpse of the potential with “Brain Age” and “nintendogs” for Nintendo DS, and “Wii Sports” and “Wii Fit” for Wii, which Nintendo developed by expanding the definition of video games and these titles were eventually well-received by many people around the world. In video games, players interact with a computer and receive output as the result of their input. If players realize that they will be able to receive greater rewards in the form of computer output than the amount of effort they put in, they will be tempted to repeat that process. Because that process makes players feel comfortable, there is a great sense of excitement and achievement. I think that this is the kind of know-how you need to make video games, but it can be applied to much wider fields than you might imagine today. When I said that health is going to be a theme of our QOL initiative, I referred to it as an example of one of these fields. More specifically, talking in general about health, many people are well aware of what we should do for their health, but at the same time, many people find it difficult to commit themselves to it. So, the questions I posed back then were, “What do you think will happen if we can apply our know-how on keeping consumers engaged and entertained on a continual basis, and make it fun to complete such endeavors?” Back to your original question, “not defining our business fields narrowly” is key for us.
Not to change the subject, but many years ago, people used to connect with video games only when they were sitting in front of a TV set. Other than that, people did not have any relationship with video games back in those days. Then, handheld video game systems were introduced, and people started to carry around their video game experiences outside the home. And today, many people carry around smart devices and use them in their free time. We have been studying how we can best incorporate our video games into the time that people use their smart devices. I introduced our “Mario Kart TV” as an example during my presentation today. Although this is just the beginning of our initial approach with that concept, players of “Mario Kart 8” can spend a portion of the time they interact with their smart devices to connect with the Mario Kart game. In the future, it is possible we will decide that certain elements of our video games should be enjoyed when players use their smart devices. In other words, we will try to ensure that there is more than one device, more than one location or more than one environment where users can access our products and make sure those users can interact with our products in various environments. I also mentioned in January (at the Corporate Management Policy Briefing) that we would change the definition of our platforms from being device-based to NNID-account-based. When our platforms are account-based, we can expand the number of applicable devices. In order to have rich and high-quality game experiences, we always want our users to play with our dedicated game systems that are specifically designed to provide such unique experiences, while at the same time, we may be able to select some portions of these games and make them available on other devices. Also, by encouraging users to interact with the physical figurines that I mentioned today, we may be able to create brand-new entertainment. In these ways, another critical point for us to carefully consider, or another key point for us, is how we can and should incorporate our entertainment offerings into the more fragmented time and opportunities of different consumers.
At the Corporate Management Policy Briefing that the company held in January, you talked about several new ways to change how you conduct business. I understand that there will be new businesses for the company, such as QOL, but how does the company intend to change its organizational structure and development processes in order to adapt in line with the times and deploy these new businesses? I hope to hear some specific examples in this regard.
Iwata:
To answer your question, I think I should explain what we have been doing about our internal organization in response to our core management policy. For one thing, as previously announced, we have integrated our hardware development divisions and established the “Integrated Research & Development Division.” Until this change took place, we used to develop our handheld video game devices and home video game consoles in separate divisions. Of course, we did not simply merge two divisions into one. We know that we need to change how we manage this new division as well as how we create and manage new projects, and we are currently making progress on this. Also, the new R&D Development Center was built earlier this year, and our developers will move to their new offices in mid-June, after E3. After settling in, the developers who are now working at different buildings will be able to work together in the same building. As a result, our development of hardware and software can be done in a more unified fashion with individual developers being able to communicate directly with others more closely, and the different R&D teams that are currently working in separate rooms can work as one team in the same room. Of course, even now, our hardware development teams and software development teams work closely with each other, but because they belong to different departments under our current organizational structure, they are not necessarily able to visit others’ rooms freely. In the Development Center, we will create a space where developers from the four different R&D divisions can get together with others. This is another concrete example of what we are doing in order to establish an environment where unique and fun hardware-software integrated entertainment can be developed more smoothly.
In addition to these changes to the R&D divisions, in March we established a new department called the “Business Development Department.” Since the company released Family Computer System (Nintendo Entertainment System) in Japan and put it on the right track for sales growth, Nintendo has not needed to implement significant changes to its principle business structure. In other words, in comparison to many other companies, Nintendo used to have a smaller need for business development because, by maintaining a similar business structure, it was able to conduct its business and grow rather steadily. However, because the environment has greatly changed and Nintendo must create a new business structure and execute a variety of new endeavors that I have been addressing recently, we have established this new department that reports directly to me. We have gathered experts from a variety of different fields for this department. By working with others in the R&D divisions, these members have already been acting as contacts for a variety of different business partners, and have been making proposals and planting the seeds for discussion. The Business Development Department will play an important role in our company producing tangible outcomes for the topics we have been discussing recently: the active use of our character IP, future approach for the new markets, future of the new business fields, how we are going to change the definition of our future platforms and how we will take advantage of smart devices. These are the concrete examples that I can mention today to respond to your question.
- END -
http://www.nintendo.co.jp/ir/en/library/events/140508qa/index.html
For the fiscal year ending in March 2015, I understand the Wii U hardware sales unit forecast is 3.60 million units. I would like to know about the relationship between this number and this fiscal year’s Wii U hardware production plan, and its impact on profit and loss. Some other things you explained today are the utilization of various network services of the Wii U platform and game-compatible figurines. In the past, I believe Nintendo’s philosophy, in principle, was that interesting and unique software drove hardware sales. I would like to confirm whether this idea remains the same.
Satoru Iwata (President):
We set the sales unit forecast of 3.60 million units of Wii U hardware as the target that we should at least reach by making the releases of two key titles for this fiscal year from the very popular, evergreen franchises that have been under development since before the launch of Wii U hardware, “Mario Kart 8” and “Super Smash Bros. for Wii U,” the pillars of our entire marketing strategy for this year. These two titles can be enjoyed alone or with others, and we believe they will encourage those who do not own Wii U hardware to purchase it. With respect to the impact of Wii U hardware sales on profit and loss, in order to sell 3.60 million units, we have to produce some more hardware units on top of our current hardware inventory. However, since the loss arising due to the hardware production costs being higher than our trade price was taken into account in the previous fiscal year, you could assume that there will be almost no loss this fiscal year for the sales of the 3.60 million hardware units.
As to whether our philosophy has changed or not, the basic idea that consumers reluctantly purchase hardware only because they want to play with appealing software remains unchanged. I only mentioned the Wii U software “Mario Kart 8” and “Super Smash Bros. for Wii U” today, but of course, we are going to talk about other Wii U titles at E3 (Electronic Entertainment Expo) in Los Angeles in June. Also, our internal software development teams directed by Shigeru Miyamoto (Senior Managing Director and General Manager of Entertainment Analysis & Development Division) are committed to developing several titles that focus on offering unique experiences only made possible with the Wii U GamePad in order for a large number of people to understand the Wii U GamePad’s significance. The titles we are preparing to show you at E3 vary from being nearly complete to still in the early phases of development but with the core of its appeal noticeable. Therefore, our strategy of focusing on software has not changed.
As for utilizing character figurines, Activision has released video game titles from the Skylanders series over the past three years and Disney Interactive released the software title, “Disney Infinity,” last year. Both video game series are compatible with character figurines and have created an extremely large market for these products. In the overseas markets especially, a huge amount of space has been allocated to those product lines at retail stores with a large market presence. Our primary focus, however, is not to develop software that is compatible with figurines. Rather, we have been developing figurines since last year because we believe there may be different approaches or ways to appeal to consumers by using them, and this could also be one way for Nintendo to utilize its character IP. At the Corporate Management Policy Briefing in January this year, we talked about our policy of actively utilizing character IP imagining that we would be able to show you the actual NFP product, which I mentioned today, at E3. However, when we talked about actively utilizing character IP, people were only focused on to whom and how licenses would be granted. So today, I decided to talk about our own project. Still nothing has changed in our belief that, for video game platforms, hardware is driven by software and our basic approach of developing new, unique and incredibly interesting software has not changed at all. We will work hard to meet your expectations.
In your presentation, you made it clear that in this fiscal year Nintendo would prioritize restoration of the balance of revenue and expenses. My question deals with the company’s mid-term prospects. I would like Mr. Iwata to tell us his current thoughts on what he would like the following two terms (the fiscal year ending March 2016 and the fiscal year ending March 2017) to mean for the company. Given that Nintendo already made a significant devaluation of inventory in the previous fiscal year, I suppose you are envisioning that the financial performance of the company is set to recover by some extent this fiscal year, but what are the key factors that will drive the business from the next fiscal year? Or, do you think that investment will expand yet again from the new businesses in and after the next fiscal year? Please tell us how you would expect the company’s financial performance to change from the next fiscal year.
Iwata:
With regard to this fiscal year, I feel that it is essential for us to restore the balance of revenue and expenses that has been lost temporarily in order to gain trust in the financial markets. On the other hand, while it is difficult to talk about the next two fiscal years using concrete figures, I feel that in the next fiscal year we will be able to be more specific about the kinds of mid-term projects that we discussed at the Corporate Management Policy Briefing in January, and in fact, we will even start to offer some of them to the public. In the following fiscal year, I expect some of these measures to start serving as a source of profits for the company. In this sense, instead of seeing a great and sudden recovery in our profitability in the next fiscal year, I am rather expecting to be able to report Nintendo-like profits from around the following fiscal year.
The company has set multiple measures for its mid-term future, but I think that sometimes it is necessary to make a big investment while maintaining a sound revenue-expenses balance. From this perspective, I would like to know whether you have set any priorities.
Iwata:
While I believe that increasing the long-term corporate value of the company is naturally our most important task, as it is impossible to make that our sole priority without regard to the short-term revenue-expenses balance on an annual basis, I think it is necessary to make investments while maintaining a certain balance of revenue and expenses. However, in terms of when we will be able to regain Nintendo-like profits, I would ask you to give us a bit more time and see how we do in the following two years.
As for our focus, we are already going to utilize, for example, our character IP from this fiscal year in ways that I described in my presentation today, so it is perhaps easier to see relatively early on the actual content of this new business endeavor and understand more clearly what we are going to do with it. Also, regarding what I mentioned at the Corporate Management Policy Briefing in January about our efforts to go into a new business area, namely our platform business that seeks to enrich people’s QOL (Quality of Life) in enjoyable ways, I would like to talk more specifically about the kind of business we have in mind within this year, and the current time frame we are working on puts the actual deployment of the initiative in the next fiscal year, with contributions to our profitability to follow in the following fiscal year. Moreover, I feel that we will be able to further stimulate our platform business by taking advantage of smart devices, and I think that we will be able to provide detailed information on this as well as some concrete results between the current and the next fiscal years. Also, the idea I mentioned about redefining the definition of video game platforms will also require approximately two years. This is how we would like to talk more about our mid-term measures and lead them to actual results. However, we will not be able to create a good environment for the company unless projects are undertaken simultaneously, so this is the kind of timeframe that we have in mind.
I would like to know when Nintendo will launch its next-generation video game systems. Should we expect Nintendo not to introduce new hardware in the next three years? It appears that financial analysts and investors are now expecting Nintendo to make a real comeback with its next-generation hardware, but given the competitive environment that surrounds the company, should we perhaps think that it is now becoming more likely that Nintendo’s next-generation hardware will be introduced earlier than Nintendo expected? Also, although I suppose the answer to this question will be that your next-generation hardware will have to adopt a groundbreaking design concept that has never been seen before, I would like Mr. Iwata to tell me, to the extent possible, what kinds of ideas he has at the moment in terms of bringing out something that we have never experienced before.
Iwata:
Once we launch a new platform, we naturally start to prepare for the next one. As it takes several years to develop a single platform, if you ask us whether we are preparing for our next system, then the correct response will be that we are always developing new hardware. On the other hand, the most difficult question for us to answer in public in concrete terms is when we are going to launch our new hardware and what kind of hardware we are going to launch, and I am afraid that I cannot talk about this in more detail. However, I can certainly assure you that we are not at a dead end of any kind in which we are out of ideas for developing new hardware. I of course believe that launching new hardware will not produce good results unless we first make sure that those who have already purchased our platforms are satisfied. We will continue to work hard to ensure that consumers who already own our platforms are satisfied, and make sure that people will continue to see great value in our software, but I would like to say that we are preparing for our next hardware system, and in fact, we already have a clear idea to some extent about the direction our next hardware is going to take.
I would like to ask you about your mid-to-long term corporate strategy from a macro perspective. Mr. Iwata, what do you think will be the keywords for the entertainment market from now on? When I think of keywords from your various explanations at the Corporate Management Policy Briefing in January, “non-wearable” or “hardware-software integrated business model” are candidates, and when I think in terms of the figurine project that you mentioned in your presentation today, something like “from virtual to real” could also be one of the candidates. On the other hand, when I look at other companies’ ideas such as “SmartGlass” and, as Google is now attempting to realize automated driving, the current trend appears to tell me that other companies too are trying to redefine the meaning of entertainment in their own ways and to improve people’s QOL by taking a systematic approach to the functionality of their devices. Considering my interpretation of the situation, I would like to hear Mr. Iwata’s opinion on what the keyword(s) will be for Nintendo from now on.
Iwata:
I think that many utility products in the world have been designed and produced with the purpose of improving people’s QOL. Nintendo has added “in enjoyable ways” to the definition of entertainment. By defining entertainment as activities that “improve people’s QOL in enjoyable ways,” we are trying to expand the definition of entertainment as much as possible. Nintendo has a history of approximately 125 years, but when it comes to video games, the company has been engaged in that business for 31 years since the Japanese launch of the Family Computer System (Nintendo Entertainment System). In other words, Nintendo has been known as a video game company only for one-quarter of our history, but people around the world, even including many at Nintendo, tend to believe that Nintendo is a video game company and even think that Nintendo should not or must not do anything other than making video games. This, I believe shows that over the past 30 years or so, the video game business has been running smoothly. However, whether we have a narrow or broad definition of video games can make a huge difference. I suppose people caught a glimpse of the potential with “Brain Age” and “nintendogs” for Nintendo DS, and “Wii Sports” and “Wii Fit” for Wii, which Nintendo developed by expanding the definition of video games and these titles were eventually well-received by many people around the world. In video games, players interact with a computer and receive output as the result of their input. If players realize that they will be able to receive greater rewards in the form of computer output than the amount of effort they put in, they will be tempted to repeat that process. Because that process makes players feel comfortable, there is a great sense of excitement and achievement. I think that this is the kind of know-how you need to make video games, but it can be applied to much wider fields than you might imagine today. When I said that health is going to be a theme of our QOL initiative, I referred to it as an example of one of these fields. More specifically, talking in general about health, many people are well aware of what we should do for their health, but at the same time, many people find it difficult to commit themselves to it. So, the questions I posed back then were, “What do you think will happen if we can apply our know-how on keeping consumers engaged and entertained on a continual basis, and make it fun to complete such endeavors?” Back to your original question, “not defining our business fields narrowly” is key for us.
Not to change the subject, but many years ago, people used to connect with video games only when they were sitting in front of a TV set. Other than that, people did not have any relationship with video games back in those days. Then, handheld video game systems were introduced, and people started to carry around their video game experiences outside the home. And today, many people carry around smart devices and use them in their free time. We have been studying how we can best incorporate our video games into the time that people use their smart devices. I introduced our “Mario Kart TV” as an example during my presentation today. Although this is just the beginning of our initial approach with that concept, players of “Mario Kart 8” can spend a portion of the time they interact with their smart devices to connect with the Mario Kart game. In the future, it is possible we will decide that certain elements of our video games should be enjoyed when players use their smart devices. In other words, we will try to ensure that there is more than one device, more than one location or more than one environment where users can access our products and make sure those users can interact with our products in various environments. I also mentioned in January (at the Corporate Management Policy Briefing) that we would change the definition of our platforms from being device-based to NNID-account-based. When our platforms are account-based, we can expand the number of applicable devices. In order to have rich and high-quality game experiences, we always want our users to play with our dedicated game systems that are specifically designed to provide such unique experiences, while at the same time, we may be able to select some portions of these games and make them available on other devices. Also, by encouraging users to interact with the physical figurines that I mentioned today, we may be able to create brand-new entertainment. In these ways, another critical point for us to carefully consider, or another key point for us, is how we can and should incorporate our entertainment offerings into the more fragmented time and opportunities of different consumers.
At the Corporate Management Policy Briefing that the company held in January, you talked about several new ways to change how you conduct business. I understand that there will be new businesses for the company, such as QOL, but how does the company intend to change its organizational structure and development processes in order to adapt in line with the times and deploy these new businesses? I hope to hear some specific examples in this regard.
Iwata:
To answer your question, I think I should explain what we have been doing about our internal organization in response to our core management policy. For one thing, as previously announced, we have integrated our hardware development divisions and established the “Integrated Research & Development Division.” Until this change took place, we used to develop our handheld video game devices and home video game consoles in separate divisions. Of course, we did not simply merge two divisions into one. We know that we need to change how we manage this new division as well as how we create and manage new projects, and we are currently making progress on this. Also, the new R&D Development Center was built earlier this year, and our developers will move to their new offices in mid-June, after E3. After settling in, the developers who are now working at different buildings will be able to work together in the same building. As a result, our development of hardware and software can be done in a more unified fashion with individual developers being able to communicate directly with others more closely, and the different R&D teams that are currently working in separate rooms can work as one team in the same room. Of course, even now, our hardware development teams and software development teams work closely with each other, but because they belong to different departments under our current organizational structure, they are not necessarily able to visit others’ rooms freely. In the Development Center, we will create a space where developers from the four different R&D divisions can get together with others. This is another concrete example of what we are doing in order to establish an environment where unique and fun hardware-software integrated entertainment can be developed more smoothly.
In addition to these changes to the R&D divisions, in March we established a new department called the “Business Development Department.” Since the company released Family Computer System (Nintendo Entertainment System) in Japan and put it on the right track for sales growth, Nintendo has not needed to implement significant changes to its principle business structure. In other words, in comparison to many other companies, Nintendo used to have a smaller need for business development because, by maintaining a similar business structure, it was able to conduct its business and grow rather steadily. However, because the environment has greatly changed and Nintendo must create a new business structure and execute a variety of new endeavors that I have been addressing recently, we have established this new department that reports directly to me. We have gathered experts from a variety of different fields for this department. By working with others in the R&D divisions, these members have already been acting as contacts for a variety of different business partners, and have been making proposals and planting the seeds for discussion. The Business Development Department will play an important role in our company producing tangible outcomes for the topics we have been discussing recently: the active use of our character IP, future approach for the new markets, future of the new business fields, how we are going to change the definition of our future platforms and how we will take advantage of smart devices. These are the concrete examples that I can mention today to respond to your question.
- END -