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Nintendo Q&A - China, the End of Tie Ratios, 3DS, Switch Online

Forums - Nintendo Discussion - Nintendo Q&A - China, the End of Tie Ratios, 3DS, Switch Online

The English transcript of Nintendo's latest Q&A session with investors was published. The whole thing can be read here:
https://www.nintendo.co.jp/ir/pdf/2019/190427e.pdf

If you are too lazy to go to the source, here's a condensed version written by myself with the questions in bold, Nintendo's answers in regular font and my own commentary in italics if there's something worth adding. A word of warning, most questions don't get answers that offer new or interesting information.

Q1 Collaboration with Tencent in China and your expectations.
A1 Tencent was chosen because they hold one of the largest positions in network communications and game marketplaces and because our past endeavors with our own subsidiary didn't net good results. Don't expect quick growth. China is not included in this fiscal year's forecast (18m). China is not the only place in the world where Nintendo plans to expand in the long term.

The most interesting thing said here is that Nintendo is determined to expand globally, something that they didn't properly pursue with the Wii and DS, and then couldn't do with the Wii U and 3DS because it was already enough work to make them sell in the established markets. Translations of games into more languages like Korean, Chinese and Russian have become more frequent recently, so these aren't just empty words.

Q2 How do you plan to achieve the goal of shipping 18m Switch units?
A3 Momentum is good, upcoming software by first and third party developers is diverse, the market is embracing Switch's capabilities to be played on TV and on the go.

Q3 Tie ratio ditched; new metric is revenue per system. But is there still room for growth in tie ratio?
A3 Goal is to increase both tie ratio and revenue per system by continually releasing major titles and improving the offers of Switch Online.

Q4 Free Switch Online memberships for Twitch Prime members. Any other such initiatives?
A4 Evaluated on a case by case basis. Important that both parties benefit.

Q5 Cloud gaming and 5G are bound to change the landscape; your thoughts on your integrated hardware and software business.
A5 No expectation that all gaming will be cloud-based. Nintendo must keep up with changes, but also believes that their unique core value will increase in value.

Good answer here. No point in jumping on bandwagons when there's something that only Nintendo can and will offer. Switch itself is proof of that.

Q6 The presentation compared revenue per system between Switch and Wii. Why did Switch grow so much more?
A6 Digital business is much bigger on Switch than it was on Wii. Accessory sales (Joy-Cons, Pro Controller) are extremely good.

Digital side was obvious, but controller sales are interesting because they were very good on Wii too.

Q7 3DS forecast is only 1m. Do you intend to use Switch to go after the handheld market?
A7 Demand for the 3DS is stable. Handheld series are getting sequels for Switch, this should motivate people to buy Switch which can be played like a handheld game system.

3DS demand is clearly on the decline, even as an entry level system. Nintendo kinda dodges the question, but it's understandable that they don't confirm an upcoming Switch hardware revision at this point. That will have to wait until a couple of weeks before the revision launches.

Q8 Mobile games. How many can we expect this fiscal year?
A8 The strategy remains to release two to three titles per fiscal year.

Q9 How do you view the Chinese market?
A9 Huge market, outsiders' expectations for our business are probably high. However, China is almost all PC and mobile games, so this will be a big challenge.

Q10 9.8m subscribers for Switch Online. More details about account numbers and retention rates, please.
A10 Steady increase in subscribers as installed base grows. Initiatives like Tetris 99 helped to bring in new subscribers and maintain current ones, so Nintendo will try to provide more of them.

Q11 Changes to Dragalia Lost.
A11 Nintendo studies player feedback and tries to make their mobile games more enjoyable.

Q12 Plans to appeal to consumers who have not purchased a Switch console yet?
A12 Nintendo needs to provide more than their usual core IPs, so new kinds of game experiences are necessary.

An answer that points in the direction of something like Wii Sports, because more utilisation of existing controller features such as motion controls is one obvious area. Labo didn't catch on, but that doesn't mean that Nintendo won't try anything else. The slow rollout of such experiences may have been deliberate, because the Wii suffered from getting pushed into the casual corner and as a consequence third parties weren't interested in making games for experienced players. With Switch, Nintendo has established a core player base beyond any doubt, so game experiences that are reminiscent of Wii, for example, wouldn't stop the flow of games for experienced players.

Q13 How to interpret the recent discrepance between sell-through and shipments.
A13 Fluctuations are common. Sell-through is very favorable, so no concerns going forward. Inventory of retailers is at an appropriate level now.

Q14 Switch software should be generating more profits than you forecasted.
A14 Nintendo would like to exceed their forecasts for both hardware and software.

Basically an admission that this fiscal year's forecasts have been set conservative after last fiscal year's hardware forecast could not be met.

Q15 Tell me more about China. Mobile games, theme parks, are these planned too?
A15 At this time we are only announcing a collaboration with Tencent. No further details.

Q16 Measures to increase Switch usage?
A16 Tetris 99, new NES games for Switch Online, DLC for already released games all help to raise engagement rates.

Q17 Will future mobile games have a Beta like Mario Kart On Tour?
A17 Not necessarily.

Q18 Why are the software forecasts so conservative relative to the recent growth in sell-through rates?
A18 We want to ensure that we meet the target and sell an even larger quantity if possible.

Q19 Plans to increase digital sales even further?
A19 Intention to implement a variety of initiatives.

Nothing concrete has been said.

Q20 Common mobile game strategy is to release a large number of titles.
A20 Nintendo opts to introduce new elements to existing applications rather than releasing more games per fiscal year.

Q21 Preventive measures against a hostile takeover, are there any in place?
A21 Nintendo has no conventional ones in place, but there are systems in place within the company and in connection with outside experts.

Almost thought there would be no crazy question this time.

Q22 Will Nintendo collaborate with Tencent in mobile games?
A22 Discussions inside the company are ongoing, but no information can be shared at this time.



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I see a lot of questions about China ...



RolStoppable said:

Q6 The presentation compared revenue per system between Switch and Wii. Why did Switch grow so much more?
A6 Digital business is much bigger on Switch than it was on Wii. Accessory sales (Joy-Cons, Pro Controller) are extremely good.

Digital side was obvious, but controller sales are interesting because they were very good on Wii too.

Q12 Plans to appeal to consumers who have not purchased a Switch console yet?
A12 Nintendo needs to provide more than their usual core IPs, so new kinds of game experiences are necessary.

An answer that points in the direction of something like Wii Sports, because more utilisation of existing controller features such as motion controls is one obvious area. Labo didn't catch on, but that doesn't mean that Nintendo won't try anything else. The slow rollout of such experiences may have been deliberate, because the Wii suffered from getting pushed into the casual corner and as a consequence third parties weren't interested in making games for experienced players. With Switch, Nintendo has established a core player base beyond any doubt, so game experiences that are reminiscent of Wii, for example, wouldn't stop the flow of games for experienced players.

Switch accessories are a double edge sword, the fragility of the joy-cons is way higher than that of the wiimotes, and I can image many more people buying replacement joy-cons rather than wiimotes. Not a good sign for the quality of the controllers, but more money for Nintendo.

And I hope to see more diverse lineup from Nintendo, even if some people didn't like some of the Wii output, it was interesting times to see what they could come up next and not the same old evolved gameplay types and mechanics.

Thanks for the summary and remarks Rol!



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Nice summary, Rol.

Nothing revealing but nothing negative either. They've done well the first couple of years and now they are in maintain momentum mode.



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Most of it is pretty vanilla, setting themselves into conservative estimates, substantiate growth, will to bring new experiences to broaden their audience and expansion into the Chinese market. Nothing stands out from it.

Also, the fact there not willing to jump on everything knocking out at their doorstep (Like 5G or Cloudgaming) is what I expected too. "5G and Cloud gaming are bound to change the landscape" (The Ouya and Steam consoles were bound to do just that,lol).



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fatslob-:O said:
I see a lot of questions about China ...

It is probably one of the largest growth markets, so not entirely unexpected.



Pemalite said:

It is probably one of the largest growth markets, so not entirely unexpected.

I think those people should research what happened to iQue when you localize a dozen or less games for each system released ... 

Despite the other major console vendors being banned and with Nintendo having access to the market for the LONGEST of them all, once the former launched their own system's into the market it was the most success ever seen before for dedicated game consoles over there because god forbid they cared about localizing the games too in the process LOL ... 

It cannot be stressed how important it is that Nintendo gets localization right given their previous track record with their past systems ... (it's toxic for chinese gamers that they are not treated like equal customers so they can't get access to all the content when they don't understand it in their own language)



fatslob-:O said:
Pemalite said:

It is probably one of the largest growth markets, so not entirely unexpected.

I think those people should research what happened to iQue when you localize a dozen or less games for each system released ... 

Despite the other major console vendors being banned and with Nintendo having access to the market for the LONGEST of them all, once the former launched their own system's into the market it was the most success ever seen before for dedicated game consoles over there because god forbid they cared about localizing the games too in the process LOL ... 

It cannot be stressed how important it is that Nintendo gets localization right given their previous track record with their past systems ... (it's toxic for chinese gamers that they are not treated like equal customers so they can't get access to all the content when they don't understand it in their own language)

I would put more of the blame on the Chinese government than Nintendo.  The government even put about a year stop on approving games and only started reviewing games again recently.  There is a huge backlog and many small developers in China went belly up because their games were never approved and put on hold.  Look at Tencent which got hit hard from drop in revenues due to the government putting a temp ban on approving games.  To simply caste Nintendo as the problem of not localizing games is a false interpretation.  Sure they might have some to blame but I would put majority of blame on the Chinese government.  I understand they are worried about their people becoming addicted to games but they need to revamp their approval process.  Most Nintendo games are family friendly so they should easily be approved yet I'm sure they have to jump through ridiculous hurdles for the Chinese government.  There are thousands of games (mainly crappy phone games) on backlog for them to review. 

Last edited by sethnintendo - on 09 May 2019

sethnintendo said:

I would put more of the blame on the Chinese government than Nintendo.  The government even put about a year stop on approving games and only started reviewing more games recently.  There is a huge backlog and many small developers in China went belly up because their games were never approved and put on hold.  Look at Tencent which got hit hard due to drop in revenues due to the government putting a temp ban on approving games.  To simply caste Nintendo as the problem of not localizing games is a false interpretation.  Sure they might have some to blame but I would put majority of blame on the Chinese government.  I understand they are worried about their people becoming addicted to games but they need to revamp their approval process.  Most Nintendo games are family friendly so they should easily be approved yet I'm sure they have to jump through ridiculous hurdles for the Chinese government.

I'm pretty sure domestic policy decisions weren't to blame for Nintendo's past localization performance over there since China didn't actively block the approval process like they did now ... 



fatslob-:O said:

I'm pretty sure domestic policy decisions weren't to blame for Nintendo's past localization performance over there since China didn't actively block the approval process like they did now ... 

Didn't they have a ban on consoles for longest time unless you partnered with one of their companies to share the profit?