In one of the questions the current state of the Japanese videogame industry is described:
During the presentation today, I heard that game software sales for home console video game machines in Japan have been slowing down. As I interviewed with several people, they say it costs them easily more than 1 billion yen in order to develop a PS3 or an Xbox 360 software, and in terms of the current Japanese video game market size, the resulting software cannot pay off at all. They also say that they are also facing a hard time to recover the development costs even with Wii software as less and less Wii software they are making can sell in Japan and that it is becoming difficult to receive the green light of their Wii software development from the management.
Not good. 1 billion yen is about 11 million $.
About cooperating with third parties:
Shinji Hatano (General Manager, Marketing Division):
Mr. Iwata explained a little bit about the example of Professor Layton. It has become challenging for one software to pay off the development cost with the Japan sales alone. The presence of the Japanese software companies is not what it used to be. The Japanese domestic sales are, of course, important. But the third parties have better grip on the Japanese market, so it may make sense for Nintendo to cooperate in their overseas marketing, for example, by us cooperating in both promotional and marketing activities.
We have been thinking in this manner, and we have already cooperated with some third parties. We did it last year and will do so this year on Mario & Sonic Olympic Games with Sega. The original Nintendo DS and Wii versions of Mario & Sonic Beijing Olympic Games together sold more than 11 million units last year. This year, the new Mario & Sonic Winter Olympic Games will be marketed by Nintendo in Japan and by Sega in the overseas markets. Nintendo is also doing some supportive activities for their overseas promotions too.
So, at a certain time in their development phase, when we can learn the substance of the software from the third parties, we try to think what we can do and how in order to maximize the sales. In the days when it is difficult for a software to pay off in Japan alone, we need to tackle the challenges with the software publishers.
Iwata:
In that regard, I anticipate the relationship between software makers and Nintendo as a hardware manufacturer to change from now. In regard to the relationship, I often discuss with Mr. Hatano lately that we cannot foresee the future by saying, "It must be like this because it used to be that way in the past." It is time we have to invent new ways.
Hatano:
I cannot elaborate on the details, but let me talk about one title with which we have come to a basic agreement. Nintendo will collaborate with Square-Enix on the overseas sales of Dragon Quest IX that they launched in Japan for Nintendo DS in July this year. For the U.S. and European sales, we would like to fully cooperate with them.
Nintendo would like to play a key role in expanding the Dragon Quest title in these markets because our preposition is that such quality title could and should sell more in the overseas markets. That is the basic agreement, and we will decide the details from now.
About Wii Music and Animal Crossing: City Folk failing to keep Wii sales high:
Iwata:
First, Nintendo's basic business structure is to have a relatively small number of titles that sells all over the world for a very long time and that each sells a large volume to drive hardware and software sales and, as the result, revitalize the market.
Talking about Wii, if Wii Music and Animal Crossing: City Folk that we launched late last year had been able to sell for a long time and to build up a steady sales volume, we might not have to say that we lacked strong software in the former half of this year. One year ago, Wii Fit and Mario Kart Wii continued their strong sales. However, if they had not sold in that fashion, we might have said that Wii had lacked the software to support the hardware at that time. In other words, it is not the question of the quantity of the titles. What matters here is, whether or not we have the software that continuously sell, and whether or not we are able to construct the circumstance in which these titles can steadily make their ways into the hands of new customers.
Tomodachi Collection took 3 years to make.
About competitors comping out with motion sensing technology:
I cannot understand at all why some people come to think that Nintendo has lost its edge as soon as they hear such news that other companies are newly applying for motion sensing technology. If fun and interesting software to take advantage of the technology could be created that easily, a number of other titles which are more fun than Wii Sports must have been already launched for Wii. Why in real life are not so many? The total power factor to combine both the technologies and software at the appropriate level must be the reason why Nintendo has been appreciated in the marketplace, and when someone argues that Nintendo has lost its edge when the actual products have not been launched yet, I feel something must be wrong here.
About the DS competing with the iPhone and iPod Touch:
The same thing can be said about the talks over iPhone and iPod Touch. Some articles suggest that Nintendo is trying to leverage the Nintendo DS business because iPhone and other game machines are gaining momentum. As I explained to you with some data today, it is true that the current Nintendo DS business is not that heated up as it used to be sometime ago, when no one could tell how far ahead Nintendo DS might be able to grow. On the other hand, the data also showed that Nintendo DS has not lost its footing at all. Actually, it has been even increasing its footing all around the world. Under such a circumstance, I do not know why some people make such a remark. I have to feel that, probably, there are people who want to write the story that Nintendo is competing against Apple, and they are picking up fragmented information here and there and connect them to write their own stories. I cannot agree to such an argument. I want to believe that some of you who have listened to my presentation were able to understand our position.
