Posted by: seanmalstrom | November 7, 2013

Malstrom reports on the Investor Question and Answer Briefing with Iwata

Above: Malstrom sneaks into the Nintendo briefing…

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It’s that time again! Nintendo is holding its latest Investor Question and Answer Briefing with Iwata. We weren’t invited, reader, but we’re going to attend anyway!

Oh, and the first question is a good one! Listen reader…

What is your take on the concern that your strategy for the digital business may cause “deflation,” namely, push down the price of video game software overall, including packaged software?

In the last post, I said how the financial bigwigs are scared to death of ‘deflation’. Of course, deflation tends to occur during great disruptions.

Iwata says:

On the other hand, just as the “Free” author Chris Anderson suggests in his book, there are some people who insist that digital products tend to become cheaper and eventually become very close to being offered for free. In other words, deflation in prices in the digital business can increase if you are not careful enough.

Did Iwata name drop a business book just to show investors that he does ‘read about business’? Hahah.

In today’s video game market, packaged software that is well received by consumers tends to have even higher sales than before but, on the other hand, the number of medium-scale hits is decreasing and recent iterations of game franchises that used to sell very well tend to sell fewer copies these days. As a result, game sales tend to polarize.

As the middle-class of society disappear, the middle-class of games disappears as well.

 In addition, we have already found that once consumers have made a digital download purchase, many of them tend to make another one. They notice such conveniences as the ability to always carry around the games and not having to worry about losing the physical game cards. 

Iwata is revealing to us some market research.

On the other hand, when we offer a new proposal to consumers, say, when we launch a brand-new IP or when we release a game with well-known characters but with brand-new gameplay that our consumers are not familiar with, it is hard for them to anticipate and appreciate the value of the content before actually purchasing and playing with it. For these titles, if we take the ordinary approach of selling the packaged software, the software might not reach its full sales potential, and even when we are able to create something interesting, the games often can just fade away without being noticed by consumers. When we offer our consumers such new play experiences exclusively in a digital format, we intend to have wide flexibility in terms of their prices and ways to market them. With this in mind, as for the software you just mentioned, namely, “Darumeshi Sports Shop,” “Wii Sports Club” and “Pokémon Bank,” we are challenging ourselves with new pricing and sales endeavors.

No one had that trouble back in the 1980s or 1990s. Perhaps it is not consumers who are hard in appreciating the ‘value’ of the content but Nintendo developers themselves.

However, while we were able to create great momentum for Nintendo 3DS in the Japanese market, we are yet to do so in the United States and Europe. One reason why the market for dedicated gaming systems appears to have shrunk more drastically in the U.S. and Europe is that home consoles, which occupy a high proportion in their markets, are undergoing a generational shift. 

Japan has been in an economic malaise. In the last few years, Europe and America joined Japan in the malaise. That is why the market ‘shrunk so rapidly’ (as well as the 3d nonsense).

That is to say, there are some areas in which dedicated gaming systems were once used that now have greater potential on smart devices. On the other hand, dedicated gaming systems are developed by considering the software that is designed to run on the hardware, enabling us to make unique propositions. With that in mind, my view is that the gaming market will be segregated to a fair degree. However, this does not mean that smart devices will simply compete with dedicated gaming systems.

Iwata is surrendering the ‘play to kill a bit of time’ job of handheld consoles to smart devices. Not good. Remember that the Wii was successful because Nintendo focused on competing against TV for time in the living room.

Generally speaking, it takes approximately one and a half years before we can bring a new hardware system onto the market, and we already realized beforehand that it would be difficult to maximize the sales potential of Nintendo 3DS without an entry-level product ready in time for the release of a new Pokémon title.

Iwata is saying the 2DS was designed only as a cheap way to sell Pokemon.

Nintendo 2DS is, however, simply one of the options for consumers and we will continue to offer the existing Nintendo 3DS and Nintendo 3DS XL platforms in the overseas markets, and we are not saying that we will abandon 3D or cease to make new propositions in 3D. “The Legend of Zelda” title that we are going to release toward the end of the year is a superb showcase of the 3D effect, featuring a top-down style and offering a new form of gameplay by taking advantage of the 3D effect vertically.

And this is why Nintendo will continue to burn in fiscal hell. Such arrogance to trick gamers to think they are going to get a new 2d Zelda game experience but only to use it to attempt to convert them to Nintendo’s sick, sick 3d obsession. What is so wrong with a new 2d Zelda like Link to the Past? Why is Nintendo so hostile to it?

Even with Nintendo’s financial house burning, Iwata cannot admit he was wrong with the 3DS and Wii U strategy. Perhaps this is because he wasn’t the originator of such strategy. It was Miyamoto who was behind the 3DS. Maybe Iwata is protecting Miyamoto’s reputation here.

Other companies will launch new consoles (in the overseas markets at the end of this year), but I think they focus on targeting highly skilled users. Therefore, in that sense, though the competition will heat up because new game consoles will come out and there will be a “war of the game consoles” played out in media articles, we wonder if the target user will actually be the same.

So Iwata’s plan for the Wii U to react to Xbone and PS4 is to sell ‘kiddie games’. Gamecube DejaVu!

This year, what Nintendo is promoting is, conversely, to stand out in the game industry for individuality. I believe we have become a unique value.

Grab your wallets, investors! Nintendo is headed for a shaky ride!

Remember when Nintendo was known for making video games? Now Iwata wants Nintendo to be known for ‘individuality’ and ‘unique value’. Instead of acting like an adult, Nintendo is literally acting like a high school child.

“I’m creative!” “I’m individual!” “I’m so unique!”

This question made me laugh:

I would like Mr. Iwata to talk about the term “commitment.” I find it difficult to understand how the commitment is benefiting Nintendo in any way, as it has simply fallen prey to media and investors. Could Mr. Iwata explain what he means by “commitment”? 

Does the investor wish to marry Mr. Iwata? Bahahahahahaha!

First of all, I used the word “commitment” to show our firm determination to do our best to reach our target. However, it was perhaps not an appropriate term to use as it has, as a result, led to some reports that speculated about my resignation.

It is always everyone else’s fault for not understanding Iwata!

What is more, how players influence the value of our products and turn them into hit titles through interacting with each other, and thereby creating buzz in society, is simply beyond our reach. 

Now it is the gamers’ fault!

Since former President Yamauchi passed away, I have been considering what he taught us in the end, and his words that the worst thing we can do in entertainment is to follow what others are doing spoke directly to my heart. 

So why did the 3DS do ‘3d’ when Sony, movie theaters, and everyone else was focusing on ‘3d’ as well? Why did the Wii U do a ‘tablet’ type design when everyone was focusing on tablets?

Iwata is in Wonderland. All the things he thinks Nintendo is being ‘unique’ in are being done by everyone else.

What Iwata really means by ‘not following others’ is ‘doing what we want to do’. Since Nintendo has a sick, sick obsession with ‘3d’ and believe they are Gods of Creative Alchemy with Hardware and Software, they don’t believe they are ‘doing what others are doing’ either. When a child is addicted to drugs, sex, and getting in trouble, they ALL think they are not ‘following the crowd’ but they are.

What is there unique about the 3DS or Wii U? Absolutely nothing. This is why the market is yawning over the products. Nintendo’s insane addiction to 3d and Gamecube-ism has blinded them to what they’re doing.

As we first began to do on Wii, one method would be to release games for our previous consoles, such as Nintendo Entertainment System or Super Nintendo Entertainment System, on other Nintendo consoles as Virtual Console games. While Wii U and Nintendo 3DS already offer Virtual Console software, I feel that we have not been able to take full advantage of our assets yet, so we would like to enrich our Virtual Console lineup. As the ability to digitally offer our products has given us greater flexibility in offering new propositions to our consumers, we should naturally consider these possibilities in the future. 

Liar! You know you wanted people to drink the ‘Now Is the Time For 3D’ and ‘OMG creativity’ for 3DS and Wii U games. Virtual Console’s popularity is a direct contradiction to the Nintendo imperative that gamers only want ‘surprise’ and ‘new’. Iwata is only willing to turn on the Virtual Console spigot when he has to.

Nintendo does not want to offer an alternative to their ‘creativity crusades’ on their console. A Virtual Console would allow this. It allowed people to buy 2d Mario instead of 3d Mario, non-Aonuma Zelda instead of Aonuma Zelda, Metroid without maternal instincts instead of Metroid with maternal insticts, and so on and so forth. Iwata does not want the market to decide what type of Nintendo philosophy it wants. Iwata is to decide what games you peons will get!

Question 8 is brutal:

Over these past four or five years, the number of Nintendo employees has expanded from 4,000 to around 5,000, and it appears that this fiscal year’s R&D expenditures may be the biggest ever. Over the same period, sales have gone down by about half. Given these circumstances, I would like to hear some comments regarding cost-cutting or workforce reduction going forward.

Restructuring the workforce is not the first option we consider even when cost cutting is required. I would like you to understand that this is because we do not see a dark future for Nintendo.

Didn’t Iwata say that last year? And the year before? And the year before that?

Concerning Yamauchi’s stock:

First of all, please understand that the first 49 days* after his death have not yet passed and, accordingly, there is nothing concrete we can say as to what we might do.

*In Buddhism, the first 49 days after one’s death are regarded as an especially solemn mourning period.

Hiroshi Yamauchi was a Buddhist? Apparently, 70% of Japan is said to be connected to Buddhism.


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