Nintendo released the Investor Q&A portion of its fiscal results briefing for the second quarter of this year. The now-in-English text is lengthy, and we decided to read it and grab some highlights for your consideration.
Away we go!
Nintendo's Strategy for Digital Distribution
If you've ever wondered why digital games are often sold by Nintendo for the same exact price as their physical counterparts, Iwata addressed this point. It's all about perceived value.
…we decided that, since the contents are the same, the company would offer the software at the same price, be it the packaged version or the digital version. This is because we want consumers to value software as highly as possible and because we have been trying to heighten the value of our software whenever we produce it. Prospective consumers can easily anticipate that games from established franchises such as Super Mario and Pokémon are worth the price, even before they start playing them. In fact, "Animal Crossing: New Leaf," which we released last year in Japan, and "Luigi's Mansion: Dark Moon," Capcom's "Monster Hunter 4" and Nintendo's "Pokémon X" and "Pokémon Y" released this year, have shown both strong digital download and packaged software sales, which shows that there are a number of people who believe that digital content holds the same value as its packaged counterpart.
Iwata went on to indicate that once the digital purchase seal is broken, customers tend to repeat buy under that model.
…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.
There's no denying the ease of swapping through digital games on the Nintendo 3DS. Especially when compared to the need to lug physical carts around as an alternative.
Nintendo and the Smartphone Threat
One investor asked Iwata to directly address the notion that the portable gaming industry is shrinking as a result of the growth of the smartphone industry. Iwata offered sales statistics to counter that claim.
There are people who then think that the market for handheld gaming devices may be shrinking, and because there are numerous articles in favor of this notion, some people then conclude that the market for dedicated gaming systems will be eclipsed by smart devices and will diminish quickly…Nintendo 3DS sold five and a half million units last year [in Japan], and I am confident that we will be able to surpass the five million mark this year, too…Previously, the only platform to have sold more than five million units was Nintendo DS, and this time, Nintendo 3DS is set to surpass this mark for two consecutive years.
The hypothesis that smart devices will replace dedicated gaming systems, in my view, does not explain this phenomenon.
To Nintendo's credit, the Nintendo 3DS was a mess when it first launched, much like the Wii U. The company dropped its price and focused efforts on creating must-have software. Since then? It's been the best selling console for the last several months straight.
Nintendo's Going After Families and "Skilled Users"
Another investor asked Iwata about Nintendo's plan for the Wii U. The President expanded on the idea that Nintendo will try to offer games for both core, "skilled" gamers and more family friendly options. Here's how he started.
We have an offering of software for the end of this calendar year that encourages family fun at home. Nintendo is preparing a number of Wii U games for next year that greatly appeal to highly skilled users, but at the end of this calendar year, we have quite a few offerings that can be played by the whole family, dad and the kids, or grandparents and the kids.
He went on to indicate that the Xbox One and PlayStation 4 are aimed squarely at the core market.
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. The games available at the end of this calendar year, "Super Mario 3D World," "Wii Party U," "Mario & Sonic at the Sochi 2014 Olympic Winter Games," "Wii Sports Club" and "Wii Fit U," all lean more toward family use, and we are targeting those who bought Wii and would be interested in the Wii U offerings. That is slightly different than what other companies are aiming for. Thus, in the sense that we attract consumers interested in this category of video games, I think the launch of other video game systems is also good for us because they energize the video game industry as a whole.
Can Nintendo compete in the market simply by avoiding the head-on collision between Microsoft and Sony? It worked for the Wii.