Iwata Addresses Mobile Game Competition, Microtransactions

As party of a wide-ranging Q&A session accompanying Nintendo's latest earnings report, company president Satoru Iwata addressed topics ranging from competition from mobile games to the use of microtransactions in Nintendo-developed games. Iwata also used the question and answer session to address many concerns about the 3DS, including how the system's recent price drop would impact the hardware's profitability and the perceptions of the Wii U's price stability. Iwata's answers also touched on pricing lessons learned from the GameCube era and the potential for a new Brain Age style hit on the 3DS. Here are some key takeaways from a transcript of Iwata's remarks provided by Nintendo. On Competing With Low-Cost Mobile Games "...It is the fact that a great variety of games are available at very low prices for smartphones. Naturally, consumers will choose more affordable ones if the video games we provide do not have much more value than those available for smartphones. However, no causal correlations have been confirmed because we think there are consumers who acknowledge that the value of what we offer does not equal to that of those available for smartphones and that what we offer holds unique value." .... In the past, when games were becoming available with Java technology on cell phones, before smartphones appeared on the scene, we were often told that no one would buy handheld game systems once people could play games on their cell phones. As a result, however, I believe that we have gone above the limits with Game Boy, Game Boy Advance and Nintendo DS by continuing to try new things which games for cell phones can not realize and to offer unique software in connection with hardware. Therefore, we are willing to do the same things in the future – we think that we can keep the high significance of our own platforms' existence by creating and offering software which cannot be realized on the other common platforms and by receiving the consumers’ appreciation of them." On How Nintendo Plans To Use Microtransactions In Its Games "I have been discussing this topic with Mr. Miyamoto for a fairly long time. For example, let's say there is an occasion where a user says, 'I'm done playing this game but I would play it more if there were additional stages,' and we were able to focus the right amount of energy to develop additional stages and that way, by distributing the additional stages, we were able to extend the life-span of the game or stimulate social topics, or increase sales. Then, we would discuss whether we could sell the add-on content at a price where both Nintendo and consumers would be satisfied. For example, in the future, I think it will be all right to have a situation where we prepare an additional stage and say to consumers, 'Can you pay some more to play this?' ...I would also like to mention that, under Nintendo's set of values 'charging money just for changing the parameters to unlock something or to allow some large advantage,' is a totally different earnings structure that is not compensation for creative work and, while pursuing this may create short-term profits, Mr. Miyamoto and I discussed that we should not use this type of billing system since we think that we will not be able to make long-term relationships with our consumers." On Reaching Profitability On 3DS Hardware And Software "It is not true that the overall handheld gaming business becomes balanced in a circumstance where generating some profit from handheld hardware sales and generating less profit from the software sales in comparison with software sales of home console business. Rather, please think in a way that the profitability becomes larger when a business starts to run well and a number of the hardware units sell. When the platform gains momentum and both hardware and software start to sell well, the manufacturing costs for hardware will be lower." On Who Is Buying the 3DS "The main purchasers of the Nintendo 3DS are young men, and the ratio of women is relatively low for a Nintendo platform. On the other hand, the situation of gaming systems is not that simple. Who purchases a gaming system and who uses it are actually different. When the Nintendo 3DS comes to one's house, it will be shared among the family, so the actual female ratio of users will be higher than that of the actual purchasers. But one thing I can say is that young male enthusiastic game fans have constituted the biggest demographic group among all the initial purchasers of the Nintendo 3DS. ...For a family with two or more children which tend to think of purchasing some Nintendo 3DS systems, it is clearly shown in our research after the launch that the price was one barrier for them. Therefore, by changing the price, we would like to change the age range and gender ratio by the end of this year, and I think that the situation will be very different four months later. On The Difficulty Of Marketing The 3DS "It is true that it is more challenging than we initially expected to communicate the appeal of 3D. One reason is that we cannot communicate the appeal of 3D through TV commercials, and it greatly differs by game content whether the appeal of 3D is easy to present or not. If one tries to show the appeal of 3D for difficult content, it will be hard and one might have to try repeatedly for a long time. This might lead to the idea that 3D may not have appeal worth its efforts. ... I think there could be a Nintendo 3DS software title which does not use the 3D feature at all, and I believe Nintendo will develop such software. Instead, other features of the Nintendo 3DS should be focused on. It might be a communication feature, or other functions (such as the gyro sensor or the motion sensor). The important thing is that each respective software title has its own characteristics, and appeals to the consumers in a way that fits the software. So I am not worried in a way like, 'The value of the Nintendo 3DS will decrease when the novelty of 3D wears off.'" On The 3DS Price Drop's Impact On Wii U Price Stability Perceptions "With regard to the influence on the Wii U, what we have to take most seriously is that the price markdown could damage the trust of the consumers who bought the Nintendo 3DS just after the launch. I feel greatly accountable for it. Our decision of the price markdown this time has a side effect that, at the launch of the Wii U, people may feel that the price might drop in the near future if they wait. Nevertheless, we have decided to cut down the price of the Nintendo 3DS as we consider it as a necessary decision now. What we will be able to do to recover the consumers' trust before the launch of the Wii U is very important to us. Since the Wii U we showed you at the E3 show in June was still in the development phase without very specific proposals on the software titles, we are going to announce the release date and the price next year when we are able to explain the specific proposals. Anyway, the biggest influence is on our consumers' trust, I think." On The Potential For A New, Non-Traditional Gaming Hit "Software such as Brain Age and Wii Fit have become such great hits that people often ask questions about the next unexpected big hits like Brain Age or Wii Fit. But even if I said something like, 'We have prepared the next revolutionary stuff like this,' it is usually a type of software that people think, 'How in the world would this sell?' However, the software which compels you to hold such a doubt, when it can become an explosive hit, can become a really great product. Therefore, there is no reality even if we say, 'We are developing something like this and it will sell just as Brain Age did.' It is not a game which looks like Brain Age, but we will be proposing something that consumers did not categorize as a video game in the past. It may be a Nintendo 3DS function, a new packaged software, software sold at the Nintendo eShop, software once sold at the Nintendo eShop then sold as a packaged game (like Art Academy for Nintendo DS) or something else, and out of those proposals we cannot tell exactly which one or ones of them will become big hits, so we are considering multiple proposals. Some of them will come out during this fiscal year and some are planned for next fiscal year. We hope, in the end, you will look back and say, 'that particular software further accelerated the penetration of the Nintendo 3DS.'" On Pricing Lessons Learned From The GameCube "Maybe the reason we were able to make the markdown decision [on the 3DS] is our lesson from Nintendo GameCube. Therefore, in that sense, it was slightly a personal decision, meaning that the current executives, who are the ones who make the decisions, all experienced, 'there was a chance for the Nintendo GameCube but we were not able to capitalize on it,' and I think that was a large factor, that the executive all shared this sense, not just myself."