Iwata took to the press to outline Nintendo’s immediate and future plans following their performance over the year. He’s made it clear that they will not give up on consoles, or make games on mobile. Rather, Iwata intends to redefine the meaning of a gaming platform, and find a new blue ocean with a new quality-of-life business. Details are below.
Wii U and 3DS Assessment, Mario Kart 8
In the short term, Nintendo recognizes that Wii U is in a poor position, because they were unable to sell consumers on the value of the GamePad. Their game plan for the Wii U is to make more games that use the GamePad’s unique features, including NFC, develop a Quick Start Menu, and releasing Nintendo DS games on Virtual Console on the system. He also announced the release date for Mario Kart 8, May of this year.
In terms of 3DS, they have concluded that in spite of missing expectations, the system is still a success in absolute terms. Based on NPD figures of 11.5 million units sold, it is the console with the highest share for the year, and worldwide figures of 42.74 justify continued expansion. They also point to the success of the Puzzle & Dragons and Angry Birds ports on the system, and intend to make the system a viable one for more mobile games to come over.
Nintendo Network IDs – Nintendo’s New Virtual Platform
Nintendo’s longer term prospects are more radical, as they no longer believe they can continue to sell consoles and games the way they have. Rather, they can no longer continue with the model where their relationships with consumers are dependent on the lifetime of individual consoles.
Therefore, they are redefining their idea of a platform with Nintendo Network IDs, or NNIDs. In the future, the NNIDs users already have in 3DS and Wii U will carry over to other platforms, and will also be usable in mobile devices. In this way, they will touch base with consumers even beyond their own consoles. This future relationship is described as completely virtual.
Iwata makes it a point to refute any ideas that Nintendo will be making games on mobile. They have a small team of developers assigned to the task of making mobile apps that will attract consumers towards Nintendo devices, and will reveal more when these efforts materialize. They will also shift development of apps and services that is normally bound to their hardware to their mobile efforts when applicable.
In connection to their new platform strategy, Nintendo is making radical changes to the way video games are sold. Whereas game prices have previously been set in stone, they intend to make prices more fluid. Players who buy more games from Nintendo can be offered lower prices. Bringing other people over to play their games (similar to what is done in mobile games and apps now) can also be a incentive to lower prices. While this is a long term plan, they will test this new sales model out with Wii U owners soon.
Licensing and New Markets
Nintendo also plans to expand licensing of their characters and IPs to widen their exposure. They already license merchandise actively in the US, but will be more active in finding more partners. They will essentially license to everyone they are not competing with and can form mutually beneficial relationships with.
They are also expanding their reach beyond traditional gaming markets (Japan, US, Europe, South America.) They recognize the potential in new markets, where Nintendo fans pay a higher cost to buy their games and consoles, and have also observed that offering the same products to these markets is no longer profitable to them. Therefore, they are planning to offer a new product line of hardware and software with a different price structure than in their current markets.
The Blue Ocean – Quality Of Life
Finally, Iwata has outlined Nintendo’s most ambitious plans yet, which will be launched in the financial year beginning April 2015 and ending March 2016. Nintendo has plans to go beyond gaming in the search of a new blue ocean, where they will create new products no one else is offering and thrive.
Iwata describes Nintendo as an entertainment company, but will now expand this to what he calls quality-of-life, making products that not only entertain but improve the quality of life of their users. Initially, these products will touch on consumer’s health needs, but also expand towards education, lifestyle, and other possible areas.
This future strategy will definitely still include, but not be limited to, gaming consoles. True to form, they are bucking trends and making non-wearable technology, in contrast to the interest in headsets, smartwatches, etc.
Post-Presentation Q&A
After the presentation, Iwata and Miyamoto fielded questions from the press. We also offer highlights below:
Iwata answered an Okasan Securities analyst question about the mobile apps and capital spending. The apps will build bridges with customers and give them more information about Nintendo, but will do more than marketing. Otherwise, customers won’t want to use them regularly. Nintendo is doing a lot of capital spending on something they’re not skilled at, but Iwata would not say what it is.
Iwata explained to another analyst that the 3DS will drive profit for the nest fiscal year, as the company works on better marketing. He also brings up high expectations for Mario Kart 8 and Super Smash Bros.
Iwata answered a deeply personal question, stating that he never lost his resolve or passion throughout the year. However, he gave himself a deep pay cut to take responsibility.
Miyamoto fielded a new question regarding the dearth of titles for the Wii U. He states that he is not trying to make excuses when he brings up the technological leap from the Wii to the Wii U. He asserts that Nintendo has been able to resolve their problems adjusting to the leap internally.
About 3rd party support, Iwata stated that they still receive a lot of support from developers who make games for children and families (such as Skylanders) but not others. Nintendo is still focusing in increasing its userbase to entice more 3rd parties down the line.
A Nomura analyst asked why they reorganized to merge their home and portable console divisions. Iwata explained that they want to narrow down the architectural differences between home and portable consoles in future iterations. He does not know if the two will merge, but they will be like siblings, similar to Apple and Android devices.
Iwata admits that they may be doing either mergers or acquisitions with the shares that the companies are buying back. He states the business is at a transition point, but he cannot talk about any specific deals at the moment.
Iwata gave a hint at what their non-wearable health device is. It is not necessarily something that you use in the living room. We will find out what he means for sure later this year.
Nintendo will be flexible when it comes to future collaboration, but they will stick to making unique products other companies do not offer, retaining their identity.
Regarding stronger sales in Japan versus the rest of the world, Iwata explains that marketing was divided between the two consoles, and as a result neither truly exploded like they expected. Iwata calls the last holiday season the worst year-end shopping season he experienced in his tenure.
Some final odds and ends:
Interestingly, Nintendo is now studying why sales were strong in France, when they were weak in the UK and the US.
Nintendo licensing won’t be as extensive as Sanrio’s, but they could do things like offer wallpapers on smart phones.
Iwata cryptically states that they share their philosophy and intends to align with them in the near future.
You can read Nintendo’s slides in the presentation here, and roundups from Macquarrie Capital Securities analyst David Gibson here, and the Wall Street Journal’s Kana Inagaki here.
