Nintendo's Iwata: No DS Phone. No New DS.

In a huge and wide-ranging Q&A sessions with investors recently, Nintendo's Satoru Iwata and Shigeru Miyamoto managed to cover territory as diverse as:

Whether Nintendo will use its massive cash reserves to acquire other organisations.
The DS as a phone.
Dealing with arrogance.
British pub culture's affects on sales.
How the hardcore gamer unbalanced the world's view of video gaming.

We've gone over the text and have extracted what we think are the highlights - the full session is linked to at the bottom of this story.

Enjoy!


Future of the Wii
Miyamoto,"And, don’t misunderstand that we are contented with the status quo. As you may be aware, there is still much room for improvement. We will make efforts, for example, to improve the Wii Channels so people can use them with more comfort. Wii will be a more comfortable machine to use in 5 years or so, so please stay tuned."

New Wii Channels
Iwata, "As for overseas development, the gift-giving function is scheduled to be added simultaneously around the world. As for the download of the TV Program Schedule Channel, each country in the world has its own environment."

And elsewhere in the session, "As for the Wii Channels, there will naturally be a limit in making the applications just by ourselves, so we will increase collaboration with others, I believe. How closely we will collaborate with others will occur in different degrees, and we would like to be flexible in seeking which kind of Channel functionality will make our customers happier."

Future of the DS
Iwata, "DS is a single-architecture platform with this huge installed base that can be used by virtually anyone. This can be not compared with any other machine in the past, so it would be a shame if we could not use it as an infrastructure for something else. However, to do so means that Nintendo has to invent a new business model, which is different from the way Nintendo was selling ROM cartridges and asking our software makers to make software, and from how we were producing them and software publishers were selling them. So, we need some time before we move to that kind or development. We will definitely need to prepare for connection points and all that.

So, I cannot dwell on the details today, but many people have already suggested such ideas, and if you can just imagine that something interesting might happen whenever you bring your DS to a train station or theme park or museum, you know that there are enormous possibilities here. We are hopeful that we will be able to show you some concrete examples next year."

In a later quote, Iwata clarifies the position regarding a new DS next year.

"When I referred to the next year’s developments for DS, I was not talking about any new hardware launch, of course. As I just emphasized the importance of the great installed base of DS and the advantage that nothing in the past had this installed base with a single architecture, we could not leverage that if we introduced new hardware.

So, what we were hinting about must be new services that we can offer with the existing hardware. With that as the premise, we would like to establish a circumstance where people can find new joy in carrying around DS all the time. Such services should contribute to making DS an actively used hardware and, also, to make the leap from one DS per household to one DS per individual."

DS As A Phone
Iwata, "So, I cannot imagine that, in the future, a single portable device will be able to provide every need for all the daily issues people have, and I do not share a vision that DS has to be merged with cell phones in the future. Of course, we do not know how cell-phone technologies will evolve and what kind of business structure will emerge in the future. I cannot say with 100% assurance that Nintendo’s future will never intersect with that of the phone business. But as far as the structure of today’s phone business is concerned, Nintendo does not have much interest."

Going the way of SEGA

Okay, nowhere does either Miyamoto or Iwata mention the name, 'SEGA'. However, to SPOnG the allusion to the former enemy in hardware sales seems too strong not to editorialise. Disagree? Tell in the Forum below.

Iwata, "Nintendo’s unique strength lies in the fact that both hardware development teams and software development teams are working in the same building and sharing the same unique philosophy of trying to always create unique and unprecedented entertainment which will surprise people in a meaningful way. Nintendo is clearly much stronger when we can combine both hardware and software development than when we have to focus on software. I just cannot think of any reason why we would abandon a weapon which brings us such a great advantage. I just cannot imagine Nintendo’s future as a dedicated software content provider.”

Plug-In Software
Miyamoto, "If we can expand Wii sales so that people will take it for granted that Wii is being set up in their living rooms, it becomes possible for an unprecedented lineup of software that would never considered as video games today to become an authentic business. I don’t know if we can call some simple plug-in applications software, but if such plug-in software becomes a prerequisite for some people’s daily lives, they may be willing to buy new ones every year to maintain a level of convenience in their lives. If such a situation is realized, a new software market may be born that cannot be discussed in terms of traditional tie-ratios. Game developers and third party publishers alike today are concerned whether they can go on just by making traditional types of video games. Software engineers are creating new styles of software, which can create new markets and profits, I believe."

How Brain Training Snuck Video Gaming In
Iwata,"More Brain Training included game software called “Virus Buster”, which is a rearranged version of the Dr. Mario game. With the expanded sales of More Brain Training, increasing numbers of people started to say that they couldn’t go to bed before they played Virus Buster. Not realising they have done so, they have already cleared the first hurdle in playing video games. And then, all we had to do was to suggest to these people that video games in general were always something relevant to them, or that games had always been something they could play.

"From the data from our Club Nintendo online memberships, we knew that those who purchased DS to play Brain Training were also buying New Super Mario and Animal Crossing. In other words, it was not true those who had purchased DS in order to play Brain Training would not buy any other titles.

"Of course, not 100% of them are purchasing additional software, but there is potential to change the total picture. Another important factor is whether or not these customers will continuously use our hardware.

"For example, if customers of WiiFit only play with WiiFit for some prolonged time period, and they play with WiiFit almost everyday, when we offer them some new title which may stimulate their interests, they will already know how to play with it in general, so the possibility for them to buy new software will increase. Today, we believe the most important thing is that our customers will not put their DS and Wii in the closet…"

UK's Pub Culture
Iwata, "I understand that the UK has its own “pub culture”. After work, they visit pubs and talk over drinks. Although Nintendo had nothing to do with this, some volunteered to start 'Wii Days'. After they played with Wii at the pubs, some of them went to retailers to purchase Wii the next day."

Money and Risk
Iwata, "The world has changed that much. So, we can’t rely any more on the past in order to predict future risks. Today, it is extremely difficult for anyone to say, “because it worked this way in the past in the game business, the future will develop in the same fashion, which will be require risk of this degree, and this amount of cash will be needed.” If our cash deposits simply keep increasing at the current pace, it is possible that we may be required to take a new step that we have never done nor announced before, but it is premature to comment on such a possibility today."

Wii Remotes
Iawata, "If one player has four Wii Remotes and the player attaches all four remotes to his or her body, we can think about many different possibilities. But the next question we have to answer is, “how much would such an application cost for a customer?” Without some technical breakthrough, it will be difficult to create entertainment which requires a player to manipulate two or 4 or 8 Wii Remotes at the same time. Of course, 10 years ago, even making a wireless game controller was regarded as impossible. So, anything can happen in the future."

Miyamoto,"We are introducing the Zapper attachment, and we will introduce a steering wheel attachment with new Mario Kart game for Wii, but they are housings or holders for Wii Remotes and Nunchucks. Also, the Wii Remote is designed so that a variety of attachments other than the NunChuck can be connected. These types of peripherals can be offered at relatively inexpensive cost, so that third party developers may also explore more possibilities in these directions."

Wii Channels
Iwata,"For now, we are trying to enrich the existing Channels, and that is why we would like to increase the number of Channels in November and December. However, in the next year, we are very hopeful of realizing something brand new so that people will be surprised and say, 'I couldn’t imagine that Wii Channels could be used this way.' When we can get to the stage where we can publicly announce specifically what we will do next, we would then like to talk to you."

Hardcore Gamers
Iwata, "Also, although some people in Japan sometimes say that only small number of veteran gamers are playing with Wii, that statement can never be applied to markets in Europe and the U.S..

"Sales of Legend of Zelda; Twilight Princess are one good example. Miyamoto and his team have put all their energy into creating this software but Japan happens to be only the territory where it has not yet reached our expected sales. However, in overseas markets, sales are moving ahead just as we originally expected."

Losing Balance To The Hardcore
Iwata, "Not long ago, many in the industry would ask the avid games for their opinions as to what kind of improvements they are hoped for beyond games already available on the market and, based upon this feedback, introduced them to improved software. However, that kind of approach just narrowed the potential customer base in each categorized market. The whole video game market lost overall balance and catered only to a small number of potential customers. Today, I often discuss with our developers what subjects the general public are interested in, even when they may not be showing enthusiasm for them."

Mergers
Iwata, "The possibility of buying out another company is often asked as we have a significant amount of cash, but we think that company buy-outs can not produce good results if several conditions cannot be met. If all these conditions can be met, we are willing to carry out a plan.

"However, if I can use an extreme example for this, if the merger and acquisition is done solely in order to allow the company to do whatever we order them to do, we do not think that will bring about a good result for us.

"Some may say that Nintendo has been too careful about M&A, but only when we can determine that the result can surely work for the future of Nintendo, that is when we will not hesitate."

China
Iwata, "Nintendo has established a company called iQue, which has been doing business in the China market for about three years now… iQue has come to a stage where it can earn profits from its business, but it has not contributed greatly to Nintendo’s sales and profits."

And finally, the ever-present fear of becoming arrogant and lazy with success seems - for some reason - to haunt the Japanese manufacturer of video games hardware and software...

Handling Success
Iwata: "But, we are afraid that our feeling may be paralysed in many different respects. People inside our organization may be bloated and conceited with our results. How we can prevent that? How we can keep the same motivation that we used to have two or three years ago? How to maintain that kind of mindset is most important. Of course, there are many external risks."

You can read the full Q&A [purl=http://www.nintendo.co.jp/ir/en/library/events/071026qa/index.html]here[/url].