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Iwata on that 3DS price crash

Christopher Dring
Iwata on that 3DS price crash

 

I think that the price cut for Nintendo 3DS must have been chosen from multiple options after a lot of discussion. In about two months after the E3 show, what caused you to make this high-risk-high-return decision? Also, my own knowledge of the industry tells me that as hardware gradually becomes cheaper, the consumer-base spread will become more expansive, which will result in lengthening the life of the hardware. Do you have any concern about shortening the life of the Nintendo 3DS by such a drastic discount at one time? Will the markdown this time have any direct or indirect influence on the Wii U? How will the markdown affect Nintendo as a whole and how will its employees work in the company?

You mentioned the high-risk-high-return decision, but to put it bluntly, the video game business is a high-risk-high-return business in the first place. You might think otherwise as Nintendo luckily achieved steady results in the past. But I really see this industry as high-risk-high-return and I am asking myself if making safe bets can actually yield results in a high-risk-high-return business at all. I think that taking on the challenges of both the Nintendo DS and the Wii was actually high risk, and I am sure you will agree with me when you think back.

Long after the launch period, however, people tend to forget the risk involved and think of it as a planned success just by looking at the favorable results. As top management of development and responsible for the proposal of the Nintendo DS and the Wii, I personally feel that they were extraordinarily risky products and, luckily, they were appreciated by our consumers to yield extraordinary results. This time, I am confident that I have thought about this price markdown more intensively than anyone else in the world. Otherwise, I would not be able to be in this position. With the just-announced markdown, we intend to drastically change the situation toward the end of this calendar year, to realize a situation that a number of you cannot imagine today and to have many people acknowledge that there are no causal relationships between our business and either smartphones or social games.

This is the main premise.

 What caused us to mark down the price is not only because of one thing that occurred in the two months after the E3 show. It was a combination of the sales situations in Japan, the U.S. and Europe, consumer feedback to our actions, diffusion speeds of the information we transmitted and detailed tactics which we will employ in the year-end sales season. Usually, price reductions are supposed to be carried out in the year-end sales season when good software titles are available. But we felt that we should not make a usual decision at this moment for a number of reasons. A usual decision will not surprise many people nor be talked about as a social topic. Also, even a good software title cannot maximize its sales potential unless a certain number of the Nintendo 3DS systems have spread because you cannot experience the 3D images without an actual system, we cannot fascinate you by 3D images through TV commercials and we really feel that the attraction of the Nintendo 3DS is less easily spread by word-of-mouth than we had expected. Accordingly, we have to increase the hardware-installed base from now.

As I said before, a price markdown can boost sales, but it will be temporary without any other measures, so in addition to the price markdown, naturally, we have more than one string to our bow. Shooting the second and third arrows with more reduced-priced Nintendo 3DS systems will allow big software titles to rapidly spread to a certain number of consumers and soon become widely talked about and great movement to the Nintendo 3DS will finally happen in the year-end sales season. We have prepared such a scenario. In this sense, the price markdown was a collective decision for the company; therefore, it was not made by just evaluating one criterion.

Concerning your experiences of gradual price markdowns, we are not denying that a lot of successful examples have followed that rule. However, our intention is to drastically change the trend with the great impact of the price markdown, to have explosive sales with big software titles based on the changed trend, and thereby to lengthen the life of the Nintendo 3DS for a sound platform business. Contrary to your concern about the short life-span, we believe that our decision could bring the life of the platform back on its intended track.

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.

When it comes to Nintendo as a whole and the employees, all the people inside Nintendo are now reminded of the fact that our business can be drastically changed when just a part of our operations cannot proceed ahead exactly as planned. I think that we have to apply the lessons we have learned this time to the future. I resolve to make Nintendo a company which never misses given opportunities. Thank you for understanding my notional explanation.

 

I believe there has been much feedback regarding the Wii U since the company’s announcement at E3 approximately two months ago. What kind of good and bad feedback are you receiving and what are you considering from these responses? Given the current situation for the Nintendo 3DS, how do you see your efforts, and not just for the pricing but also in terms of software, marketing, relationship with the current Wii, etc., that have been carried out until now?

We still have time until the launch of the Wii U but since software for a home console takes a long time to develop, and these aspects are strong especially from both the perspectives of content and quantity, we needed to disclose information about the Wii U to many developers so we can have a solid lineup at the time of its launch. On the other hand, there was great public interest in "what Nintendo will propose after the Wii." We were very thankful for this but also experienced a tough challenge from an information management perspective. Unless we officially informed the public of the overall configuration of the system, we knew that fractions of information would spread in a way we did not intend, and as a result, we would not be able to present the product as intended. Therefore, it was slightly early but we announced the basic configuration of this system at E3.

You mentioned, "good feedback and bad feedback" but there seems to be a great difference in how it's viewed between someone who has actually had hands-on experience at E3 and someone who saw our presentation far away using the Internet. Of course, maybe not 100% of the people who were at the show said the system was excellent or not everyone who saw it from far away had negative comments, but I have the impression that, clearly, there is a great difference in consumers' evaluations depending on whether someone has had actual experience with the system or not.

We learned a key lesson at the most recent E3, that it is always important to consider what is occurring inside the exhibition and presentation, but for people who are watching the show through the Internet, the scale of these people is much larger and now that their discussions using social media spread out in society, unless we effectively present our message to these people, even if the people who were there say, "It was great!," the presentation will not be a great success. In fact, I was interviewed by the media many times at E3, and as I recall, over half of the reporters said, "congratulations" at the beginning or end. I think we can say that "congratulations" is great praise for a presentation and I only experience this once every few years when our show is good. I do not have any close relationships where reporters would say such a thing just to flatter me, so I think the response at E3 this year was very good. As I said, however, since some people outside there had a completely different impression, this is something we need to think deeply about.

Also, I just mentioned "home console" unwittingly, but although the Wii U was announced as the successor of the Wii, I believe it will be positioned slightly different than the past home consoles. In the past, there were two categories of gaming systems, handheld devices and home consoles, and there was thought to be a great wall in between those two categories; however, the Wii U will be connected to a home TV, but it is not a simple home console, meaning it is not something "playable only when facing the TV." This is because, the controller has its own screen, so even if you are not facing the TV or the TV is occupied for some other reason, you can still use the game system. Therefore, in our release, we have written "a new game console" and not "a new home console." In English, both are translated as "console" and therefore, this nuance will not be expressed but, in the Japanese releases, we would like to propose the Wii U without using the term "home console."

For your information, for game systems that have been sold as handheld devices, many consumers do not actually use them outside of their homes. Given this fact, we proposed the idea of carrying the Nintendo 3DS outside by enhancing the communication functionality and challenging consumers to change their usual routine but, on the other hand, there is a very high demand for playing a game system inside the house without using the TV, and we would like to answer that demand with the Wii U. In other words, since our lifestyles are changing minute by minute, I think that a play style where a person plays only when the person sits in front of the TV and has to occupy the TV is becoming less and less fitting with the times. Therefore, I would like to make the Wii U Nintendo's new answer to the upcoming change of lifestyle.

In addition, I would like to use this occasion to talk about something I was hoping to talk about someday. That is, what is going to happen to the TV? I think there are people in here who know more about this topic than I, but when you look at things like electronics magazines, they basically state that "TVs will have multiple screens," or "TVs will work with smartphones." One of the Wii U's proposals is, "Even if you don't buy the latest TV, the existing TV in your house will become multi-screen." In households in Japan, I believe many families have recently replaced their TVs to watch terrestrial digital media broadcasting as the transitional period to which ended just the other day, and I do not imagine that mass amounts of those new TVs will be replaced in the near future. One of Wii U's proposals is that the TV will turn into a multi-screen TV that works very closely with the Internet, without replacing the TV.

In September 2006, we announced the Wii and said, "The Wii will change the relationship between games, the TV, the Internet and a family," but we are considering a proposal of a higher dimension this time. Of course, we do not intend to take the aspect of giving the user the best game experience lightly at all. It is an extremely important factor. But it alone will not be able to make the Wii U something relevant for everyone in the family. Such other elements will be important to make the Wii U something relevant for everyone in the family. Therefore, please think that the Wii U is a product that is a combination of a proposal for a "new play style that is not restricted to the TV," a proposal for a "new kind of entertainment using multi-screens" and also "the future of TV." This year is very important period for us because we can say it is a challenge for the Nintendo 3DS, and since we have announced that the Wii U will not be launched by the end of March next year, I do not intend to speak about it anymore in detail, but I would like to speak about it more when the appropriate time comes, but the Wii U is not simply a Wii with a different user interface and we are not proposing to society a performance-enhanced Wii, rather we are proposing hardware with a totally different concept and vision.

As for the current situation for the Nintendo 3DS, as I said earlier, if each specific topic that I mention, for example, "this is what was wrong" or "that is what was wrong," is picked up, it will not be beneficial for future Nintendo 3DS business. Therefore, I will not mention any particular topics here, but I will say that we learned many lessons, and from these lessons, we would like to make a well-prepared situation by the year-end holiday season, and propose it to society to change the situation drastically.

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Tags: Nintendo , 3ds , satoru iwata

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