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Xeodrifter diary #13

GN Podcast #480

EoD - Smash Wii U!

Iwata discusses Tomodachi Life, Pokemon X/Y/Ruby/Sapphire, Smash Bros 3DS as long-tail sellers

Coming from Satoru Iwata...

This is the sales transitions of “Pokémon X” and “Pokémon Y,” including their package versions, download versions and versions bundled with hardware, released in October last year. As you can see, the titles continue to sell for a long time in the U.S. and Canada in contrast with the sudden spurt in the Japanese market. Although the total sales figure of Nintendo 3DS is approximately 15 percent less in the U.S. and Canada than that in Japan, the combined sales of the “Pokémon” franchise there surpassed the number in Japan this June and have kept enlarging the gap.

In other words, once a key title becomes popular, the selling power is sustained for a long time. In overseas markets, the key titles for the year-end sales season are “Super Smash Bros. for Nintendo 3DS” and “Pokémon Omega Ruby” and “Pokémon Alpha Sapphire.” On top of that, it would be important for us to take advantage of sales potential of the big titles we have released so far.

We released “Tomodachi Life” in overseas markets this year, which is the title released as “Tomodachi Collection: Shin-seikatsu” (Japanese title) in Japan last year.
In Japan, the initial sales of this title were positive because it was the sequel to “Tomodachi Collection,” released for Nintendo DS only in Japan and was a big hit. It is, however, completely new for the overseas markets. We therefore have made efforts to sell it steadily for a long time there. Please let me show you an interesting sales transition of this title in the European market.

As you are aware, it has maintained stable sales for quite a long time. It has lost momentum lately, but we think it is because video games generally sell the least in September and October in Europe, and we anticipate that the sales will be boosted again toward the year-end sales season.

Let’s compare this with the sales transition of “Animal Crossing: New Leaf,” which was released almost one year ago. The initial sales of “Tomodachi Life” are lower than “Animal Crossing: New Leaf” due to the difference in brand awareness. However, the sales surpass “Animal Crossing: New Leaf” in summer, which indicates that “Tomodachi Life” has high sales potential. Both “Animal Crossing: New Leaf” and “Tomodachi Life” have few competing titles in the video game industry. We think it very important to fulfill sales potential of these types of games in order to vitalize the Nintendo 3DS business.


Nintendo explains why the New 3DS/XL released in Japan this year, why EU/NA have to wait

Coming from Satoru Iwata...

When it comes to the overseas markets, we do not plan to launch New Nintendo 3DS/3DS XL for the U.S. or Europe this year. Additionally, there are only a couple of big titles, “Super Smash Bros. for Nintendo 3DS,” and “Pokémon Omega Ruby” and “Pokémon Alpha Sapphire,” overseas as no “YOKAI WATCH” franchises or “Monster Hunter 4 Ultimate” will be scheduled this year there. Based on these observations, some might wonder if, apart from the domestic market, the sales of Nintendo 3DS will really be able to gain momentum in the overseas markets.

The overseas markets are different from the Japanese market in both their stages of popularization of Nintendo 3DS and their market characteristics. The stage of popularization of Nintendo 3DS means the degree to which we have turned potential purchasing power into actual sales of the product in a market. In Japan, the total number of sales of Nintendo 3DS has reached nearly 17 million in the three and a half years since its launch. It is almost the same as the lifetime sales of GameBoy Advance released in 2001, which implies that it is reasonable that the sales of Nintendo 3DS have been temporarily slow moving in the Japanese market. This is one of the reasons we needed to bring New Nintendo 3DS/3DS XL to the market this year. To the contrary, neither of the cumulative sales figures of Nintendo 3DS in the U.S. nor Europe is more than that in Japan despite, based on the historical performance, bigger sales potential. In short, Nintendo 3DS is still at an earlier stage of popularization in these two markets.

Also, the difference in market characteristics shows up in the software sales pace. In the Japanese market, both hardware and software tend to sell during a short period along with a quick spread of information on them. In the U.S. and Europe, on the other hand, highly acclaimed games are likely to be longtime sellers.


New 3DS/XL set record for Nintendo in terms of hardware refresh sales

Coming from Satoru Iwata...

Here I would like to tell you about the current situation of New Nintendo 3DS and New Nintendo 3DS XL (known as New Nintendo 3DS LL in Japan), launched on October 11 in Japan in advance of markets overseas.

The sell-through results of the two models combined was 234 thousand units, which is the largest first-week sales of remodeled devices we have ever released. New Nintendo 3DS XL has been more popular and was out of stock at many stores. We are sorry about the shortage of supply.


3DS sets million-selling software record in Japan, consumer reaction/3rd party sales prove platform viability

Coming from Satoru Iwata...

Tracing the history of software for dedicated video game platforms since 2000, when we started to receive precise video game sell-through data in the Japanese market from independent research companies, the number of titles that sold more than two million units amount to seven for Nintendo 3DS, 15 for Nintendo DS, eight for Wii, two for GameBoy Advance, and regarding other companies’ platforms, two for PSP and three for PS2.

Four double-million-selling titles in five months is a first in the history of the Japanese video game market. It is almost certain that the three titles I introduced before will become double-million sellers in four months, which is also a first.

Furthermore, having three “million” sellers in four months is so rare, even though it happened three times for Nintendo DS (in 2005, 2008 and 2009) and Nintendo 3DS (in 2011, 2013 and 2014), that the other platforms have never experienced it.

It seems that the market status of video games for dedicated platforms is increasingly being reported as pessimistic in contrast with the popularity of smartphones. The facts I have showed here proves that dedicated video game platforms still have ample business opportunities. I might add that third-party titles developed by software publishers as well as Nintendo titles have produced significant results. It is true that the sales of video games have been globally polarized between huge hits and ones that do not sell well, but I would like you to know that some blockbusters have consecutively emerged in the field of dedicated video game platforms.


Iwata - multiple million-sellers in Japan bringing in new 3DS owners

Coming from Satoru Iwata...

A major factor in the decrease of sales of the Nintendo 3DS hardware in the first half of this year is that we could not release any million-selling titles for the platform in the Japanese market. However, the two versions of “YOKAI WATCH2” (Japanese titles) released by Level-5 in July have sold approximately 2.8 million copies in total including their download versions. In addition, the sales of “Super Smash Bros. for Nintendo 3DS” released in September are currently 1.88 million units and will shortly reach two million units including its download version. Furthermore, the sales of “Monster Hunter 4 Ultimate” have already exceeded two million including its download version in three weeks since its release in October (in Japan). Such a sequence of double-million sellers is due to the fact that each of them appeals to different generations. “Pokémon Omega Ruby” and “Pokémon Alpha Sapphire” are on the way in November. Seen in this light, in the second half of this year, we can reasonably expect such a surprising outcome as four double-million sellers in no longer than five months.


Iwata discusses Pokemon Omega Ruby/Alpha Sapphire preorders, guesses why momentum is higher than X/Y

Coming from Satoru Iwata...

In addition, we have had very strong pre-orders for “Pokémon Omega Ruby” and “Pokémon Alpha Sapphire” to be released around the world in November. As you can see from the slide comparing them with those for “Pokémon X” and “Pokémon Y” released last year, the momentum of pre-orders has been robust regardless of the region.

Many people in the industry would anticipate that however dramatically “Pokémon Omega Ruby” and “Pokémon Alpha Sapphire” have been remade, their sales would be lower than those of “Pokémon X” and “Pokémon Y,” which were completely new titles, but the trend of pre-orders has gone against their expectations so far. In particular, they have been surpassed by far in Europe.

Please let me show you an interesting hypothesis explaining the reason for such strong pre-orders: Those who have enjoyed the “Super Smash Bros.” series and those who were impressed with “Pokémon Ruby” and “Pokémon Sapphire” as the first “Pokémon” title are of the same generation and overlap substantially with each other. We call it the “Hypothesis of the same-generation of “Super Smash Bros.” and “Pokémon Ruby/Sapphire.

Those who were elementary school students when “Super Smash Bros. Melee,” and “Pokémon Ruby” and “Pokémon Sapphire” were released have grown up and they are now 18 to 25 years old. Our research in each part of the world commonly indicates that consumers between the age of 18 and 25 represent a large percentage of those who purchased “Super Smash Bros. for Nintendo 3DS” in the release period. It is approximately 30 percent in Japan, which is twice the overall average of Nintendo 3DS software, and has even reached 50 percent in the U.S. and Europe. This great momentum for the game in the initial stage was supported by this generation.

Thanks to “Super Smash Bros. for Nintendo 3DS,” consumers of this generation pay more attention to Nintendo 3DS and are likely to remember enjoying “Pokémon Ruby” and “Pokémon Sapphire.” We think this is why the pre-orders for “Pokémon Omega Ruby” and “Pokémon Alpha Sapphire” have been strong. They are now old enough to pay for their own expenses. They can afford to buy Nintendo 3DS to enjoy both “Super Smash Bros. for Nintendo 3DS” and “Pokémon Omega Ruby” and “Pokémon Alpha Sapphire” if they choose, and they might encourage their friends to play it with them too. We therefore see it important to stimulate their latent demand in the year-end sales season. Taking into account both the trend of pre-orders and the same-generation hypothesis, we anticipate that “Pokémon Omega Ruby” and “Pokémon Alpha Sapphire” to be released next month will have more sales potential than just another remade game in the industry.


Iwata apologizes for Smash Bros. 3DS shortages, says sales pace is better than expected, impacting 3DS positively

Coming from Satoru Iwata...

I think the good global start for “Super Smash Bros. for Nintendo 3DS” has several implications. First of all, it proved that the “Super Smash Bros.” series, which has been popular for home consoles, can have a strong presence for handheld devices. Before the release, some in the video game industry were skeptical of the sales potential of “Super Smash Bros.” for handheld devices, but now I can say that they were worrying about nothing.

Secondly, the initial sales pace was faster than either Nintendo or anyone in the industry could expect and we are afraid that the lack of stock caused inconvenience for some consumers for some time after the release both in Japan and the U.S. After a vast number of consumers started this game at one time and it spread by word-of-mouth, Nintendo 3DS has been used more actively, and we have noticed increased attention and enthusiasm in the entire market for the device. Considering that the software was released just before the year-end sales season with many anticipated titles scheduled, we believe it has really contributed to improving the momentum of the Nintendo 3DS market.

Furthermore, since characters from various Nintendo games appear in “Super Smash Bros.,” consumers naturally get to know the entire lineup of Nintendo IP and this title could make them interested in other game franchises. In other words, the more this game is played, the higher the overall value of the Nintendo IP lineup becomes.


Iwata - Wii U up, 3DS down and total net sales decline explained

Coming from Satoru Iwata...

As Mr. Tatsumi Kimishima has just explained in the financial figure outline, the balance of revenue and expenses improved in the second quarter. While operating income was close to break-even during the low sales season of this six-month period with few key title releases, it moved back into the black in the three-month period of the second quarter.
As a general trend, for Nintendo 3DS during this six-month period, there were few key titles which had a meaningful impact on the market compared to the same period of the previous year. As a result, sales units of the Nintendo 3DS hardware and software declined. On the other hand, for Wii U, the release of “Mario Kart 8” in May and announcements at E3 in June contributed to improving people’s expectations for the Wii U platform. As such, the Wii U hardware and software are selling more than the level of the previous year. Even though the balance of revenue and expenses improved, total net sales decreased in comparison with the previous year.

The main cause for the decrease in sales for the first half of the term is that the sales of Nintendo 3DS in Japan have temporarily been slow moving and declined compared to the last term. In 2012 and 2013, we maintained a very high level of sales in the domestic market for Nintendo 3DS throughout the year. As you can see from the software sales in the first half of each of the past three years, we have kept our software business at a certain size regardless of the release timing of big titles, but the hardware sales have had less momentum this year.
The sales from the launch of New Nintendo 3DS and New Nintendo 3DS XL on October 11 are not reflected in these graphs. These products have made a good start, which I will elaborate on later. We anticipate that we will get out of the temporary lull of the domestic Nintendo 3DS market and catch up in the latter half with penetration of the new hardware.


Iwata reconfirms that he is back in good health

Coming from Satoru Iwata...

Thank you for attending our Corporate Management Policy Briefing despite your busy schedules. I am Satoru Iwata, president of Nintendo.

As we announced before, I underwent an operation for an illness in June and took sick leave for some time. After the mid-August Bon vacation, I returned to the office and have now resumed work as usual. Thank you for your concern.


Nintendo's Quality of Life platform - more details, support for Nintendo's future game platforms

- uses sensors and the cloud to monitor people's lifestyles
- device can be placed next to bed to monitor sleeping habits
- may have a subsciprtion
- comes from Nintendo's new health care division
- due out by the end of March 2016
- "five 'non' sensing" features: non-wearable, non-contact, non-operating, non-waiting and non-installation.
- uses radio waves
- reads a user's movement, heart rate, respiration and fatigue
- sends that data to servers to be analyzed
- aims to improve health and quality of life through diet and exercise
"Defining a new entertainment business that seeks to improve (quality of life) creates various possibilities for the future such as 'learning' and 'lifestyle,' but it is our intention to take 'health' as our first step," Iwata said at the time. "We wish to achieve an integrated hardware-software platform business that, instead of providing mobile or wearable features, will be characterized by a new area of what we like to call 'non-wearable' technology.

We will be considering themes that we have not incorporated to games for our existing platforms" with the aim to create a new market.

What is generally good for health requires some kind of effort to be made by the individual. This is where our strength as an entertainment company to keep our consumers engaged and entertained comes into play, assisted by the non-wearable feature, which is the biggest differentiator of this new business field, as well as user experiences that integrate into people's daily lives, all of which help us overcome this difficulty. If we do indeed succeed in doing so, we will be able to provide feedback to our consumers on a continual basis, and our approach will be to redefine the notion of health-consciousness, and eventually increase the fit population.

While we feel that this is going to take two to three years after its launch, we expect the QOL-improving platform to provide us with new themes which we can then turn into games that operate on our future video game platforms. Once we have established such a cycle, we will see continuous positive interactions between the two platforms that enable us to make unique propositions.

We only start something new if we think we will be able to create a big market, but as I'm not able to discuss pricing plans and other details today I don't think there's much point in giving a figure for our projected scale. By using our know-how in gaming... to analyze sleep and fatigue, we can create something fun." - Satoru Iwata
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