Interview with Iwata Satoru, President of Nintendo Co. BUSINESS PROFILES Pursuing Simplicity is the Key for Game Software Development

Interviewer: Otsuka Keiichiro

WATA Satoru, president of major luxurious, which in turn requires cus- beating we took in 2002. Nevertheless, I Japanese video game maker Nintendo tomers to consume enormous time and domestic sales remain weak and the total Co., said in a recent interview that his energy. Customers now find themselves of global shipments for fiscal 2003 came company would soon release new ver- hard-pressed to keep up with the game in at 1 million units under the 6 million sions of its hit software titles such as developers’ approach. If we put the target. Mario and Pocket Monsters (Pokémon). brakes on such a trend, we would be able He also said Nintendo would market by to put the industry back on a growth Otsuka: SCEI launched the PSX, the end of this year a new portable game path. Nintendo was aware of this early which combines a home game machine, code-named Nintendo DS (dual on. We would like to market such soft- machine with a DVD recorder, last screens). He expressed confidence that ware and expand the sales of game December. Did the new SCEI product Nintendo DS will provide a fresh, innova- machines. affect Nintendo? tive gaming experience. Otsuka: Sales of Nintendo’s Iwata: The PSX is not a game machine Otsuka: According to the Computer GameCube game console have but a home electronic appliance. So, it Entertainment Supplier’s Associa- remained stagnant, struggling behind didn’t compete with our game machines. tion in Tokyo, domestic and overseas Sony Computer Entertainment Inc.’s The PSX is priced differently from our shipments of home video game soft- (SCEI) PlayStation2. Did last year’s products and customers bought the PSX ware in 2001 and 2002 slipped by price cut have any effect? for different purposes. I think few peo- around 10% year on year. How do ple, if any, would be at a loss to choose you see the current state of the game Iwata: I think so. We had a hard time in between the PSX, which sells for ¥80,000, industry and its future? the first half of fiscal 2003. But sales dur- and our GameCube priced at ¥14,000. ing the Christmas shopping season after You had better put this question to Iwata: I think the number of game play- the markdown were brisk in Europe and Matsushita Electric Industrial Co., ers will decrease if the game industry con- the United States, with the shipments at Toshiba Corp. or Pioneer Corp. tinues to pursue its current strategy of home and abroad in the October- making software more complicated and December period last year hitting the 3.5 Otsuka: How is the GameBoy million unit range. We narrowed the gap Advance portable game machine sell- with PlayStation2 and made up for the ing?

Photo: Nintendo Co.

Nintendo president Iwata Satoru holds the newly released Nintendo DS at the Electronic Entertainment Expo 2004

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Iwata: Global shipments for fiscal 2003 GameBoy Advance, releasing them in Otsuka: Nintendo has not entered were targeted at 20 million units but did- Japan in February under the title the online game business, while n’t get beyond the 18 million range. Famicom Mini. As a follow-up, 10 other game companies are focusing Sales were good in the United States and other popular titles, such as Mario on them, as is shown by SCEI’s Europe, led by the GameBoy Advance SP Bros. and Twin Bee, were released PlayStation2. Is Nintendo not think- folding machine, but sales of this for the hand-held game machine on ing of heading in that direction? machine in Japan dropped below the pre- May 21. Do you intend to continue vious year’s level. This adversely affected the revival of old software? Iwata: Not at the moment. SCEI’s our global shipments. online golf game didn’t sell well, while its Iwata: It is a matter of course that we off-line golf game sold one million Otsuka: My next question is about should consider the utilization of our copies. This was also proof that cus- your game software strategy. You software assets. There are many things tomers do not want online games. said that you would like to release we can do. Adults can hardly get Online technology has its own interesting new software which would bring cus- involved in games unless we offer them features, so I don’t rule out the possibility tomers back to the fold. What cus- simplicity. Adults who do not usually of making use of it for games. But, at the tomers do you specifically have in play games should be able to understand moment, most customers do not wish to mind? them in 10 seconds. We would like to pay the extra money for connection to Iwata: We are facing a critical situation, revive older software which would the Internet, and for some customers, in which the number of game players will prompt such adults to feel like playing connection procedures to the Internet are decrease unless we change tack. We will them. still not easy. release software targeted at customers in Some time ago, game companies as different age groups. Donkey Konga, soft- Otsuka: Much software for SCEI’s well as the media were predicting that ware for the GameCube jointly devel- PlayStation2 and Microsoft’s X-Box online games would take off in the oped with Namco Ltd. and released last is dynamic enough to appeal to future. But game companies now find it December, has sold well. Its content was adults. But it seems Nintendo is not difficult to make online game businesses well received. I think the charm of good at producing software for successful, and their enthusiasm for them Donkey Konga partly lies in the fact that adults. is cooling. During the year-end shopping even a three-year-old child can play it. season last year, none of the online games Iwata: Game software should neither be succeeded. The failure of SCEI’s golf Otsuka: Specifically, what kind of exclusively targeted at children nor game was a good example. All the games software do you plan to release? adults. Instead, we will develop software that sold well were off-line games. which anyone can instantly understand. Iwata: We plan to release new versions At the same time, production of software Otsuka: Exorbitant costs are the of such popular titles as Mario, Pokémon, readily acceptable to adults is worth main obstacle to the development of The Legend of Zelda and Kirby Super Star, studying. games, aren’t they? because customers want them and we In March last year, we released Made would like to take on new challenges. As in Wario, a collection of mini-games, Iwata: It is not unusual for development software for the GameCube, we would which was favorably received by both of software for portable game machines like to offer easy-to-understand software adults and children. Made in Wario con- to cost between ¥100 million and ¥200 using such characters as Donkey Kong. tained features of the so-called Family million. Development of full-blown soft- We will release in Europe and the United Computer launched in Japan in 1983, ware for household game machines costs States by the end of the year a new ver- and so evoked a sense of nostalgia in as much as ¥500 million. Development sion of Donkey Konga, varying the music many adults. Children, for their part, of software at such high costs is not according to local tastes. Music for the must have enjoyed it without under- sound. Some kinds of software might U.S. version will be different from that standing these connotations. justifiably cost ¥500 million, but that for the European version. We have sent I think we should continue to adopt a doesn’t mean all software should cost that samples to our overseas sales agents, similar approach. When we market new much. which have received them well, partly software for adults, we should publicize it This is why we released low-cost because some samples contained classics. as software that everyone can enjoy. It WarioWare, Inc. Mega Party Game$! in will be nice if adults who have kept away October last year as a follow-up to Made Otsuka: Nintendo repackaged 10 from playing games will be motivated to in Wario. We developed this new soft- classic titles of its original home con- take them up again. That will be more ware for less than ¥100 million in only sole system, such as Donkey Kong, effective than undertaking a promotion six months, which enabled us to set the Super Mario Bros. and Pac-Man, for specifically aimed at adults. per-copy price at ¥3,800. Because of the

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low cost, WarioWare, Inc. sold more than plays. The two screens will display differ- as having the same purpose as the PSP. 400,000 copies. ent scenes. When playing a soccer game, Just as the GameCube does not compete for example, one screen will show an with the PSX, the Nintendo DS will not Otsuka: Do you plan to form tie-ups overview of the field and the other will compete head-to-head with the PSP. with other companies in software show a view of one of the characters. development to curb development Different scenes shown on two screens Otsuka: Nintendo reported a net loss costs? will give game players the feeling that of ´2.8 billion in its consolidated they are on a soccer field. The Nintendo financial statement for the April- Iwata: Tie-ups with other companies DS will be a success if it provides cus- September period last year. will not necessarily reduce development tomers with a new gaming experience. Nintendo reported its first net loss costs. Tie-ups are aimed at developing Game developers are finding it difficult since its shares were listed in 1962. unique commodities which neither to make completely unique software. The losses apparently resulted from Nintendo nor its partners can develop That is why they have been making soft- a foreign exchange loss of ´40.3 bil- alone. Donkey Konga was created ware too complicated while excessively lion stemming from the yen’s appre- through the combination of Nintendo’s tinkering with such details as improve- ciation against the dollar. How do Donkey Kong character and Namco’s ments to the quality of the displayed you view the financial results as the Taiko no Tatsujin (Drum Master). There images. Of course, customers will not company’s chief executive? were merits for both sides. We intend to accept this trend. Even developers them- expand tie-ups not only with Japanese selves did not feel like using such soft- Iwata: The first loss since the stock list- companies but also with foreign compa- ware, with the result that the game busi- ing was indeed disgraceful. As the presi- nies. We are now holding negotiations ness has been stalled in Japan and the dent, I am striving to boost sales and with major Western game developers and United States since the second half of last operating profits, but can do nothing will be able to conclude a deal by the end year. The situation is quite serious. about exchange rates. Nintendo has for- of the year if things go smoothly. eign-currency deposits totaling about $5 Otsuka: What will you do with the billion, so we suffer a loss when the yen Otsuka: Nintendo last year bought existing game machines after releas- appreciates. Given that we boosted our 2.6% of the outstanding shares in ing the Nintendo DS? assets through foreign-currency trading in Bandai Co., which owns such charac- the past, I am not pessimistic about the ters as Gundam. What was the pur- Iwata: We will continue the marketing situation. pose of the share purchase? Was it of GameCube and GameBoy Advance, When the yen appreciates, most com- related to the possibility of a tie-up because they are different from the panies have to exchange dollars for yen to with Bandai? Nintendo DS. If the existing machines maintain the value of their assets. But are withdrawn from the market, cus- Nintendo can keep the value of its assets Iwata: It all started when a holder of tomers will not think that the Nintendo without doing so immediately. Our cur- Bandai shares approached us. We DS has different features from these rent and net profits may be affected on bought the shares as Bandai’s business machines. paper, but that is not a real loss. Drastic value and stock price were balanced. We fluctuations in exchange rates are not already had a relationship with Bandai, as Otsuka: The PlayStation Portable desirable but we cannot help it. we had marketed Bandai’s software. A (PSP) game machine SCEI will release closer relationship would be beneficial for in the end of this year will boast wire- Otsuka: How do you view the current both sides and it will be nice if the two less local area network (LAN) func- business situation in Japan? companies can work together in doing tions using an ultra-small optical disc, something interesting. which will enable high-speed commu- Iwata: The days when all business sectors nications without cables. Will the PSP could thrive are over. Business sectors Otsuka: Later this year, Nintendo compete with the Nintendo DS? selling products which are not daily plans to release a new portable game necessities, like the game industry, will be machine, provisionally called Iwata: Entertainment goods are not nec- affected by business fluctuations. But if Nintendo DS. What will it be like? essarily superior just because they are we make a product consumers want at equipped with state-of-the-art technolo- any cost, they will buy it. We must make Iwata: Featuring two 3-inch color gy. Game developers have made games efforts to produce such things. screens, the Nintendo DS will enable cus- too complicated for ordinary people to tomers to play games in a different way. play, because they thought advanced We will also develop software that will technology by itself is great. I think cus- Otsuka Keiichiro is a staff writer at Kyodo bring out the strengths of having two dis- tomers will not regard the Nintendo DS News.

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