Iwata Speaks

Nintendo’s quarterly investors’ meeting saw CEO Satoru Iwata face down questions on whether the firm can keep expanding audiences, and if it’s paying attention to new online technologies. And, of course, the format-holder chief had the right answers. Michael French picks through the highlights…

EMBRACING CLOUD GAMING

Cloud Computing is a term often seen in the newspapers these days. Now that the Internet and other telecommunication networks have been highly developed, you can have computers process complex transactions online and return the results quickly through fixed-lines and cell-phones. The cluster of computers online is called the ‘Cloud’. With the Cloud, you do not need an expensive computer on hand anymore even for the most complicated information processing. All you need is an input and display device. This is the concept of Cloud Computing.

One of the advantages of Cloud Computing is the flexibility of the allocation of computers installed. It is said to be a very efficient technology for a business with volatile demand – for example, the demand of a service increasing ten times suddenly in a day and decreasing to only a fraction in three months again.

On the other hand, in the world of entertainment that we create, it is pretty true that what comes first is a quick response to players from the computer. The technologies we use in our video game consoles actually include some elements which are very suitable but others which will never be suited to Cloud Computing. With Cloud Computing, for example, customers would be irritated even by a slight delay in response after pressing a button. So, for what is suitable for Cloud Computing, we
will take advantage of the technology in
the future.

It is also natural that we will align with a service provider of Cloud Computing, and not going through the trouble to develop our own facilities. Having said that, however, Cloud Computing would not conquer every field of entertainment because present telecommunication technologies inevitably involve a certain delay and limitation of transmission speed. We would employ Cloud Computing as far as it is useful.

MOVING INTO EMERGING MARKETS

It is not just those players in Japan and the other developed countries in North America and Europe that are interested in games. Those in several countries with rapid economic development can afford more entertainment than before. And it is vital for our basic strategy of ‘gaming population expansion’ that more people in such countries as well as in Japan, America and Europe, enjoy our video games.

But some people in newly-emerging countries do not have an established custom of paying for software.

We do wonder if the traditional business model of the video game industry will succeed in such regions. If we do totally different business there with cheaper services and software than developed countries, people in developed countries would have negative feelings toward us and say, ‘Why do we have to pay much more than those playing video games elsewhere?’

This could be one of the biggest problems for us that would need to be solved. Needless to say, popularising our video games throughout newly-emerging countries is indispensable for Nintendo’s growth in the mid-and-long term. We will take enough time to work on it.

ENCOURAGING ‘GAMING POPULATION GROWTH’ AROUND THE WORLD

The charts below show how the Japanese gaming population has shifted. The leftmost bar is May 2005 – around the time when Brain Training for Nintendo DS was released. The rightmost bar is January 2010 – comparatively recent. We have gathered this data by conducting interviews continually with 3,000 people in Tokyo and Osaka. We have been investigating how many people play or do not play video games – and if an interviewee does play, which machine he or she plays.

The blue portion shows the proportion of people who have played video game machines in the most recent year. It refers to the people who have played not only Nintendo’s machines, but all consoles and handhelds excluding phones and the like. The yellow represents people who used to play video games like NES or Game Boy, but have not played in the last year. The pink refers to people who have never played games in their lives.

The goal of ‘gaming population expansion’ is to attract the people in the yellow portion back, or to invite the people in the pink area to the blue area.

At first, the proportion of people who were playing video games was only 35 per cent among seven to 64-year-olds in Japan, but this proportion has changed rapidly. We believe Brain Training and Wii played very big roles.

The gaming population once peaked at 57 per cent, but then showed a slight downward trend in Japan. However, this trend seems to have recovered again since our New Super Mario Bros. Wii became a huge hit.

As you can understand at a glance (see middle and bottom charts), the proportion of US sleep users in yellow is very low. In other words, Japanese people are more likely to stop playing video games soon after they purchase them, whereas American people tend to continue playing for longer.

In Europe, there are huge differences among the countries. In the UK, the size of the gaming population is comparatively high. Meanwhile, the German gaming population is very small. Social acceptance of games seems to be very low in Germany. To some degree, it may be due to the large number of war-themed games (in Western countries) which enable players to shoot guns. German society has strong feelings of rejection towards these things, partly because of their historical background.

France is in the middle position between Germany and the UK. Additionally, the product-diffusion rate differs depending on the country. It is extremely fast in Japan and the UK, while it is slow in the US, and much slower in Germany.

The speed of customers’ acceptance of new products also varies. Therefore, we always try to face the European market with a deep understanding of each country’s unique characteristics.

BALANCING CHILD SAFETY WITH GAMING’S GROWTH

Nintendo once seriously considered adopting a function which would force games to stop mandatorily, to prevent children from playing at a time that parents had decided. However, we also considered how the players would feel if the game suddenly stopped during an exciting part.

We finally integrated a Wii function to record playing time instead of making the game shut down. DS does not have such function because it was developed two years earlier than Wii. But in the case of Nintendo 3DS, we are contemplating incorporating some kind of system. Nintendo is seriously considering such measures – probably the most earnestly in this industry. Our arguments are so serious that people might be surprised if they were aware that a game company like Nintendo is having such arguments internally.

We believe that we will never be able to improve the social acceptance of video games without careful consideration of this challenge.

COMPETING WITH OTHER FORMS OF ENTERTAINMENT

To expand the gaming population, we have to break through the barrier of encouraging non-gamers to play video games. The greatest obstacle to ‘gaming population expansion’ is people’s lack of interest. The best measure to overcome this obstacle is a recommendation from someone close to them: families, friends and relatives. Video games will not become more popular without word of mouth. Word of mouth will not easily spread except among those who are of the same generation and gender and belong to the same organisation, school or office.

We are focusing on increasing the number of people playing with our game devices in a family where word of mouth could spread. This is why DS and Wii were made popular, to some extent, among those who had not been interested in games before. Our PR activities have not fully penetrated this barrier yet. At the same time, PR efforts with an infinite budget for a marginal increase in sales would be off balance. It is very challenging for us to come up with a method to efficiently convey the charm of a product to those uninterested.

Taking the example of Nintendo 3DS, it would be difficult to promote the attractions of 3D play without the need for any special glasses through TV, newspapers or magazines. We therefore are thinking of letting people experience Nintendo 3DS in various places at the time of its launch.