Head past the break for a ton of comments from Satoru Iwata regarding connectivity between Nintendo’s consoles and handhelds, Nintendo Network IDs, and the inclusion of smart devices into Nintendo platforms.
The slide shows all Nintendo platforms that were launched in the past ten years. While we have tried to achieve, among other things, software-driven connectivity between handheld devices and consoles, handheld devices and consoles were in principle separated completely in terms of our ability to connect with our consumers.
In addition, we tried to encourage consumers to upgrade from an existing handheld device to a new handheld device, or from an existing console to a new console, by providing backward compatibility that enabled them to take their software assets from their existing system. However, we became disconnected with our consumers with the launch of each new device as we could only form device-based relationships.
On Wii U, we launched Nintendo Network IDs, which are abbreviated as NNIDs. This is the first step of our efforts to transform customer relationship management from device-based to account-based, namely, consumer-based, through which we aim to establish long-term relationships with individual consumers, unaffected by the lifespans of our systems. Our future platform will connect with our consumers based on accounts, not devices.
As a second step, Nintendo 3DS became compatible with NNIDs in December 2013. Nintendo 3DS was originally designed for a device-based management system, so making it account-compatible at a later time meant that not all of its features were perfect. However, we feel that we have taken a step in the right direction as we now have a uniformly managed system in which we are connected with our consumers on both handheld devices and consoles.
Of course, when we do launch new hardware in the future, rather than re-creating an installed base from scratch as we did in the past, we wish to build on our existing connections with our consumers through NNIDs and continue to maintain them. Another very important point that we need to consider is how we will incorporate smart devices into Nintendo platforms, which were composed solely of Nintendo hardware in the past.
The traditional definition of a video game platform imposed a restriction in which we were unable to connect with consumers unless they purchased a Nintendo system. Given that the competition for consumers’ time and attention has become fierce, I feel that how we will take advantage of smart devices is an extremely important question to answer. However, in order to be absolutely clear, let me emphasize that this does not mean simply supplying Nintendo games on smart devices. Taking advantage of smart devices means connecting with all consumers, including those who do not own Nintendo’s video game systems, through smart devices and communicating the value of our entertainment offerings, thus encouraging more people to participate in Nintendo platforms. I will elaborate on this point later.
As I just illustrated, we will manage our relationships with our consumers through NNIDs in a uniform manner, and connecting with our consumers through NNIDs will precisely be our new definition of a Nintendo platform.
In other words, our platform will not be bound to physical hardware and, instead, will be virtualized.
I have often heard the opinion from many that Nintendo should release its first-party content on smart devices. The rationale behind such a suggestion, in my view, is that it would be illogical not to expand our business on smart devices given that they have outsold dedicated video game systems by a large margin.
Many people say that releasing Nintendo’s software assets for smart devices would expand our business. However, we believe that we cannot show our strength as an integrated hardware-software business in this field, and therefore it would difficult to continue the same scale of business in the medium- to long term.
Therefore, we would like to, instead of directly expanding our business on smart devices, focus on achieving greater ties with our consumers on smart devices and expanding our platform business.
However, creating stronger ties with consumers would require them to engage with our offers frequently. As we know that this is not an easy task to achieve,
We will use a small, select team of developers to achieve it. Also, we recognize that attracting consumers’ attention among the myriads of mobile applications is not easy, and as I said before, we feel that simply releasing our games just as they are on smart devices would not provide the best entertainment for smart devices, so we are not going to take any approach of this nature. Having said that, however, in the current environment surrounding smart devices, we feel that we will not be able to gain the support of many consumers unless we are able to provide something truly valuable that is unique to Nintendo. Accordingly, I have not given any restrictions to the development team, even not ruling out the possibility of making games or using our game characters. However, if you report that we will release Mario on smart devices, it would be a completely misleading statement. It is our intention to release some application on smart devices this year that is capable of attracting consumer attention and communicating the value of our entertainment offerings, so I would encourage you to see how our approach yields results.
Also, there is one more thing that I would like to mention about utilizing smart devices. With respect to services previously released on dedicated video game systems that are, however, capable of improving usability and consumer experience when they are implemented on smart devices, we will try to actively shift their focus to smart devices. This is to say that we will no longer spend an equal amount of resources toward providing the same service both on and off device, but will instead concentrate on the one that has greater purpose as well as room for improvement.
The environment in which our users can download paid software is one example of where we should aim to make more off-device improvements than on-device ones.
As we continue to redefine our platforms from a device-based system to an account-based system using NNIDs, we will also try to change the way in which dedicated video game systems as well as software are sold that people have come to take for granted.
The way in which dedicated video game systems and their software are sold has not changed significantly since the business model of dedicated video game platforms was first established 30 years ago. Dedicated video game systems are sold for two hundred or three hundred dollars, on which standalone software titles are distributed for 30 or 50 dollars. This simple model received widespread support from consumers that enabled us to create today’s market. The decision to change it is the manifestation of our recognition that we cannot expect this model to work forever amid dynamic changes in people’s lifestyles.
If we succeed in the redefinition of video game platforms that I speak of today, our account-based connections with consumers will become very clear. For example, until now it has been taken for granted that software is offered to users at the same price regardless of how many titles they purchase in a year, be it one, five or even ten titles. Based on our account system, if we can offer flexible price points to consumers who meet certain conditions, we can create a situation where these consumers can enjoy our software at cheaper price points when they purchase more. Here, we do not need to limit the condition to the number of software titles they purchase. Inviting friends to start playing a particular software title is also an example of a possible condition. If we can achieve such a sales mechanism, we can expect to increase the number of players per title, and the players will play our games with more friends. This can help maintain the high usage ratio of a platform. When one platform maintains a high active use ratio, the software titles which run on it have a higher potential to be noticed by many, which leads to more people playing with more titles. When we see our overall consumers, they generally play two or three titles per year. We aim to establish a new sales mechanism that will be beneficial to both consumers and software creators by encouraging our consumers to play more titles and increasing a platform’s active use ratio without largely increasing our consumers’ expenditures.
Nintendo aims to work on this brand-new sales mechanism in the medium term, but we would like to start experimenting with Wii U at an early stage.