Kimishima on Switch’s stock woes, maintaining Wii-like momentum, third-parties, eSports, more
Last week, Nintendo delivered its latest financial results. The news was accompanied by the regular financial results briefing held by president Tatsumi Kimishima. Kimishima weighed in on the issues with Switch supply, maintaining Wii-like momentum, third-parties, eSports, and more.
We’ve rounded up the full Q&A in its entirety. You can read all of Kimishima’s comments below.
Will you sell Nintendo Switch in China? What is your view of China in the long term as a market for Nintendo Switch?
Tatsumi Kimishima (President and Representative Director): We are aware of the vast size of the Chinese market, but we are not selling in that market at present. That said, there are software publishers in China that are developing games for Nintendo Switch. One of those titles was introduced just the other day (during the September 14, 2017, broadcast of Nintendo Direct), and we hope our consumers are looking forward to its release. As business opportunities expand in China, we believe that Chinese software publishers will develop more software for Nintendo Switch. We have previously researched the possibility of selling our products in China, and that effort continues as we consider bringing Nintendo Switch to the Chinese market.
I found the data on the “Nintendo Switch Gameplay Trends for Japan, the US, and Europe” slide (as shown in the presentation) to be very interesting, showing “Gameplay in TV mode is primary” at under 20%, “Gameplay in tabletop mode or handheld mode” at around 30%, and “Playing in both modes” at over 50%. Now that you can tell how users are utilizing their Nintendo Switch systems in the past half-year since launch, donʼt you have any ideas about adding other features like video viewing outside of gameplay?
Kimishima: We believe that our consumers have grasped how Nintendo Switch is unique in offering three different gameplay modes. Nintendo Switch is a console, and at the same time it is also portable, allowing for different gameplay modes. Although we would not go so far as to say “one system per person,” we are thinking about the potential for this to spread as more of a personal device.
Nintendo Switch is a dedicated video game system, and we are focusing our messaging on the attractiveness of Nintendo Switch as a dedicated video game system. We hope to bring in broader consumer demographics by proposing new gameplay modes using Nintendo Switch.
Nintendo Switch sales have been favorable since the beginning for both hardware and software, but it remains difficult to purchase the hardware, and now ahead of the holiday season it seems that inventory levels are unusually low. What are your thoughts at present about what the bottlenecks are in the production system, and what are you thinking about ways to increase or decrease production volume in the future?
Kimishima: Even though the Nintendo Switch launch was in March (and not during the holiday season), we had planned at the start of this fiscal year to ship 10 million units of hardware by the end of March 2018, based on our understanding of the high level of interest from so many consumers Six Months Financial Results Briefing for Fiscal Year Ending March 2018 Nintendo Co., Ltd. before the launch. The 10 million target was a very high figure, and we simply didnʼt think such a high-volume sales target was easy to meet. However, weʼve continued to receive favorable consumer response after launch and inventories remained low, and I think we must own up to the fact that our initial projections were too conservative. The Nintendo Switch system itself is made from a huge number of components, and weʼve made urgent requests to many of our contract manufacturer to ramp up production, with some of them even installing additional production lines. We released yesterdayʼs upwardly revised full-year hardware shipment target of 14 million units because we now project that we are capable of shipping that many units. This 14-million-unit shipping target for the full year means that we plan to ship roughly 10 million units just in the second half of this fiscal year, and production at this pace would manufacture even more than that. For instance, just splitting those 10 million units across six months translates to over 1.6 million units shipped per month going forward, with the production capacity being more than that. I think you can tell from recent Nintendo Switch sales trends that shipments are improving. I think we are ready and able to deliver Nintendo Switch to our many consumers around the world this holiday season.
In the presentation you explained that in Japanese market, Nintendo Switch user demographics are expanding to include more female consumers and more families. Are you increasing the lineup with an eye to capturing these largest demographics next year? The Animal Crossing application is out. Are you planning on any tie-ins between the smart-device applications and dedicated video game systems? In addition, are you considering any means of leveraging tie-ins to lead children or female consumers to your dedicated video game systems (from smart devices)?
Kimishima: We think that Nintendo Switch sales volume was up in the first half of this fiscal year because Nintendo fans who love games understood the Nintendo Switch concept and purchased the system. The coming holiday season is when we expect purchases from many consumers, including children and families. As such, we believe we need to fully explain titles already on the market, and we also need to put out titles that offer new ways of playing and that can entice even more consumers to enjoy our offerings. Nintendo Switch is designed to provide many different ways of playing, and while we cannot talk about any specific titles at this point, we are working to be able to offer new ways of playing that utilize new and different intellectual property (IP), and we hope youʼll look forward to the results of our efforts.
We cannot announce anything presently about potential tie-ins between the smart-device application Animal Crossing: Pocket Camp and our dedicated video game systems. We will continue to consider tie-ins between smart-device applications and our dedicated video game systems.
The presentation explained that the continual release of software would lead to an increase in hardware use among the Nintendo Switch systems connected to the Internet. I would like to know any specific figures you have, such as the number of units in operation or the Internet connection rate. Also, apparently Nintendo will be moving its online service for Nintendo Switch over to a for-pay model in 2018. What kind of reaction are you getting at this point? Please also tell us what changes you expect to see in the ratio of systems connected to the Internet once these services are for-pay.
Kimishima: We will continue to consider key performance indicators (KPIs) so that we can talk in terms of specific figures.
The shift to for-pay for the Nintendo Switch Online service was originally planned to begin in the autumn of 2017, but we pushed that back into 2018. With the paid online service starting, we are taking time to prepare services that offer our consumers greater satisfaction. We cannot announce anything specific at this time, but in essence, the shift to for-pay will allow us to provide better services to our consumers.
There have been past questions about your plans to release smart-device applications in China, but do you think it will be possible to release smart-device titles in China perhaps in the next fiscal year?
Kimishima: We are aware of the scope of the Chinese market which is very large. Our understanding is that there are many consumers awaiting Nintendo’s games there. Nintendo cannot expand its business in China alone, and an important issue is whether we can proceed with a partner entity in China to bring our IP to consumers in China. We can see the possibility for such a partner relationship arising in future. Nintendo will continue to consider those options.