The Japan Economic Foundation interviewed Nintendo Co., Ltd. president Satoru Iwata. Here's a somewhat lengthy excerpt from that interview.
Otsuka: According to the Computer Entertainment Supplier's Association in Tokyo, domestic and overseas shipments of home video game software in 2001 and 2002 slipped by around 10% year on year. How do you see the current state of the game industry and its future?
Iwata: I think the number of game players will decrease if the game industry continues to pursue its current strategy of making software more complicated and luxurious, which in turn requires customers to consume enormous time and energy. Customers now find themselves hard-pressed to keep up with the game developers' approach. If we put the brakes on such a trend, we would be able to put the industry back on a growth path. Nintendo was aware of this early on. We would like to market such software and expand the sales of game machines.
Otsuka: My next question is about your game software strategy. You said that you would like to release new software which would bring customers back to the fold. What customers do you specifically have in mind?
Iwata: We are facing a critical situation, in which the number of game players will decrease unless we change tack. We will release software targeted at customers in different age groups. Donkey Konga, software for the GameCube jointly developed with Namco Ltd. and released last December, has sold well. Its content was well received. I think the charm of Donkey Konga partly lies in the fact that even a three-year-old child can play it.
Otsuka: Nintendo repackaged 10 classic titles of its original home console system, such as Donkey Kong, Super Mario Bros. and Pac-Man, for GameBoy Advance, releasing them in Japan in February under the title Famicom Mini. As a follow-up, 10 other popular titles, such as Mario Bros. and Twin Bee, were released for the hand-held game machine on May 21. Do you intend to continue the revival of old software?
Iwata: It is a matter of course that we should consider the utilization of our software assets. There are many things we can do. Adults can hardly get involved in games unless we offer them simplicity. Adults who do not usually play games should be able to understand them in 10 seconds. We would like to revive older software which would prompt such adults to feel like playing them.
Otsuka: Much software for SCEI's PlayStation2 and Microsoft's X-Box is dynamic enough to appeal to adults. But it seems Nintendo is not good at producing software for adults.
Iwata: Game software should neither be exclusively targeted at children nor adults. Instead, we will develop software which anyone can instantly understand. At the same time, production of software readily acceptable to adults is worth studying. In March last year, we released Made in Wario, a collection of mini-games, which was favorably received by both adults and children. Made in Wario contained features of the so-called Family Computer launched in Japan in 1983, and so evoked a sense of nostalgia in many adults. Children, for their part, must have enjoyed it without understanding these connotations. I think we should continue to adopt a similar approach. When we market new software for adults, we should publicize it as software that everyone can enjoy. It will be nice if adults who have kept away from playing games will be motivated to take them up again. That will be more effective than undertaking a promotion specifically aimed at adults.
Otsuka: Nintendo has not entered the online game business, while other game companies are focusing on them, as is shown by SCEI's PlayStation2. Is Nintendo not thinking of heading in that direction?
Iwata: Not at the moment. SCEI's online golf game didn't sell well, while its off-line golf game sold one million copies. This was also proof that customers do not want online games. Online technology has its own interesting features, so I don't rule out the possibility of making use of it for games. But, at the moment, most customers do not wish to pay the extra money for connection to the Internet, and for some customers, connection procedures to the Internet are still not easy. Some time ago, game companies as well as the media were predicting that online games would take off in the future. But game companies now find it difficult to make online game businesses successful, and their enthusiasm for them is cooling. During the year-end shopping season last year, none of the online games succeeded. The failure of SCEI's golf game was a good example. All the games that sold well were off-line games.
Otsuka: Exorbitant costs are the main obstacle to the development of games, aren't they?
Iwata: It is not unusual for development of software for portable game machines to cost between Yen 100 million and Yen 200 million. Development of full-blown software for household game machines costs as much as Yen 500 million. Development of software at such high costs is not sound. Some kinds of software might justifiably cost Yen 500 million, but that doesn't mean all software should cost that much. This is why we released low-cost WarioWare, Inc. Mega Party Game$! in October last year as a follow-up to Made in Wario. We developed this new software for less than Yen 100 million in only six months, which enabled us to set the per-copy price at Yen 3,800. Because of the low cost, WarioWare, Inc. sold more than 400,000 copies.
Otsuka: Do you plan to form tie-ups with other companies in software development to curb development costs?
Iwata: Tie-ups with other companies will not necessarily reduce development costs. Tie-ups are aimed at developing unique commodities which neither Nintendo nor its partners can develop alone. Donkey Konga was created through the combination of Nintendo's Donkey Kong character and Namco's Taiko no Tatsujin (Drum Master). There were merits for both sides. We intend to expand tie-ups not only with Japanese companies but also with foreign companies. We are now holding negotiations with major Western game developers and will be able to conclude a deal by the end of the year if things go smoothly.
Otsuka: Nintendo last year bought 2.6% of the outstanding shares in Bandai Co., which owns such characters as Gundam. What was the purpose of the share purchase? Was it related to the possibility of a tie-up with Bandai?
Iwata: It all started when a holder of Bandai shares approached us. We bought the shares as Bandai's business value and stock price were balanced. We already had a relationship with Bandai, as we had marketed Bandai's software. A closer relationship would be beneficial for both sides and it will be nice if the two companies can work together in doing something interesting.
Otsuka: What will you do with the existing game machines after releasing the Nintendo DS?
Iwata: We will continue the marketing of GameCube and GameBoy Advance, because they are different from the Nintendo DS. If the existing machines are withdrawn from the market, customers will not think that the Nintendo DS has different features from these machines.
Otsuka: The PlayStation Portable (PSP) game machine SCEI will release in the end of this year will boast wireless local area network (LAN) functions using an ultra-small optical disc, which will enable high-speed communications without cables. Will the PSP compete with the Nintendo DS?
Iwata: Entertainment goods are not necessarily superior just because they are equipped with state-of-the-art technology. Game developers have made games too complicated for ordinary people to play, because they thought advanced technology by itself is great. I think customers will not regard the Nintendo DS as having the same purpose as the PSP. Just as the GameCube does not compete with the PSX, the Nintendo DS will not compete head-to-head with the PSP.