Last week Nintendo reported its 3rd quarter financials (October through December of 2015). As usual, it held an investors’ question and answer session and Nintendo has finally released the official English translation. While nothing concrete was revealed, two questions and the answers Kimishima (President of Nintendo) gave were especially interesting.
One person asked:
With regards to the financial performance, I believe you said that the fiscal year ending in March 2016 has been about balancing revenue and expenses, while the next fiscal year (ending in March 2017) will be a step towards aiming for Nintendo-like profits. Have these priorities changed at all? It seems like a lot of new endeavors, such as smart device business and amiibo sales, will need to go smoothly in order to realize Nintendo-like profits. If you had to provide one example of an area where you can be sure to achieve Nintendo-like profits, what would that be?
The previous and current fiscal years have been a period of preparation to launch a number of new endeavors, such as NX development, development for smart devices and business using our character IP, in addition to driving our Wii U and Nintendo 3DS businesses. At the same time, it has been our priority to take a close look at areas of our existing business where the revenue and expenses had become unbalanced, and to make sure that we corrected this balance. As I have said before, we will be launching many of our new business activities as we move from this fiscal year into the next.
When you start any new business, it is important to make the public aware of what you will be doing. In the next fiscal year, we will have to make preparations and investments to achieve these goals, and that comes with certain costs.
The question was to pick one area with which we will be able to achieve Nintendo-like profits, but I would like to suggest two areas. One area is our NX business, and another is our business for smart devices. I believe that keeping these two endeavors on track will be key to achieving Nintendo-like profits. I don’t have any further details to share about the next fiscal year at this time, but we will explain about our plan and when we will aim to achieve Nintendo-like profits at a future date.
Let’s take a few points from his response. Notice he mentions that both the previous and current fiscal years (so between April of 2014 and through March of 2016) have been a period of preparation to launch a number of new endeavors, such as NX development, development for smart devices, etc. So, that means NX development has been ongoing for the past two years. This of course will also refer to the restructuring of its development and hardware studios that has taken place over the last few years. He then mentions that Nintendo will be launching many of its new business activities as it moves from this fiscal year (ending next month) into the next (starting in April).
The next point he makes is that in the next fiscal year (April 2016 through March 2017) Nintendo will have to make the public aware of what it will be doing and, as such, preparations and investments to achieve that goal must be made and that will come with certain costs. He’s probably referring to presenting the NX either at a tradeshow (E3) or perhaps it will have its own dedicated showing.
He then goes on to say that NX and mobile will be the two areas that will drive Nintendo’s profits for year ending March 2017. That means both would need to be on the market and selling prior to that date. We already know Miitomo is set to come out next month in many territories. We also know that historically the majority of gaming revenue comes during the holiday months of October through December. If NX is going to significantly contribute to profitability it will need to be on store shelves in time for the holidays, not after.
The next question asks about striking a balance between revenue and expense and how to achieve “Nintendo-like” profits:
Nintendo has been working to restore balance between revenue and expenses and has announced a number of new ventures during this and last fiscal years in order to realize Nintendo-like profits from next fiscal year on. How would you evaluate your current progress on your plans, such as reorganization and business partnerships? What areas need improvement in the future?
We have made a number of changes to our corporate structure to gear up for our new ventures. For example, (as I have described before,) where development was split between handheld and home console divisions in the past, we have unified these activities for both hardware and software development, and the exciting new ideas coming from development are evidence of the progress being made as a result of that unification. We are also making steady progress in working with our partners in a variety of businesses.
Of course, gaps in communication that may arise from reorganization could hinder plans that require timely execution. This is why our Corporate Planning Department is also implementing organizational reform that allows for precise understanding of progress across the whole company. The General Manager of the Corporate Planning Department has a lead role in this project.
To achieve Nintendo-like profits, one important factor will be establishing a solid launch for our NX and smart device businesses. I believe the key to doing this is to allocate our resources appropriately to proceed with hardware and software development on schedule and deliver our products to our consumers in a timely manner.
Notice that once again Kimishima mentions the NX as the important factor to achieving Nintendo-like profits. In fact, he goes on to say that a solid launch is vital and the key to doing this is to allocate resources appropriately to keep hardware and software development on schedule and to deliver the products to consumers in a timely manner. This suggests that Nintendo has a very strict timetable in place and seems confident that the product will result in profits this coming fiscal year (April, 2016 through March, 2017).
If you pair up his answers with all of the rumors over the past four or five months, it really does sound like the NX will hit this year. Now we just need to know what the heck it is and what games it will play. Hopefully we won’t need to wait too long, but it does seem pretty clear that we won’t hear anything concrete about it until after this fiscal year ends on March 31, 2016. That leaves us with the possibility of April or May announcements if Nintendo wants to get ahead of E3, or perhaps they hold their cards until June and have a massive blowout there. I, for one, cannot wait.