“We think eliminating marketing and R&D inefficiencies is the most important issue for the time being.”
☆ NintendObs Event – Nintendo Q2 FY3/2015 Q&A.
Question:
It takes a certain amount of time and costs a large sum of money to make any mid-term strategies profitable. What are you considering for your cost-cutting plan for the future? I think the way to spend money may vary significantly in view of business field expansion or collaborations with external organizations. I would like to know in what field efficiencies or operations reviews can be made.
Answer:
Iwata:
Considering the business scale of Nintendo, the number of employees is not so large. Therefore, the prevalent notion around the world that companies should first and foremost decrease the number of employees in order to reduce costs cannot be effectively applied to this company in the same way, I believe. Spending on marketing and R&D is an overwhelmingly large part of our total expenses. While we always try not to waste money, there were indeed some cases that our attempts were in vain. The important thing is to seek efficiencies to the extent possible to bring the same effect. We emphasized that restoration of the balance of revenue and expenses is a priority this fiscal year, and in our view, the second quarter financial results were in line with that to some extent. Having said that, we think eliminating marketing and R&D inefficiencies is the most important issue for the time being. The idea that restructuring the workforce leads to cost cutting and strengthening our future competitiveness does not apply to us. While TV media advertising was considered the only way to reach the mass audience in the past, even without TV ads these days, many consumers are proactive about obtaining information from us thanks to the popularization of the Internet and smart devices. For example, when Nintendo produces a film to introduce games or makes new TV commercials, consumers take the time to view our YouTube programs or visit the Nintendo websites. Also, we put effort into “Nintendo Direct” and one of our video productions called “The Cat Mario Show,” which can be viewed on the Web and is regularly updated, has become so popular that many people watch this video program. Many consumers in Japan now make the conscious choice to view our video programs in the Nintendo eShop of Nintendo 3DS every week. Unlike TV commercials for games that suddenly appear on your TV screens without notice, consumers actually pay attention to our programs, so the effect of one viewing is much larger. By having consumers watch our TV commercials and encouraging them to proactively view our programs by creating interesting content on the Web, they might become excited about certain topics and share that information through social media, resulting in others, who were not originally interested in our offerings, watching our programs. Our marketing activities for games can still become more efficient. As an additional note, with the recent depreciation of the yen on a period-average basis for this fiscal year so far compared to the previous year, marketing expenses in the overseas markets, when they were converted to yen, have increased. Please understand that while it’s difficult to grasp the spending in local currencies after such amount is converted into yen, we have improved profitability by making marketing activities more efficient in the second quarter compared to the first quarter of this fiscal year.
— Semi-Annual Financial Results Briefing
Source: Nintendo JP.
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