“When we look at Nintendo’s current network services from this perspective and others, they look like patchwork.”
☆ NintendObs Event – Nintendo FY3/2015 Q&A.
Question:
My question is about “the new core system.” Because it has not been largely picked up by media or investors, I would like Mr. Iwata to explain about it. Specifically, why at this timing you, by collaborating with DeNA, have decided to replace your existing “core system”? I assume that there must be an objective as well as pending issues to be addressed. Also, when you search for a partner to jointly develop “a core system,” I think that a systems integrator would be a natural candidate for you to work with, so why have you chosen DeNA as your partner?
Answer:
Iwata:
Before answering your question, let me explain for the others that the “core system” the questioner just referred to means the “integrated membership service” that I mentioned in my presentation today that will build a bridge between smart devices and dedicated video game systems.
So far, Nintendo has built its official website, started the Club Nintendo membership service, made its dedicated video game systems network compatible, started Miiverse and has constructed other online services one at a time. When we constructed each one of them, we were trying to create a certain solution to achieve a certain goal or to address to a certain issue. In other words, we did not have an overall vision as to what the final and comprehensive format should be like and, as a result, we cannot say each of these services was connected to one another in an ideal way. Also, when we were designing them, we did not have the idea of building a bridge between smart devices and dedicated video game systems and, at least five years ago, we could not foresee that smart devices would have increased in significance to be the dominant window through which consumers connect with one another and society. When we look at Nintendo’s current network services from this perspective and others, they look like patchwork. They are not ideally designed for user convenience, and when we try to improve one, we have to modify not only the portion directly related to that service but also other seemingly unrelated components, so it cannot be done easily. In other words, we have many ideas that we would like to realize but we have not been able to execute them as smoothly as we had hoped.
You pointed out in your question that it would be normal for us to place this sort of order with a systems integrator. I understand that many seemingly similar cases have been dealt with in that fashion. For business affairs in which the requirements can be firmly fixed beforehand, it would generally be fine. However, the circumstances will keep on changing even from now, so it will be rather difficult for us to firmly define the requirements in advance. I understand that there are many system integrators who are pretty good at constructing the systems for which the requirements have been firmly predetermined, namely, when the client can completely identify what kind of specs are to be integrated. On the other hand, many of them are not very good at constructing the systems which are subject to clients’ ever-changing demands or if the clients require them to make modifications in accordance with changing circumstances. Of course, there are some systems integrators who are good at such requirements, and I am just talking in general. For this time, Nintendo will operate a smart device business jointly with DeNA, where we create new applications and operate the relevant services. The operations include analysis and feedback, and we will design the structure in a way that we will be able to carry out our consumer management duties based upon this analysis and feedback. We have come to understand that there are great overlaps between this structure and the integrated membership service that Nintendo aims to establish. Also, through the various negotiations leading up to the business and capital alliances, we realized that DeNA’s corporate culture is well acquainted with constantly changing requirements and that they are highly capable of flexibly changing the system and then quickly reconstructing it. In addition to carrying out the smart device business, we concluded that we should also construct an integrated membership service together so that the “bridge” will be built more cleanly, because even though we will not be able to perfectly define the requirements in advance, or even when we are faced with further environmental changes, we will be able to construct a structure which can flexibly deal with these changing requirements. We concluded that, even though this is something Nintendo cannot execute with its own internal resources, we can achieve it if we work with DeNA.
As you pointed out, this project has neither been widely reported nor covered, and although it might not have captured a lot of media attention yet, I believe this is going to be a very important challenge for us. The better the system can operate, the more smoothly and frequently our consumers will be able to travel between smart devices and dedicated game systems. It will increase the number of reasons for our consumers to keep on playing games or to keep on playing with their friends and relatives, increase the opportunities where one can recommend some games to others and vice versa or where people can exchange game-related information. Today, the speed at which information can spread is extremely fast. Anything that experiences a boom in today’s world is almost always riding on the wave of this information spread, so we have to construct a system which matches today’s environment. In the past, TV ads and word of mouth might have been the main components of that system, but today, people argue how we should add the Internet to a system and how we should combine these efforts with smart devices, and we are aiming to construct such kind of comprehensive system. So far, we have been offering a loyalty program in which we offer corresponding points to those who have purchased our products, and we have been offering some rewards based on these points. What we are aiming to establish is not a simple extension of the existing loyalty program but a loyalty program with, say, the entertainment elements where the members feel that they have received certain rewards as a result of not only their purchases but also the history of their gameplay and how each consumer has interacted with others. Since it is impossible to define the requirements for this sort of loyalty program 100 percent in advance, we see it very advantageous that we are able to work with DeNA who will be able to flexibly deal with such requirements. We have not decided if the next meeting with you will be a Financial Results Briefing or a Corporate Management Policy Briefing, but around the end of October this year, we will probably have the next opportunity to communicate with you. We will prepare for that so we will be able to disclose more concrete information at that time.
— Financial Results Briefing for the 75th Fiscal Term Ended March 2015
Source: Nintendo JP.
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