By the end of this year, barring unexpected delays, we'll have downloaded Nintendo's first dedicated game / app for smart devices. In partnership with smart device veterans DeNA, Nintendo is plotting a small number of apps that it hopes will generate significant revenue, transforming its profit margins and tempting players towards dedicated hardware in the process - that's the aim.
In a recent AGM shareholder Q & A, now officially translated, Satoru Iwata was asked about how Nintendo will tackle pricing models for its apps. Iwata-san stated that pricing "will be compared with the prices of other smart device game applications", but made clear that even in free-to-play the company will be aiming for structures that don't draw criticism for shady practices. The goal is to earn a small amount of revenue per player from many millions around the world, as opposed to extracting large sums from a small audience through dubious, addictive models.
When we look at successful smart device game applications abroad, a number of companies have been asking each of a greater number of consumers to pay less money. Companies may be able to make a very profitable business in Japan by asking a small group of consumers to pay a large amount of money (for their smart device applications), but we do not think that the same approach would be embraced by people around the world. Accordingly, even though we recognize that it is not an easy path to take, as long as Nintendo makes smart device applications, we must make them so that they appeal not just to some limited age group but to a wide age demographic just as our games thus far have been doing, and they should appeal to anyone regardless of their gaming experiences and gender, and most importantly, regardless of different cultures, nationalities and languages. We would like to make several software titles that are considered worldwide hits as soon as possible.
Regarding your question about the target audience, we are trying to make applications that appeal to a wide variety of people so that the games can receive payments widely but shallowly from each consumer. In other words, even if a consumer makes a relatively small payment, because of the large consumer base, the game can generate big revenue. This is the business model we would like to realize. I think the shareholder has just asked these questions partially because he is concerned that Nintendo might shift to the notorious business model that asks a small number of people to pay excessive amounts of money and that Nintendo's brand image might be hurt. Please understand that Nintendo will make its proposals by taking into consideration what Nintendo really should do with this new challenge.
Reiterating previous comments on upcoming apps, Iwata-san also explained that there'll be a small volume of apps over the coming year, with a focus on each developing large audiences and evolving into 'services'; this approach has often been cited as a strength of partners DeNA.
On a different note, we are not planning to release many game applications from this year (when our first smart device application will be released) to the next. The reason for this is that software for dedicated game systems is considered a "product" that tends to produce the strongest and most fresh impact on the world at the time of its release into the market but its impact can be lost gradually as time goes by. With that analogy, smart device applications have a strong aspect of "service." Even though the initial number of players tends to be small, those who have played invite others to play too, and as the total number of the players gradually increases, so does the revenue. This, however, means that the release of the game does not mark the end of its development. If the game cannot offer services that evolve even on a daily basis, it cannot entertain consumers over the long term. Accordingly, we would like to spend sufficient time on the service aspect of each title, and we would like to grow each one of our small number of game applications with the objectives that I just mentioned.
Are you encouraged by Iwata-san's words and looking forward to seeing what Nintendo brings to smart devices, or are you just fundamentally against the whole idea? Let us know.