Industryweek 12503 120216 Tatsumi Kimishiwa Nintendo

Nintendo's Big Switch

Dec. 2, 2016
In conversation with the new president of Nintendo, Tatsumi Kimishima as the company deals with some of its largest and most significant changes.

It has been a little more than a year since Tatsumi Kimishima became president of Nintendo Co., taking over the reins from the late Satoru Iwata. A former banker, Kimishima is now overseeing one of the biggest shifts in the company’s history.

Switch, a new console that the Kyoto-based company will start selling in March, will be at the center of an entertainment web that will include mobile gaming, theme parks and merchandising. The device has a tablet-like display unit that connects with a TV but can also be taken out and about. Here, Kimishima discusses the challenges of manufacturing a new product, among other topics.

What can you say about your first year in charge?

Three years ago, all of us together — the previous president, Genyo Takeda (technology head) and Shigeru Miyamoto (creative head) — created a plan to revitalize our business, which included smart devices, our new hardware and maximizing our intellectual property. Quite simply, the biggest issue was not about whether I change this, but how do I execute these projects? Now the critical period is finally here. From the end of this fiscal period and into the next one is when we actually show the product and deliver it to our customers.

Why did Nintendo decide to combine household and portable gaming?

We didn’t just want a successor to the Wii U or the 3DS. So our original concept was, “What kind of new experience can we create?” And what we showed this time was an object that’s both stationary and one you can take outside to play with anyone you want. Thanks to our software, the 3DS hardware is still growing. So that business still has momentum. And certainly rather than being cannibalized by the Switch, we think the 3DS can continue in its own form.

Is the Switch part of a bigger hardware plan?

The part we’ve shown this time is just a conceptual image of how the Switch is different from the Wii U and previous systems. Going forward, of course, in terms of what kind of accessories will come out, we want to show this in January and later. By no means was that everything.

Is there a chance we will see Switch evolve after it’s released in March?

What we haven’t shown you yet is the software lineup. We also haven’t shown all of our first-party software. When we make new hardware, how it works with our software is critical. This is what we weren’t able to show. We want people to touch the device in January and experience the software for themselves.

Will users be able to flexibly change its form?

We have shown you various scenarios. It will allow everyone to come together to play a game, or let you play by yourself at home. And depending on the software, it will also allow you to do things beyond that. As the previous president said, when it comes to gaming, it’s not just about being holed up inside the house, but doing it outside in different ways. That doesn’t just mean under a blue sky, but with other people and, for example as we showed in the video, in different places. Inside the plane, inside the car, at all the places where people get together.

The video didn’t seem like a typical Nintendo promotion. It was aimed at an audience that you would expect for Sony or Apple.

As the name implies, we’re switching a lot of things. But we have no interest in switching our customers. We have no intention of just going after a certain age group. Depending on the kind of software that comes out, families and kids will be able to play too. The titles we did show, those are games that for people who understand they will grasp it right away, but for families and kids, we want them to understand by actually experiencing it.

So would you say the video was made for hardcore gamers?

Our core philosophy is that we want to increase the number of gamers at all ages, and there’s no change to that. So we have no intention to lean just towards core gamers. But to communicate our new idea, when you think about who will understand it first, naturally it will be people who really understand games. To communicate that as quickly as possible, we focused on those folks who really understand games.

There seem to be many possibilities for your hardware and software ecosystem. What do you think of hardware tie-ups with other companies?

If you asked me if it’s possible, in terms of if we’re getting ready, the best takeaway for now is that no, this is not happening at this moment. But in terms of the various ways you can play, you will have to see it together with the software and accessories that we’ll have, which we will reveal in January. In terms of attachments to the core part that is the Switch, it may be appropriate to call them accessories. Or it might be better to call them add-on hardware. It’s probably more correct to call them accessories. You can assume that there will be a wider array.

Virtual Reality, Profitability, and Finding the Next Pokemon Go

What’s your view on virtual reality?

Miyamoto has talked about this several times. It’s not that we’re uninterested. In fact, we have a lot of interest. VR offers the experience of playing in a new way. But that depends on the software and how you use it to play. Especially when it comes to games. And beyond games, it also applies to other non-game things, so it is something to look forward to.

Will Switch have VR capabilities? Are you developing VR that will connect to Switch?

If you asked as if this might be possible in the future, certainly we can’t say no. In terms of how it can be used for gaming, it’s something we must consider. It depends on the system specifications. I can’t say that we have no interest in VR because VR offers new ways of playing, but that depends on what kind of software can be played. But what kind of software works, that’s only something you only know once you actually experience it. And our games are ones that are usually played for a long time.

What are your expectations for Super Mario Run?

In terms of expectations, we all saw what happened when we delivered Pokemon Go. And honestly I was quite surprised by it myself. There’s no doubt that more people are using smartphones to play games. And as this time we’re using Mario, that’s a very important intellectual property for us. And that’s what Miyamoto’s team is working on now: making sure it spreads out just as quickly as Pokemon Go.

So our expectations are big. And as Tim Cook mentioned, more than 20 million people have already registered to receive notifications when the game is available. In terms of the game itself, you can download it and play a certain part of it, and then pay a fixed price and then play it over and over as many times as you want without having to pay anything extra. And that should give peace of mind that kids can play it. And we’re hoping that will help it become more popular.

What is Nintendo’s philosophy toward smartphone games?

Our main business is the hardware/software business. In addition, our smartphone business has helped sell a lot of our existing packages. And it has really proved our original thesis: by releasing our software on the smartphone, it positively impacts our existing hardware and software business. And that’s precisely the synergy effect we were expecting. And as that has been proven correct, we have more confidence.

Where do smartphones and Switch fit into your ecosystem?

There’s an image of our future that our previous president painted two years ago: we had what we called NX — which is now the Switch — and surrounding it are our businesses for smartphones, theme parks, movie-related businesses. We’re at the start — you will see various connections between our smartphones, theme parks, movie-related business, and merchandising that uses our intellectual property.

What are your expectations for the Switch?

In terms of how many units will sell, we’re looking at past examples where competitors, and our own Wii, had a lot of momentum, and that means the first year after it goes on sale will be extremely important.

Were you surprised at the market’s reaction to the Switch video, with shares falling?

To tell you the truth, I was surprised. I had wondered about the reaction. But I don’t understand why. And there’s no real point in me talking about the stock price.

What’s your assessment of where Nintendo is at in terms of profitability and sales?

Our revenue has fallen for eight straight years. What we aim for is to increase the number of people who play games. We want to deliver all kinds of new surprises to our customers, and it is through their support that our revenue increases. That’s the end result. But if that result doesn’t show, that means we weren’t able to deliver. Next year is when we see the result.

Iwata-san often mentioned 100 billion yen as being an appropriate level of operating profit for Nintendo. Is that a goal for you?

We want to get back to those figures. That’s the level that everyone is talking about, and that’s what we want to achieve. But as you know, foreign exchange has a tremendous impact, so depending on the level our operating profit may change quite a bit, but it is something we are watching very closely.

By Yuji Nakamura and Takashi Amano

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