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Peter Main: Introduction of Speakers
Thank you, good morning. Appreciate your being with us. Our agenda
today is to take about ten to fifteen minutes to briefly discuss the
sales updates from our holiday season - the terrific momentum that
we're coming out of that very important sales period with. Then to
move to a look at some of or first half plans and then thirdly to
discuss a little further at the announcement you receive last night
regarding the retirement of Minoru Arakawa effective immediately. We
expect that, again, to take about twelve to fifteen minutes and
we'll have about ten minutes available for Q&A following that.
The first part is the update on last season will be presented by
Peter MacDougall. As many of you may know, Peter has successfully
served as president of Nintendo of Canada for the last twelve plus
years and he'll be succeeding me as Executive VP of Sales and
Marketing effective of my retirement February the first. And he'll
be followed by George Harrison who many of you have met in the past.
George is senior vice president Marketing and Corporate
Communications. He'll talk about our plans for the first half. I'd
now like to turn it over to Peter MacDougall.
Peter MacDougall: Nintendo Sales & Projections
Thank you Peter and good morning. While we do not yet have final
year end fiscal numbers, we are confident in saying we have
completed the best holiday season ever for video games and the
market will easily exceed eight billion dollars in revenue for the
full year. To put this in comparative terms, industry estimates show
the number of camcorders sold in America in 2001 was down 9%, the
number of television sets was down 12%, while through November, the
number of video game systems sold jumped by 44%.
For Nintendo of America, this holiday season was one of our best
ever. Our one-two punch is working beautifully. Year to date
through November, TRSTS shows all Nintendo hardware units - and
that's consoles and handhelds combined - outselling all PlayStation
hardware - that's PS One and PS2 combined - by over 27%. Overall, Nintendo
was responsible for over half of all hardware units sold in America
through November. Coming out of the year, our inventories on N64 and
Game Boy Color are virtually zero with trade inventories minimal. In
fact this has been the cleanest transition in our history. Let me
put the portable category in perspective for just a minute. A year
ago at this time we told you about all time record sales levels for
Game Boy Color. Well in 2001 our combined handheld systems - Game
Boy Color plus Game Boy Advance - ran 20% higher than in 2000 on a
hardware unit base and upwards on 25% on total retail dollar base.
Frankly, it's difficult to find an adjective to adequately describe
our Game Boy business.
Of course there's always more attention on the console front than
anywhere else - and we couldn't be happier with GameCube's
performance through year end. In North America we shipped 1.3
million units to retail before yearend and sold
through 1.2 million to consumers. Sellouts were common
throughout December and no store had more than a couple of days
inventory at any time. In Japan we saw a similar holiday season
rush. In that market we shipped 1.3 million units through retail
from launch through yearend and sold through more than 90%.
Currently there are about 100,000 units in transit, which means that
of the 2.7 million GameCubes shipped worldwide
in 2001, more than 90% of them sold
through by yearend.
We remain on track to see our total GameCube shipment grow to a
minimum of previously announced total of 4,000,000 units before our fiscal
year end of March, 2001 and we don't anticipate any slowdown in sell through.
What these hardware numbers clearly demonstrate, as is always the
case, is the power of TRST software. Preliminary TRST data for
December show Super Smash Bros. Melee outselling any Xbox title.
It's the hottest game going. Pikmin was also in the top ten
during December and showed strong momentum coming out of the year.
Based on average sell through per title per week in December,
GameCube games outsold Xbox games. The best-selling Game Boy game
for the season was Pokemon Crystal. Now on a year to date basis
through November, Nintendo remains the number one game publisher in
America and we expect that will hold when the yearend numbers are
tabulated.
We have every evidence that the games driving Nintendo GameCube sales so far
like Smash Brothers, Luigi's Mansion, Star Wars: Rogue Squadron, and
Pikmin will continue to do so for many months to come as new
hardware owners build their household library. But the parade of
great Nintendo GameCube titles is just beginning. 2002 is going to
be a banner year. And to provide more details, I'd like to turn it
over to our senior vice president of marketing and corporate
communications, George Harrison.
George Harrison: 2002 Outlook
Thank you Peter. 2002 looks to be a great year for Nintendo of
America. We'll be building off the strong launch on of course Game
Boy Advance and the Nintendo GameCube. Our first task is to continue
to build the improve the installed base of both the hardware
systems. Now as Peter mentioned, we ended December with minimal
inventory of both hardware systems so it will be a few weeks before
we can refill the pipeline. In fact in the case of the GameCube, if
the post holiday sales remain as strong as they have, we may be able
to hand them out for some time.
While we're not ready yet to make an official forecast for the next
calendar year, we believe that we can sell through in excess of 6
million Game Boy Advance hardware systems and 4.5
million GameCube systems [in 2002]. These goals would be
consistent with the strong performance of Game Boy that we've seen
over the last few years and in the case of Nintendo GameCube,
consistent with the year two performance that we've seen in the past
for home consoles.
On the software side, we expect continuing strong sales of key
launch titles including Luigi's Mansion, Super Smash Bros., and
Pikmin. In addition, we'll be launching next week NBA Courtside
2002 with Kobe Bryant. This title will be supported with a specific
campaign for the title as well as a sports library campaign. Next up
for the Game Boy Advance is the Super Mario World, which releases on
February 11th. This will be our big title for the first quarter, and
the title around which we will build our retailer Game Boy hardware
campaign from President's Day in February all the way through
Easter. Sometime in the first quarter, we'll also see our first
example of connectivity between Game Boy Advance and GameCube. Now
ironically, the first titles that will support this system will be
the Sonic titles coming from Sega and from THQ for the Game Boy
Advance. We think this will be the tip of the iceberg for this great
game innovation and you can look forward to more games taking
advantage of this connectivity in 2002.
Looking a little bit further into 2002, you'll see a steady stream
of AGB software - perhaps even an appearance
by Pokemon before the year is over. For GameCube, there are
several great titles coming this year, including Star Fox, Eternal
Darkness, Zelda, Metroid, and Mario Sunshine. Additionally, we'll
see a growing list of third party titles introduced, which should
bring the total list of GameCube to over 70
titles by the end of the calendar year. We're very excited
about our product plans for 2002 and we look forward to showing you
more of them as we get to E3 in May. Let me turn us now back to
Peter Main.
Peter Main: Arakawa's Retirement
Ok, as most of you undoubtedly heard on the releases last night, the
announcement by Minoru Arakawa of his intention to take retirement
effective immediately. This in fact took place late yesterday. The
decision that he had been pondering for many months. In fact,
discussions were underway between NCL and NOA on this matter to
address his intentions and prepare for a smooth transition since the
middle of last summer and basically at the end of the day, after
twenty two years in a very very competitive hard driving business,
Mr. Arakawa is truly looking forward to Saturdays at a place other
than the office and weekends and being home for dinner on time. His
immediate plans are to do some travel with his wife Yoko, spend some
time with his kids, and indeed he's announced he's planning to build
a new home for the winter months on the island of Maui. He's going to
get underway with some of those plans in the weeks ahead.
Clearly his contributions to the video game industry in America cant
be overstated. His accomplishments are a matter of record. He
undoubtedly will be remembered as the father of today's video game
industry in this country. Many of the hallmark's of our industry's
current strengths are indeed innovations that were introduced by
Arakawa - ranging from his relentless focus on quality of software.
While I was ascribed with the name of the game moniker, it really
was a reflection over these many years of the philosophy that had
him drive the business. And in behind that, many innovations ranging
from sell-through instead of sell-in, logistics, distribution,
development, and importantly the development of an overall, very
very strong company.
The timing for this transfer makes imminent good sense. Clearly as
Peter MacDougall and George have talked about, we've had a strong
strong year. As you know, the industry is at record levels. The
position of the company with a clean transition and the strong
product lineup for the months and indeed years ahead for both
Advanced Game Boy and the Nintendo GameCube position us well to take
advantage of this continued growing love affair by the North American public
with game based interactive entertainment. Equally important is the
internal strength of Nintendo of America. We clearly have one of the
strongest management groups in the entire industry. Again, people in
our senior ranks with seven, eight, ten, twelve years of in-depth
experience with this company in this business position us well to
make the transition. Last but not least, the financial resources of
Nintendo worldwide are well presented in our publicly-available
balance sheets. We're at a very strong point in our history and this
is about as good a time as it could be... (click here for our
in-depth look at Arakawa's retirement)
Questions: GameCube Related Questions
GameCube's projected market share?
Clearly, we're focused on positioning GameCube as an even broader
appealing product than N64 was with respect to the demographics.
Clearly reflected with the array of software we came to market with
from the starting point. In the past it's typically being twelve to
eighteen months until we arrived with the array of third party and
indeed even second party software that we showed up with this time.
We're focused number one on maintaining our stronghold with the more
youthful twelve and under player, followed by the thirteen to
seventeen year old teen player with whom we've typically had strong
relationships but we've unquestionably
broadened our focus to expand our capabilities with the
nineteen plus crowd. Sports, other action adventure, and other
products that you'll see in the future. As to share, as we've
pointed out in some previous reviews, we believe that this
generation of product in North America could see a total universe in
the region of 55 to 60 million pieces of hardware in contrast to a
number that was just under 50 million with the N64, PlayStation One
arena... We're focused on driving this business to perhaps 25
million plus pieces of hardware in the North American market in the
next 60 months.
When may Mario Sunshine debut in North America?
We had our first little peak at the Mario product at Space World
last August. Actual timing for the launch won't be announced for a
while. It's not on our schedule at this point before we get to the
E3 show. You'll probably see it at the E3 show and hear any update
on the launch date at that time.
First and second party efforts to get average GameCube user age
up?
Our objective clearly is to maximize our impact on the total market
opportunity. We all know that 50% of
it's over the age of 18. We're looking at first, second, and third
party opportunities to make sure we're bringing the most unique and
best quality software to market against the interests of each of
those groups and I just want to leave it at that. We've got a lot of
activity underway and in order to reach that target I spoke of,
we're going to do a better job on the eighteen plus. I think we had
a good start on products like - one example - the Lucas Star Wars
product that performed extremely well. It was a hardware seller for
us in the holiday season. You're going to see more product like that
in the future. Certainly, Eternal Darkness is clearly positioned at
the older end of that demo but you'll be seeing a number of
additions to that in the short term. In the next few weeks you'll be
hearing about other products that are being added to that. I think
the introduction of a sports title from a first party though we
certainly have a lot of really strong third party in December,
seeing Kobe, which ships next week, this early in the lifecycle is
further evidence of our focus.
Yamauchi leaving NCL? Would a departure of Arakawa favor Mr. Mori
or Mr. Iwata when Yamauchi leaves?
We have not heard a definitive position on that. There was
speculation and some allusion to it but we have not heard a specific
date or his plan at this moment. Only Mr. Yamauchi can answer that
[second] question. I'm really not in a position. I think the key
point is that both at NCL and Nintendo of America, this company has
got a very very strong management team in place, a tremendous amount
of experience in all aspects of the business, and we're well
positioned to deal with future changes
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