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In a rare conference with the media, Nintendo's greatest minds recently discussed Nintendo's latest endeavors. Nintendo of America executives Peter Main, Peter MacDougal, and George Harrison offered  a comprehensive review of GameCube's introduction and an in-depth look to the future. The discussion included a review of last year's sales, projections and analysis of future operations, Arakawa's retirement, and user base demographics. 

GameCubicle.com transcribed the discussion for your reading pleasure. A few key points of the conversation have been highlighted:


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


Transcribed by GameCubicle.com


Here's to a great 2002 for GameCube [holds up glass of champagne]...

January 8, 2002

Rick - Editor in Chief, GameCubicle


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