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Nintendo finds itself under fire from furious shareholders
Nintendo finds itself under fire from furious shareholders
July 3, 2014 | By Mike Rose

July 3, 2014 | By Mike Rose
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    27 comments
More: Console/PC, Business/Marketing



In the absence of president Satoru Iwata, Nintendo's top executives found themselves under fire at the annual general meeting of shareholders this month, as investors took pot-shots from every angle.

The company has been under severe pressure recently, as it recorded losses last year while sales of its Wii U console continue to fizzle out. While Iwata would normally field the questions, he missed the meeting due to illness.

To give an idea of how tense the back and forth between Nintendo and its investors must have been, when a shareholder suggested that Iwata should try to take it all in his stride a little better, Miyamoto remarks, "Just for your information, I too have been feeling a great deal of anxiety. Mr. Iwata is a president whom I can rely on very much, and I would like to continue this journey with him."

The barrage of tricky, and sometimes odd, questions came thick and fast. One investor asks why Nintendo hasn't given any free games away to its shareholders, while another questions whether the screen of the Nintendo 3DS could be altered such that it can be "manually extended to become twice the size both horizontally and vertically."

And partway through the meeting, a shareholder puts simply: "I do not understand video games and I even feel angry because, at Nintendo’s shareholders’ meetings, the shareholders always discuss things relating to video games or such childish topics as 'what the future of video games should be,' while I, for one, was flabbergasted that Mr. Iwata continues to hold his position although he had said that he would resign if the company’s performance were bad."

A tricky audience for Nintendo then, but senior managing directors Genyo Takeda and Shigeru Miyamoto valiantly drive the conversation forward, providing some interesting food for thought at times.

"If you ask me about the most challenging aspect of designing Wii U, it was that the high-resolution graphics were anticipated by everyone and could not be an advantage," Takeda tells one investor of the Wii U hardware.

And he notes that the company is still having a hard time explaining to consumers what the benefits of the Wii U GamePad are.

"We want to pass on to our younger developers the DNA of offering unexpected and fun entertainment to consumers by doing things in different ways from others, so the company can continuously produce unprecedented entertainment," he says.

Nintendo's overall message to its shareholders is that it's in a bit of a slump right now, and there's no easy solution to getting out. But the company believes that the efforts it is going to right now for the future, will help to steer Nintendo back into a new high.


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Comments


Sam Stephens
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I think investors should be, I don't know, a little more invested in the companies they're putting money into. Making games is what Nintendo does. The biggest people at Nintendo, Iwata included, are experienced in and involved with development, so it seems a bit ridiculous to not expect that to be the lens through which business is discussed.

Saurian Dash
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Couldn't agree more, the attitude displayed in that particular quote was utterly ridiculous:

""I do not understand video games // the shareholders always discuss things relating to video games or such childish topics as 'what the future of video games should be,' "

Then why invest in a video game company? Why is this person so surprised that the focus of the meetings are discussions regarding the future of the gaming medium and Nintendo's place in it?

Lars Doucet
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"I invested in this oil company, but all they talk about is childish things like exploration and drilling!"

"I invested in this fashion company, but all they talk about is childish things like clothes, design, and modelling!"

Chris Hendricks
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"They told me that this company makes products that print money! You mean they've just been making video games this whole time?"

Ian Fisch
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No. You are wrong.

There are literally thousands of pertinent questions one could ask about Nintendo's business that have NOTHING to do with videogames.

What kind of pensions are being offered to new employees?

What kind of health insurance benefits are being offered?

How much is being invested into marketing in emerging markets?

What is their buillions in cash reserves doing? I'm guessing it's not just sitting in a big vault. Is it being invested in foreign markets? Currency? Mutual funds?

etc.

etc.

etc.

Sam Stephens
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@ Ian Fisch

No one said these things aren't important. There were several topics in the Q&A not related to video games. What we are saying is that it's fairly ridiculous to hold shares in a company and not know anything about its products. Hardware and software development is what costs and makes Nintendo's money. It would makes sense that most business discussions about the company would be about these products.

Javier Degirolmo
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Many shareholders only care about a business making money and don't really care about what it does. In fact the biggest shareholders generally have shares in just about every industry in existence, even though they usually don't understand most (or all) of them.

This is also how many times the executives end up screwing up a perfectly functional company. They want to impose their own rules when they don't really understand anything about how it works. Their expertise is doing business, nothing else.

Michael Mullins
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I have to agree with this Ian. A lot of analysts only look at the numbers from a product agnostic standpoint and they can get away with it for a number of reasons (I hold them in lower regard), but it's just plain bizarre that a shareholder would show up in person to a shareholder meeting and proclaim no interest or even active disdain for the product. Nintendo's response was clever, according to decorum, and well deserved. That shareholder is a fool.

Justin Kovac
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I felt HD graphics could have easily been an advantage if Nintendo marketed it as such, much like how the PS4 and Xbox One are marketed as the new and more powerful systems.

Mario Kart, Mario, Zelda, Pikmin, etc in 1080p is a great step up from the 480 that the Wii gave us. The focus was on a GamePad which was rarely used (Nintendoland multiplayer games are a great way to use it and wish they did that more). Sell the system as an HD Nintendo system first, (Wii 2/ Wii HD) then focus on what new possibilities the GamePad could bring. Or give us more than a few Wiimote+ games.

Also, give us proper 2 player separate screen GamePad use in Mario Kart 8. :)

Dave Hoskins
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Investors just want to see nice graphs going up over time. They don't want to discuss the technical stuff that actually happens in the company.
Although, if I had any, I would have dumped my shares a year ago, I'm sorry to say.

Ian Fisch
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The HD resolution excuse doesn't pass muster. I can play original SD Wii games on an emulator at 1080p and they look phenomenal. There's no reason that HD development should be more difficult than SD.

James McWhirter
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Resolution is one thing, but designing a game that takes advantage of the jump to HD is another.

Indeed Wii and GameCube games do seem to look great in HD from the screenshots I've seen, but outside of those games with stunning art direction they don't look ready for prime time at those resolutions.

Just look at the leap from Pikmin 1/2 to Pikmin 3: the series is finally gorgeous from a natural point of view. Likewise, Mario Kart Wii does look handsome in HD, but the step up to Mario Kart 8 from a pure visual point of view is phenomenal: I cannot even wonder how many more resources went into making that happen.

Nintendo tends to hire staff and train them up over time within the company, unlike other companies who usually contract out staff and (sadly) let them go later at the end of the lengthy development period, so I can see why Nintendo's internal teams would be struggling with the visual leap from a development cycle point of view.

Terry Matthes
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" There's no reason that HD development should be more difficult than SD."

There are actually a lot of reasons why it takes longer. The art alone would eat up a lot more time.

Higher resolution art takes longer to produce. If I have to finalize a sprite or model that is going to be 100x100pixels vs 800x800pixels it's a lot faster to concept and finalize because the level of detail necessary isn't as great. No producer is going around talking to artists making HD graphics saying "Why can't this be done as fast as that SD game we made?". You'd look at them like they had three heads.

Jim Burns
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Those shareholders do not sound bright

Leroy Sylva
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I don't even know why they invested their money at all if they're that idiotic.

A fool and his money are soon parted, methinks.

mark whitten
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"I also believe that some major sites on the Internet sometimes produce biased and distorted articles about the company. For shareholders, this affects Nintendo’s share price, and for non-gamers, this paints a negative picture of games in general. What does Nintendo think about this and how are you going to deal with it?"

talking about you

Pierre Chanliau
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Holy shit, no wonder VALVe doesn't want shareholders. These people sound legitimately disconnected with reality and sound almost insane!

"...while another questions whether the screen of the Nintendo 3DS could be altered such that it can be 'manually extended to become twice the size both horizontally and vertically.'"

WHAT KIND OF QUESTION IS THAT?! DOES HE EVEN KNOW WHAT HE'S ASKING?!

Michael Joseph
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No kidding! AUTOMATICALLY extended is the way to go!

Matt Diamond
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It took me a few minutes, but eventually I decided that the shareholder was referring to a retina display. Maybe.

Scott Rubin
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"there's no easy solution to getting out"

Easy solution #1 - Pokemon MMORPG. Alone it would make more money than the rest of Nintendo's entire business combined.

Easy solution #2 - The crazy hardware ideas Nintendo has are not bad. The problem is they never make enough software to back it up. Wiimotes are good for Wii Bowling and... The GBA->GCN link cable was good for exactly three games (Pac-Man vs., Crystal Chronicles, and 4 Swords). If you cranked out a whole bunch of top-tier must-play games that actually used the WiiU pad, maybe it would catch on.

Easy solution #3 - In a era with Steam and app stores, Nintendo games are vastly overpriced. Start a Netflix-like subscription servers for WiiU/3DS. Pay $5 or $10 a month, get unlimited access to every Virtual Console game.

Somewhat less Easy solution #4 - Realize that your customer is the entire world, not just Japan. Every single game and product you make needs to be released to the entire world simultaneously at the same price. No more Japan-only games. No more region locking.

Easy Solution #5 - Let NoA run the show.

Jason Long
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Easy solution #1 - Pokemon MMORPG

This is not actually an "easy" solution. The truth is, Pokemon drives their hardware sales. A Pokemon MMO would destroy them. Unless you're pretty much packing up the hardware business and going pure-MMO software, it's a huge risk. And with the number of big-name brands going MMO only to fail far short of what they should have been - Star Wars, for example - there's no guarantee that an MMO would be done right or that people wouldn't tire of it after a while, so it's STILL a big risk. It's not that Nintendo is too risk-averse, but rather that this type of risk would be even riskier because they would have no idea what they were doing.

Mac Senour
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I'm not sure that Nintendo has fully embraced that it's the gateway drug of video games.

Larry Carney
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I literally imagine half the people asking these questionable questions to look like the fellow on the Monopoly box.



But I suppose no cartoon caricature could do justice to the reality of their inanity.....

Christopher Hallett
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I feel that the quote about the shareholder not understanding games is a bit rough and has caused a lot of people in the comments to focus on that. The full quote is as follows:

"I do not understand video games and I even feel angry because, at Nintendo's shareholders' meetings, the shareholders always discuss things relating to video games or such childish topics as "what the future of video games should be," while I, for one, was flabbergasted that Mr Iwata continues to hold his position although he had said that he would resign if the company's performance were bad.
I hope that Nintendo's shareholders' metting will become an opportunity where the shareholders discuss the company's business operations from the viewpoints of capital gains and dividends."

Why is this important to show the full quote? Because the guy clarifies why he hated the video games discussion in the 2nd part of the quote (not featured in this article at the time of this post). The guy is an investor who went to the meeting to get proper investment information that would help him understand how well the company is doing and what direction it is heading in. Should the latest Nintendo games and ideas be mentioned? Of course, but that should be used in support of statements relating to company performance. For example: We expect the sales in the 4th quarter to pick up as the new Zelda game is to be released then and we have tailored it (along with our marketing campaign which will cost X) to draw in a new type of audience (open world games).

Should he have called the games discussions childish? Maybe not, but he had a perfectly reasonable question and a perfectly reasonable expectation that the meeting would get him proper investment information.

Sam Stephens
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I can understand why this kind of information would be valuable, but why didn't this shareholder just ask those questions then instead of putting down both the company and the other shareholders for doing what they do best? This person was also downright rude by questioning Mr. Iwata's continued position as president of the company in the face of personnel who just re-elected him and obviously feel he is the right man for the job.

Bob Johnson
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The questions were odd compared to previous Q&As. Few maybe zero of them sounded like they were from professional investors or anyone with any real insight into the business or company.

I really didn't get anything out of this Q&A. Maybe part of the problem was that Iwata wasn't there. I don't know. The questions were straight out of NeoGaf or something.

And, btw, you should never invest in anything you don't understand unlike that one questioner who said he doesn't understand videogames ???


Mike Griffin
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We're now witnessing this sort of company-wide 'get with the times' effect, where Nintendo's creative and executive/marketing teams have recognized changing conditions and are making better moves - but it's happening very quickly.

After a cozy stint with a massively successful home console in the Wii, the shareholders aren't accustomed to not making rapid headway. The Wii U's slow and not so steady rise is making them nervous. The ripples of new strategy that extend from the center (creative/executive/marketing) take time to reach - and convert - these shareholders.

Thus, during rapid recovery efforts (responding to a changing market) we get bizarre Nintendo investor questions. Especially from those who have a large stake but are not on the same page, in terms of esoteric game industry stuff.


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