Interview with Nintendo’s U.S. President: Strong Future Ahead for Wii

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The WSJ (subscription required) has a great interview with Reginald Fils-Aime, president and CEO of Nintendo’s U.S. division. The conversation gets into the Wii’s expanded audience and whether the Nintendo console is a novelty that will eventually fall behind. Fils-Aime holds his own pretty well and lets the facts speak for themselves while avoiding direct bashing of other consoles:

WSJ: What’s the best illustration of how Nintendo has managed to expand the gamer audience?

Mr. Fils-Aime: In my view, what’s happening in Wii households. The reason I believe that’s most compelling is today Wii is still hard to get. Largely it’s still those core gamers who are waiting in line and doing all the work to find the system.

What those data show are, once it’s in the household, everyone is picking up the Wii remote. That’s what our strategy is all about. That’s why we have Wii Sports packed in. That’s why we have the Forecast Channel, the News Channel. It really is to motivate that nongame player to be comfortable with the Wii remote and use it.

WSJ: Does that mean you will sell more games than you did for past systems, or will you sell a comparable number of games that are simply used by a broader audience within the household?

Mr. Fils-Aime: First, we’re going to sell more systems. In the past, the consumer that would have looked at this and said “it’s not for me” is now finding experiences that give them enjoyment. The second piece is we will sell more software — not just us, but third parties as well that create content for this expanded audience.

WSJ: You said independent, third-party publishers have collectively sold more games for Wii than Nintendo. Have any of these companies topped a million units sold with any of their individual titles?

Mr. Fils-Aime: They have not, but a number have reached or are about to reach the half million mark. Ubisoft has two titles that are awfully close. EA has done very well with Madden and Tiger Woods. Activision has done very well.

We focus on this because there’s a historical view that third-party licensees cannot make money on Nintendo platforms, and it’s just false. Today, third parties are doing extremely well both on Wii and DS. That’s why they’re devoting more and more of their own development resources against these two platforms.

WSJ: Some game executives have told me Nintendo historically charged game publishers a higher royalty rate to make titles for Nintendo consoles than rivals, which crimped publishers’ profits. And Nintendo executives have said publishers in the past put their second-string development teams on Nintendo projects. Is this why most companies have been less successful with Nintendo games than they have with titles for other hardware?

Mr. Fils-Aime: I think our licensing structure is very comparable and competitive with what other platform holders do. That is not the issue. While in the past development teams may not have been up to par, I certainly believe that’s changing. When you have Disney or EA creating dedicated centers of excellence on our platforms… the game creation and game content will only get better.

When you have such a strong publisher as Nintendo, third parties may have looked at our platforms and said, “It’s tough to compete.” But that paradigm has really been broken as key licensees create content that competes just as effectively as Nintendo-published content does. Again, I point to Ubisoft. During the launch window [for Wii], Ubisoft was selling not too many less games than we were from a Nintendo first-party perspective. That’s staggering. That’s because they made a commitment to the platform.

WSJ: Do you foresee a day when third-party publishers beat out Nintendo for the first-place position for Wii game sales?

Mr. Fils-Aime: I think it’s certainly doable. I think some of the content here is quite provocative. Boogie from EA is quite provocative. I love the support we’re getting from 2K games and their sports franchise. Activision with Guitar Hero — when that comes out on Wii I think that has the potential to become the top-selling game across the industry.

WSJ: Are people today buying the Wii as an impulse purchase because it’s relatively inexpensive compared with other systems, and when the price comes down on the PlayStation 3 they’ll buy that console?

Mr. Fils-Aime: What I know is Wii is outselling PS3 right now 3-to-1. Wii is right now outselling Xbox 360 at a pace of 2-to-1. When I do that math, and analysts have, there will be a crossover point when the Wii is the top-selling system, first, world-wide and then, secondly, here in the United States [on a cumulative basis]. If I’m a competitive platform holder I have to be concerned. The data certainly suggest it’s not some fringe buying the Wii and it is a much more massive consumer group that represents the core and the expanded audience.

WSJ: When do you think that crossover point might be — this year?

Mr. Fils-Aime: On a U.S. basis, we have sold through roughly 2.5 million Wiis… On a pace of 2-to-1 [compared with Xbox 360 sales], that inflection point certainly happens this year, if not next.

WSJ: The Wii remains very difficult to find in stores. Why in May of 2007 — more than a half-year after Nintendo introduced the Wii — are there not a few more Wiis on store shelves?

Mr. Fils-Aime: It’s consumer demand. The issue is not a production issue. We’re producing north of a million a month. It’s that demand is so unprecedented at this point in time six months after launch.

WSJ: Sony has said that the PS3 is a technology that’s future-proof because of its powerful microprocessor and high-definition disc format. In a couple years, is there a possibility the Wii will start looking a little creaky in comparison to the PS3, and Nintendo will be left in the dust?

Mr. Fils-Aime: I guess when you’re not doing well you have to grasp at something. From our perspective, this industry is about entertainment and it’s about driving a consumer interface and engagement with content. That’s why people want to play games. From that standpoint, our strategy is certainly working and we believe it’s going to work into the future. What that future is going to look like and what’s the content — stay tuned.

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