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Wednesday, July 20, 2022

Nintendo Question & Answers: 82nd Annual General Meeting of Shareholders

By LUDWIG VON KOOPA - Telling you ahead of time... it's a mound of stupid and boring questions and answers.

My apologies for being over two weeks late on analysing the question and answer session at Nintendo Co. Ltd.'s 82nd Annual General Meeting of Shareholders. But there weren't much headlines out of it since it's kind of boring. (Also, I totally forgot it happened and to look for it, despite Nintendo scheduling these things long in advance. If I was an actual shareholder, they would've sent me a notification. But I'm not, so I didn't.) I'll try to at least write something brisk and interesting about each of the eleven questions so you won't fall asleep by the end of the article.

Question 1: How will these meetings happen going forward?

When you don't have anything interesting to ask at a meeting, ask about the mechanics of the meeting itself. Sheesh. Nintendo President Furukawa said that, due to the coronavirus and the increasing number of Nintendo shareholders, they might hold meetings virtually or with livestreams like other companies are doing. Nintendo might follow those other companies. Or they might not. Typical non-committal pointless answer. The actual meeting took place at Nintendo's Development Center in Kyoto, Japan (in the seventh floor conference room). Moving on...

Question 2: What's Nintendo's Business Continuity Plan?

Business Continuity Planning (BCP) is basically its own discipline, and an important one... that's usually overlooked and not discussed. Basically, how will the company continue to function after some kind of disastrous event? Like, what if a typhoon goes and destroys Nintendo's development headquarters? What does Nintendo do? It's a good question and I appreciate that someone's thinking about it.

Furukawa said that Nintendo does have one of these plans in the event of something like an earthquake or a highly contagious and dangerous disease. Furukawa (or whomever the current president will be) will make a committee and... then decide what to do. Well, that's not much of a pre-planned response. Still, Nintendo regularly backs up data for their in-development games (and presumably data of games already made) and stores that data in dispersed locations, so if one gets wrecked, others might be around and they can get back and running. Nintendo also has multiple contract manufacturers in case one manufacturer's facility is wrecked.

I'd like to hear more about Nintendo de-tangling itself from relying on China for its supply chain, in case of the plausible disastrous event of a war against China. Would Nintendo still be able to manufacture goods? But he didn't go into that.

Question 3: Will you make a new F-Zero game?

This is the question that actually did make some minor media buzz. Reportedly, this guy bought enough Nintendo stock that he could get a seat at the Q&A session JUST to ask this question about F-Zero. Obviously, Nintendo not producing any new F-Zero games for quite a long time allowed this guy to save up his money for a long time to be able to afford so much of this stock.

Furukawa said that Nintendo doesn't have the development capacity to make remakes or sequels to every intellectual property in their library, at least not all at once. Shinya Takahashi, Nintendo director, said that at the 79th Annual General Meeting of Shareholders in 2019 (and unfortunately, KoopaTV wasn't making these kinds of articles back in 2019), someone asked about the Famicom Detective Club series... and Nintendo WAS planning to remake those games. (And to this day I feel bad I haven't bought them.) But if Nintendo IS working on something, they wouldn't answer affirmatively if asked.

I'm pleased that Shigeru Miyamoto, despite being present, didn't chime in to spout his inconsistent diatribes against F-Zero.

Question 4: How will Nintendo improve working conditions for employees?

Nintendo allegedly encourages using paid vacation and flexible working schedules, as well as better benefits to temporary employees. Nintendo is also allowing for a “more flexible dress code” that's appropriate for their working environment. (So... programmers probably aren't wearing suits and ties.)

Shigeru Miyamoto chimed in, saying that the size of Nintendo's staff has increased by orders of magnitude since forty years ago, but Nintendo still feels that it's important that individuals are recognised and know how they're important to the overall company mission. He didn't go into specifics on how Nintendo fosters such an environment, just saying that Nintendo has a special “Nintendo DNA”, whatever that means. I'm not sure how familiar Miyamoto is on how employees at other companies work, since Miyamoto has been with Nintendo for really his whole professional career. It's not like he's worked at other places to know if Nintendo actually has a “unique workplace culture” or whatever. Every company claims to have the best culture. I'd think that Nintendo can get away with having a sub-optimal work environment because... hey, you're working at Nintendo. You should feel honoured just for the chance. And Nintendo as an employer can take advantage of that.

Question 5: What's going on in China? Is your information secure with them?

Here's the obligatory China question... though I did ask for China commentary earlier in this article. Furukawa said that Chinese customers are mostly fixated on mobile devices and computers, as opposed to dedicated gaming consoles. Once again, Furukawa cited Tencent saying Ring Fit Adventure is a strong performer.

I do like that the guy asked about hacking reports and information leaks coming out of China—foreign businesses really need to be careful of doing business in China, because they're scoundrels over there and will dishonourably screw you over for a quick yuan. Furukawa didn't go into any China-specific information security practices, which is probably a bad thing, but he cited that Nintendo employs “outside specialists” to look for security issues, and Nintendo “introduced the information security management system in 2017”, which makes me wonder what, if anything, Nintendo was doing for information security prior to 2017. With everyone on the Internet claiming to be a NINTENDO INSIDER with LEAKED INFORMATION (even if they're often fakes), if there are Nintendo employees or contractors or someone with access to valuable information, and they are telling the public (or telling other people who tell the public), Nintendo really needs to constrict how that information flows and fire and blacklist anyone who gives so much of a hint to these horrible individuals.

Question 6: Why isn't there a female Internal Director? How many women are managers at Nintendo?

Furukawa says that they nominate, promote, and hire people based on their own qualities and who would be best at the job, and their gender doesn't matter. Still, Nintendo does want to be welcoming towards women (unlike some other gaming companies), but that doesn't mean discriminating against men just because they're unlucky to be born that way. Furukawa actually answered the direct question on women managers and said that women account for 23.7% of management positions worldwide.

Question 7: I like quality stories in my mobile games. Will Nintendo do that for future mobile games?

The guy asking was talking about Fire Emblem Heroes, and I'm not sure that counts as a quality story. But it is more of an attempt at a story than Nintendo's other mobile games. Furukawa basically said that Nintendo's current mobile strategy is for things like Pikmin Bloom that can be enjoyed by non-gamers who don't care about stories or even the franchises the mobile games are allegedly based off of. ...So I don't think the guy who asked the question liked that answer. I don't, either. I also dispute that Pikmin Bloom is fun.

Question 8: Thoughts on Russia?

Nintendo currently isn't shipping any physical products to Russia, and the Russian eShop has been suspended. The financial results are immaterial because Russia never bought much Nintendo stuff anyway. Nintendo could possibly not sell things in Russia ever again.

Question 9: Why did inventories increase by 110 billion yen year-to-year?

Nintendo is hoarding raw materials before their supply becomes more limited and prices keep going up. Also, Japan has a new accounting standard. Previously, Nintendo could report that their inventory of raw materials goes down in-between when they give the materials to their manufacturing subcontractors to manufacture a Switch and when they purchase the Switch back from the subcontractors. The new standard says that they need to keep the inventory level the same because they're obligated to buy back the finished Switch, and instead their balance sheet has a debt to the subcontractor. Boring stuff, unless you're an accounting major (which probably means you're a boring person).

Question 10: How will Nintendo handle global currency inflation?

A weak Japanese yen currency has typically meant that foreign countries would have a cheaper time buying Japanese products, which should increase sales for Nintendo (especially since almost 80% of all of their sales are outside Japan—Nintendo knows this, so I don't like how people in discussion boards keep thinking that Nintendo ignores countries outside of Japan when making decisions). However, since Nintendo also uses yen to buy things overseas like raw materials, employees in countries with overseas subsidiaries, and other items, that cancels out some of the effect of the increased sales.

Furukawa cites that their European and American counterparts are complaining about how Euros and dollars keep becoming more and more worthless due to inflation, which makes actually living quite difficult when prices rises faster than your wage. This presents the possibility of people buying Nintendo products less, since it's not like you NEED Nintendo products to survive. Food, shelter, and medicine come first, and it's already pretty tough just to get those things. Furukawa did say that Nintendo currently doesn't have plans to change Switch prices.

Question 11: With stock buybacks and stock splits, what resulted in Nintendo's capital policy changing?

...It was a matter of... careful and deliberate discussion!

Stay tuned for Nintendo's 10 for 1 stock split effective October 1, 2022. That means that there will be ten times as many Nintendo shares trading, and each individual share should be at a fraction of the price they are now. (If you hold stock now, your count of stock will go up by ten times, so you shouldn't lose value as a result.) That means being a Nintendo shareholder will be more affordable, and that should attract more people to become shareholders. And maybe that will encourage a virtual meeting per question 1.

It's now the end of the article. You didn't fall asleep, did you? When you wake up, let KoopaTV know in the comments section about that. Not that more sleep is a bad thing, you know...

The questions asked at the 81st annual general meeting of shareholders were more interesting, as documented and analysed by KoopaTV last year.

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