Tell us about the download distribution business status of WiiWare and Virtual Console. Please also briefly explain the business model of download distribution and existing packaged software as they must have different business structures and profitability scales.
Iwata:
The total sales for the fiscal year just ended from Virtual Console and WiiWare, whose service started near the end of the term and were very limited in sales, was 7.8 billion yen. I really cannot tell how this past year sales will evolve in the future. I personally feel that they have the potential to explode sometime in the future, but it is rather difficult to predict when the tipping point will happen. Since there are no inventory risks for WiiWare and Virtual Console, I believe that the business efficiency will get better as soon as the services gain momentum.
For your information, the business relationships between us and software manufacturers for Virtual Console and WiiWare are very different. As for Virtual Console, Nintendo manages the process to make third party software ready for the download sales at Nintendos own business risks. This is because when we started the service, the future prospect of download sales on Wii hardware was totally unknown. Since Nintendo is shouldering a large portion of the business risks, we are also receiving proportionally larger margins.
In case of WiiWare, all the development risks are absorbed by our software manufacturers. They shoulder the development risks for themselves, they submit the software to the rating board for the appropriate rating to be determined, and they handle their marketing. Accordingly, the software makers margins are bigger. We are not in a position to disclose the margins as part of the contracts, but I just wanted to bring up this clear difference between Virtual Console and WiiWare.