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Nintendo's Iwata: Being first to market isn't important
Nintendo's Iwata: Being first to market isn't important Exclusive
July 20, 2012 | By Chris Morris




Microsoft's one-year head start on Sony this generation is often cited as one of the reasons the Xbox 360 has established such a dominant lead over the PlayStation 3.

By that logic, the Wii U should be in a good position for the next generation, given it will have at least one year to build an installed base before it has to worry about competition for other console makers. Satoru Iwata, Nintendo's global president, however, isn't a big believer in that theory. First to market, he says, might be a nice bragging right, but in terms of the bottom-line, it's relatively meaningless.

"Being first in the next generation race is not important at all," he tells Gamasutra. "One of the reasons we believe this is the time for Nintendo to launch the Wii U is it's going to be important for the world."

That's a big, some might say haughty claim, but Iwata explains the rationale behind it.

When the Wii launched, HD TVs were hardly commonplace, something that has changed today. In the interim, though, the second screen has become a force to deal with.

Apple's iPads, and other tablets, are expensive, though – and the Wii U offers an alternative. In addition, Iwata doesn't believe people who have bought a high definition television in the past few years are likely to buy a replacement model for five years or so.

There's a lot of pressure on the Wii U. Nintendo recently reported the first corporate loss in the company's history as a publicly traded firm. Iwata says he does not expect that to be repeated next year.

"Our intention is to return to profitability after just one year of losing money," he says. "I just cannot say that it's a good thing for Nintendo at all to record an annual loss for two or more years in a row. … The [loss of the] past year is due to the 3DS hardware sales. We were selling hardware below the cost, so this year we are already recovering and improving the profitability of the 3DS."

(Iwata says Nintendo is still losing money on 3DS hardware, but that will change "in the very near future … based up on where we are today in terms of our schedule to return to profitability.")

While Nintendo hasn't announced pricing or a launch date for the Wii U, Iwata says the company learned a lot with the launch of the 3DS handheld system, on which it was forced to slash prices just months after the system launched in the U.S. due to poor sales.

"The pricing of Wii U is going to be one of the most important elements when it is going to be launched," he says. "The environment is different. Wii U is going to be launching in a different environment than when the Wii was launched. Also, the involvement surrounding [mobile and social] businesses is different than several years ago."

As for the struggling Wii, don't expect it to go away forever when the Wii U hits shelves later this year. Iwata says that although Nintendo's focus will have shifted, he recognizes there will still be a market for the device.

While doubters have long since declared it dead, he still sees a lot of money left in the system – in both international markets and domestic.

Speaking of dead, don't think Iwata hasn't heard the catcalls about the Wii U simply matching the power of the Xbox 360 or PS3. And he's certainly heard the grumbles of forum dwellers that believe Nintendo should give up and begin licensing its games.

They're annoying, but Iwata points out that Nintendo has been dealing with premature obituaries for years.

"Even when we were going to launch the Wii system, there were a lot of voices saying 'Nintendo should stop making hardware'," he says. "The reasoning behind that was Nintendo would not have any chance against Microsoft and Sony. The fact of the matter was: I did not think Nintendo should compete against these companies with the same message and same entertainment options for people.

"We have not changed our strategy. In other words, we just do not care what kind of 'more beef' console Microsoft and Sony might produce in 2013. Our focus is on how we can make our new console different than [others]."


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Comments


Francisco Javier Espejo Gargallo
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I think that the Blue Ocean strategy worked nicely for Nintendo these last years. Instead of following tendencies, they just created new ones. Now, with 3DS and WiiU, they're adapting to what's hot on the industry now, and that's why they're not going to be as successful as they've been with Nintendo DS and Wii.

Nicholas MacDonald
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I'm not sure that analysis takes into consideration how forward thinking the Wii U might actually be. There aren't any dedicated second screen devices out there now, only a smattering of do it yourself solutions such as Airplay, or just connecting an HDMI cable. Even then those instances really only offer screen extension, rather than truly dual screen play.

Mike Griffin
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The key difference, of course, lies in the fact that the second screen device is included with the primary output-to-TV device.

As opposed to, let's say, declaring that Sony has a "second screen" device for its PS3 in the PS Vita, or Microsoft soon having hundreds of millions of second screen devices using SmartGlass.

Those represent additional, accessory purchases. Optional interfacing and gameplay for a developer. Not a second screen device shipped with every console.

The Wii U's portable second screen seems like a natural progression for Nintendo, a company that has been at the forefront of mainstream portable gaming since 1989 with the Gameboy. A company whose profits have largely been secured via a successful portable device strategy, buffering them through the highs and lows with their home consoles for decades.

So in that sense, the Wii U's GamePad concept likely won't come as a shock to casual mainstream buyers. Even if they don't quite grasp the gameplay permutations and functionality at first glance, they know Nintendo has been pumping out quality little portable gaming devices for over 20 years. "It must be cool, they're good at this."

As usual, it will come down to the games.

David Holmin
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The Wii U is different in that it's extremely versatile. Proper button set, motion controls, DS-like dual screens and touch pad. It's entirely up to the developer what can be done, and it's all out of the box. I'm not convinced it will be as huge a commercial success as Wii, but personally I find it more interesting.

Leon T
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They can still be as successful without being Blue Ocean. The 3DS, while not Blue Ocean, is really in a space by itself. There is no other 3D dedicate gaming device with a touch screen on the market. The problem for it is that the 3D feature only appeals to a niche audience and the game library has no new breakout mainstream games. There are just sequels to 2 mega selling DS games so far with NSMB2 making #3.

Plus we don't know if Nintendo will move back to the Blue Ocean strategy with the Wii U yet. They really haven't shown the direction the console will take.

David Serrano
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@ Leon Terry

"we don't know if Nintendo will move back to the Blue Ocean strategy with the Wii U yet."

Nintendo's BOS for the Wii was low end hardware disruption combined with new market disruption with the games. The Wii U seems to be the next phase of a low end disruption model... to target the next level of consumers with innovation of the lower end hardware: "Once the disruptor has gained a foothold in this customer segment, it seeks to improve its profit margin. To get higher profit margins, the disruptor needs to enter the segment where the customer is willing to pay a little more for higher quality. To ensure this quality in its product, the disruptor needs to innovate."

So the next phase should be to expand the audience by targeting consumers who are willing to pay a little more... which would logically make the target audience for the Wii U mid-core and core (non-hardcore) players. But as Mike Griffin notes it will come down to the games, and this is why the launch titles are so frigging confusing. It's a mishmash of casual, core and hardcore titles which only adds to the confusion.

Ian Uniacke
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"There is no other 3D dedicate gaming device with a touch screen on the market. The problem for it is that the 3D feature only appeals to a niche audience and the game library has no new breakout mainstream games."

I'm not sure you understand what the blue ocean strategy is. What you have said here describes the blue ocean strategy EXACTLY.

Benjamin Quintero
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The one crippling factor that Nintendo has to deal with is that this will be the first console they develop where the hardware was built without a design in mind. The second screen idea was more of a backlash against the iPad, but Nintendo itself hasn't proven that they even understand why they chose to go with the screened controller.

If Nintendo can overcome this hurdle then they will probably have another run-away success. I keep looking at this console, wanting to like it. I keep looking for a reason to drop out of the arms race that Microsoft and Sony are having, but if this console ships at a premium price and with lackluster games there isn't much that will save it from another 3DS fiasco.

Merc Hoffner
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Err, 2nd screen a backlash? iPad release: 2010. DS release: 2004

One might equally counter-argue that after the explosive success of the DS in driving a second wave of portable touchscreen devices (remember the collapse of those compaq presarios?), Apple took a page out of Nintendo's book. Obviously they didn't - it was designed in isolation - I think that's certainly the case here - they've gone on record as much.

Sometimes coincidences happen. It's hardly even what I'd call a coincidence; it's more a convergent evolution. It was obvious that the future lay in more direct control of what's happening on the screen, both on the part of the platform maker and the gamer.

As for the 3DS 'fiasco', well Nintendo learnt and adapted with the price point more quickly than any platform holder I've seen: quicker even than the $600 PS3 debacle. Nintendo paid attention and said that the same miscalculation has been taken into account for Wii-U - I'm betting it'll be on the more affordable side, but we'll see. One thing we do know: By composing their systems out of affordable parts, Nintendo has much more room to price maneuver than any of their competitors.

Giro Maioriello
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@Merc
'By composing their systems out of affordable parts, Nintendo has much more room to price maneuver than any of their competitors.'

Exactly, I have to wonder how much 'wiggle' room Sony have to cut the PSV price if they feel the need to.

Nicholas MacDonald
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I think that we quickly forget that Nintendo has been trying for a long time now to get Wii U functionality in the living room. Many consoles have at least had a limited version of add-on screen functionality (Dreamcast comes to mind). More specifically, the GBA-GCN games like Four Swords and Crystal Chronicles are early examples of Wii U styled play.

The Wii U's release timing has some influence by the iPad of course, but I think it's inaccurate to think that Nintendo just churned this out on a whim because of Apple.

Raymond Grier
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Cameron might be onto something with his economic theory. A year or two from now it might a lot harder to get people to buy anything but Nintendo's product will be well into production, have made money and be gaining an audience. The other 2 companies may have to take their biggest price hits ever, maybe they should hold off a few years.

Will Oberleitner
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Some how I just fall in love with Iwata every public message. I anticipate american style "ignore the problem tout the success" messages. Reggie of Nintendo of America is more keen to that tune. Iwata comes across somewhat more earnest and transparent. He has to be we all know the problems and if he did not address them we would continue to speculate failure. I really wish Iwata was on stage at e3 instead of Reggie, as a ninetendo fan we do not want to be patronized...

Cary Chichester
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I thought the main point behind the layout of the Pro controller and the specs matching the 360 and PS3 was to bring back the third-party developers that had since abandoned the Wii. One of the reasons those developers left in the first place was because of the Wii lacking beef, but Nintendo still says that beef isn't something they care about, so what's to stop the same thing from happening again? I don't know how much longer Nintendo can keep doing its own thing and expecting others to follow.

Merc Hoffner
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I don't know how long 3rd parties can keep sustaining growing dev costs. Nintendo's now given 3rd parties an 'out' for the cost spiral 2 generations in a row. Last time they said no to the Wii; result? Catastrophic industry wide losses and collapse, while Nintendo made more profits than ever. I bet that Nintendo bets they won't do that again - and if they do then it's their own funeral.

How long can Nintendo sustain themselves without real 3rd party support? Well, given the financial sustainability of the N64, Gamecube, Wii, and even to some extent the GBA and DS, I'd say the answer is indefinitely. Of course, no-one's disagreeing they'd stand a much better chance With the industry's backing than without.

Cary Chichester
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I think XBLA and PSN—excluding certification costs—have been a great option for console titles without high dev costs. Not only will Nintendo have to worry about these marketplaces, but also a likely surge of future F2P console games and a new challenger in the form of the OUYA. They may have a history of success, but the battleground isn't what it used to be. War has changed.

Gern Blanston
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Cary-

"I don't know how much longer Nintendo can keep doing its own thing and expecting others to follow."

Nintendo always does their own thing, and the other companies generally follow suit. So I suppose they'll continue on their own path as long as they're able to stay in the gaming business. Why would they stop doing their own thing at this point? Nintendo was solely responsible for the new wave of motion gaming, and will soon be responsible for dual-screen gaming on the TV. They are continuing to blaze a new trail, regardless of who likes it or not.

"One of the reasons those developers left in the first place was because of the Wii lacking beef"

This is true, and the Wii had hardware that made it impossible for developers to do proper ports for multi-platorm games. That's why instead of Tony Hawk's Project 8, Activision had to make Tony Hawk's Downhill Slope for the Wii... and there are countless other examples just like that one. The difference this time around, though, is that Nintendo is not using technologies that are comparable to that. Porting games from even next-gen systems shouldn't be nearly as much of an issue. Sure, the Wii U's CPU is quite weak, but at least it will be possible for devs to make proper versions of their games on it for its entire lifespan.

-----------------------------

Merc-

"Last time they said no to the Wii; result? Catastrophic industry wide losses and collapse, while Nintendo made more profits than ever."

That is a bit misleading. After all, the majority 3rd party games on the Wii did not sell well. Nintendo's profits were due almost entirely to their own hardware/software initiatives. I feel that many of the financial losses of third parties were not just from higher production costs, but because there was no inexpensive outlet (other than PC) where their games could be more visible to the public. The Wii ended up a 'Nintendo Machine', with very few 3rd party games selling even close to as much as 1st party ones. Looking at the software attachment tells us everything we need to know. Point being, the Wii was just as developer unfriendly as the HD twins, only in different ways. The financial losses taken this gen had equal amounts to do with each of the big 3.

----------------------------------

On the topic of being first to market, I would like to say that being first to the market means more than Iwata realizes (or will admit). Nintendo will be setting trends for this coming generation, and the other companies will be following suit (whether they'll admit it or not). As long as they can dominate the market through fall of 2013, this slight head-start will be doing them immeasurable good. Even if they're sales aren't record-breaking, just seeing them on top of the market sets the consumer tone. The longer the other two companies wait, the more consumers will see the Wii U as the only next-gen console. Only good can come from them being early at this point.

Cordero W
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If you seriously think that any of the big companies are worried about the small markets of XBLA, PSN, or even that joke of a console OUYA, then you're not being realistic. The times are still the same when it comes to the game industry. Even now, the only thing that is happening is that some old, unadaptable companies are falling while new ones take their place. In the next few years, we'll have the new EA (which is likely Zynga at this point), a new Capcom, a new whatever. And the cycle will just repeat itself with people saying "indie games are the future!"

We're just going through a cooldown period right now, that's all, as the industry tries to balance development times and costs. Soon, everyone will find their comfy spot and return to churning out games ala "PS2 era speed style." F2P is just a a moment's amusement.

Merc Hoffner
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@ Gern

That's a bit disingenuous, and again calls into question the chicken or egg argument. Did 3rd party games fail on the Wii because it was the Wii, or did 3rd party games fail because there were no 3rd party games, and of what was there, there was little investment (and more controversially did 3rd party games ACTUALLY fail to sell)

I like to use the argument of reasonable expectation of success, for which I propose 3 criteria - necessary for you to have a reasonable as opposed to unreasonable expectation of success:

1) The game must be pretty good.
2) The game must exist in a reasonably non-niche genre
3) The game must be very well marketed or be a mainline part of a successful franchise or both.

Can we agree these are reasonable criteria? Now can we name some 3rd party Wii games which met these and sold poorly? No? Now can we name some HD games which met these and failed? Yes?

I think given the striking level of non-investment from 3rd parties, the Wii was incredibly successful: Just ask Ubisoft: one of the few who put ANYTHING on the Wii AND one of the few who saw some profits this gen. Honestly, can we blame a console for losses on which you DIDN'T put your games? I remember one financial statement from EA which did exactly that: They attributed losses in the hundred's of millions on failed sales of their core Wii games. But they spent less money on core Wii game(s) than they lost. How does that work?

When talking risk/reward one must consider the cost of failure as well as the profits of success: Failed Wii game? Lose $5 million, try again. Failed HD game? File for bankruptcy just like Grin. At 1/3 the dev cost you can make 3 games for the same money - therefore success vs failure becomes much less stochastic and your situation becomes much more adaptive. Given what I'd call a certain risk (through testing) of MS/Sony platforms and an 'uncertain' risk (through lack of testing) of Nintendo platforms, choosing to not even give it a go in the next gen would be, well, irresponsible. But if studios want to gamble +$400 million on the next Red Dead and cut out a possible market they're free to.

Chris MacDonald
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Third parties have left the Wii in droves because as soon as word let loose regarding the Wii U much of our sales dried up. Right now we in fact sell very few units of Wii titles compared to 360 and PS3. At the moment, even those are starting to get sluggish due to the rumors circulating about 2014/2015 launches for new Microsoft and Sony consoles.

Carlo Delallana
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First loss as a publicly traded company? That's almost 25+ years? Pretty good track record.

Curtis Turner - IceIYIaN
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Doesn't make any business sense when people ask Nintendo to leave the hardware market. If anything, all the companies should exit everything and make Computers and Windows games!

The only thing stopping Nintendo from doing quite a bit of damage at the end of the year is Microsoft with Windows 8, Surface

Chris MacDonald
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I really want to be excited for the Wii U, but I just can't muster it up. The tablet controller adds some interesting gameplay possibilities, and I'm eager to play games that make unique use of it. However, I still don't feel like I've gotten $400 of use out my PS3, $250 from my 360, or $150 from my Wii. I haven't seen the latest price figures, but that last I saw had the Wii U being between $250-400. How fragile are the controller screens and how much will those things cost to replace? $50? $100? Fiscally, I just don't see myself buying one anytime soon until they have some really awesome exclusives.

In addition, I'm not looking forward to developing for a third platform again. For the next couple years, the Wii U won't be a huge strain on third party developers due to similarities between hardware. Unfortunately, in a few years it will be the fish out of water as we begin developing next gen Direct X 11.1/12 quality experiences.

Leon T
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The Wii U is going to be interesting to watch. I'll either buy one or get it as a gift when it launches. I am ready for new hardware now. I've heard kids talking about it and sounding excited so I think it will have an okay launch at least. It still fits as the family/party console and is starting out with better third party support than the Wii did.

I do wonder how much a factor the backwards compatibility, NSMB U, and Wii Fit U games will play. If Nintendo does everything right I can see them selling between 12-20 million in the first year. It can reach 10-12 million as long as NSMB U and/or WiiFit U can mover hardware still. It will only reach 20 million if Nintendoland is actually a mega hit along with NSMB U and Wii Fit U. I don't think any third party title announced so far is a system seller on the same level as those titles.

Nintendo really needs to get the price right. I think over $300 will be too much, but I can see them hitting $350.

Daniel Martinez
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The following statements are in respect to hardcore gamers:

My favorite quote came from a high-ranking Microsoft official (I think it was Bill Gates at the time) in a video game magazine saying: "They (Sony) have a Ferrari, we have a Ferrari. Except our Ferrari is leaving the starting line sooner than theirs is, and in a race that's a good thing." I'd say Microsoft has a Ferrari, and Sony has a Speed 12. Eventually the Speed 12 will overtake the Ferrari with its sheer power and then the Ferrari will just have to wait for it to break down at some point (PSN hacking) and gradually overtake it.

The flawed logic with thinking of it as a race is: there's no guarantee you will capture the majority of the market just because you are the first to launch. Consumers (especially in this industry) have fierce brand loyalty. I mean look at Nintendo Vs. Sega of the early 1990's as another example. Consumers oftentimes go for what they perceive to be the "best" and if feedback from peers is any indicator, the reason they are now playing Xbox 360 is because, when compared to Sony's Playstation Network, Xbox Live has "the best" online experience, even if you do have to pay for it.

For casual gamers: marketing and simplicity seem to do the trick (Apple anyone?).

Merc Hoffner
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Been fond of Ferrari analogies for a long time. Try this oldy: Sony and Microsoft launch: "We'll sell you a Ferrari for $100,000! That's a steal. You'd be stupid not to buy it!"
Great deal, yeah, but I don't have $100,000. And I need fuel economy. I think I'll get a Ford.

justin revell
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The only reason to buy the Wii U is to play Mario and Zelda. I find it very sad that Nintendo puts no effort into new IP's. I don't think lightning will strike twice for the Wii the gimmick has worn off. Plus if the 360 and PS3 drop to 200bucks or under why would I buy a less superior game console for more.

Cordero W
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"I find it very sad that Nintendo puts no effort into new IP's. I don't think lightning will strike twice for the Wii the gimmick has worn off. "

What's a gimmick? And there are new ips. There's other games other than Mario and Zelda that comes from Nintendo and other devs who develop for it. But you're confusing ip with gameplay. They deliver the same ip, but "different" gameplay. And it continues to work because their ips are that flexible. AND they continue to innovate and go outside the box. So what, you just want a different skin and the same ole same ole?

Ole Berg Leren
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I am Ole, and I find this offensive.

Merc Hoffner
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To name some from this gen: Wii Sports, Wii Fit, Animal Crossing (more or less), Professor Layton, Brain Training, Nintendogs, Ouendan etc. Not only new IP, but often genre defining, or even genre originating games. Compare to say, Resistance Fall of man: a WWII/SciFi FPS (generic concept much?) or say even the new Playstation All Stars Battle Royal (homage at best?).

"Nintendo doesn't make new IP" only works if you choose to ignore all their new successful IP - something only 'real' gamers do. I'll concede Nintendo's not shown something for Wii-U with that same spark - yet - but I have confidence, based on a real track record.

Jeremy Alessi
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Miyamoto once said something like this:

"People will only remember if a game was good or bad, not whether it was late to market."

Anyone assuming (comments above) that there is some sort of race going on are mistaken. There's no race, there's only the delivery of quality entertainment.

Toby Grierson
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I've only ever seen a first-to-market disadvantage.

The Dreamcast was too early and Sega wound up framing itself as a competitor to the Nintendo 64.

That worked OK for about a year or two, then competitors showed up with something like 5 to 10X the performance. Same porting issues as with the Wii & others but without anything particular special like the Wii's motion controls.

And the mass market just kind of forgot about it in the face of the X-Box, PS2 & Cube match up.

So a large gap can mean you don't qualify as "next-gen".

The Wii U can repeat this if it sells itself as graphics supreme two years before Microsoft and Sony bring it out. You can see this probably already in people suggesting it's a catch-up to the five year old X-Box and Playstation. But if the controller is special enough and the graphics meta-narrative weakened enough, it won't be so bad to be first.

In any case, this is the first time Nintendo broke their 5-year cycle in a while; it is late. Microsoft and Sony, apparently, are going to be later.

This is newish and the game may be changing.


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