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Viral success of 'Pokémon Go' could be a turning point for Nintendo


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Viral success of 'Pokémon Go' could be a turning point for Nintendo

Thesuccessful leveraging of a much beloved IP to a viral hit with the new game"Pokémon Go" could prompt Nintendo to make other popular charactersavailable for mobile platforms.

While some industry observers believe Pokémon Go is on trackto out-earn every other mobile game on the market, Nintendo itself does notfully own either the brand or the game, meaning only a fraction of the revenueswill reach the console maker. Still, the game's success likely cementsNintendo's recent embrace of a mobile strategy.

After decades of restricting its IP to Nintendo hardware,the Japanese gaming giant in early 2015 announced an about-face with a new planfor mobile gaming. Its first app for iOS and Android devices,"Miitomo," quickly reached No. 1 in app stores, but that successpales in comparison with the popularity of Pokémon Go. The new game, releasedin the U.S., Australia and New Zealand on July 6, shot to the top of both iOSand Android charts in 24 hours, and within a week saw its daily usage numbersexceed those of Snapchat, Tinder, andInstagram.

Developedby Niantic, a startup that spun off from Alphabet Inc.'s Google last year, Pokémon Go uses asmartphone's GPS to guide its players, called Pokémon trainers, to real-lifelocations to track and capture virtual creatures that can be seen through theplayer's smartphone camera. Trainers can travel to locations designated aslandmarks called "PokéStops," where various items can be collected,and "Gyms," where Pokémon can fight rivals for control of the area.

SNL Image
Augmented reality smartphone game "Pokémon Go"
Source: Niantic/The Pokémon Company

Peter Warman, CEO and co-founder of games market researchcompany Newzoo, said that while the Pokémon brand ensured a built-in audiencefor the "Go" app, the social aspects of the game — with playersroaming around their neighborhoods, catching Pokémon together and sharing gameimage snaps and stories online — is what made Pokémon Go a viral hit.

"It's completely geared towards the content-firstgeneration who wants to create and share all day long," Warman said."The marketing of the game by its users is at the very core of theconcept. It suits the interests of a wide variety of people — from avid Pokémonfans and collectors to people who just want to share something fun."

Nintendo's market value on July 19 climbed above $39 billionin Tokyo, putting the company ahead of Sony Corp. On July 15, the company traded ¥476 billion($4.5 billion) worth of shares, the biggest turnover for any company in theTokyo index this century. Earlier, on July 11, Nintendo saw its highest one-daysurge since 1983, with shares climbing 24.52% to ¥20,260 ($193).

"The stock is climbing so high not because of the gameitself but because of two things that it proves," Warman said."Firstly, it shows that Nintendo is seriously opening up to the largestgames segment in the world. Secondly, it illustrates the power of Nintendofranchises, ensuring tens of millions of downloads in the first weeks purelybecause people are curious and/or have affinity with the brand."    

Nintendo already is planning to release two new smartphonegame titles based on the popular "Fire Emblem" and "AnimalCrossing" franchises via a partnership it struck with Japanese mobile gamemaker DeNA.

SuperData Research CEO Joost van Dreunen believes that thecurrent momentum of Pokémon Go and the game's apparent impact on Nintendo'sstock is likely to influence the company's mobile strategy going forward.

"Nintendo has been undervalued for a while now becauseof disappointing Wii U sales," van Dreunen said in an interview. "Tosome degree this recent jump in share price was a necessary market correction.Perhaps it will also advance Nintendo's strategic roadmap and lead to therelease of other well-known Nintendo properties on the mobile market."

Ray Anderson, CEO of app store carrier billing platformBango, agreed that Nintendo could transition more of its franchises to mobile.He pointed to how the company earlier took Mario, originally a character in a"Donkey Kong" game, and propelled him into an iconic franchise of hisown.

"I think they're just scratching the surface now withwhat they can do with their franchises on mobile," Anderson said."They could introduce more of their characters into augmented reality, andI bet they will evolve into the virtual reality world in due course as well."

Although Niantic has not officially disclosed how much moneyit has made from Pokécoin — virtual currency players can buy and trade forin-game perks — SuperData Research estimated that Pokémon Go generated $14.04million across mobile platforms in about five days' time. That would put itahead of other mobile titles based on the franchise, such as "PokémonShuffle Mobile," which earned an estimated $14.03 million since itsrelease in August 2015. Bango expects Pokémon Go to rake in "tens ofbillions of dollars" in the long run.

Besides in-game purchases, Pokémon Go stands to make a significantamount of money from partnering with businesses eager to cash in on the craze,noted Bango's Anderson. A restaurant could ask to sign up as the location of arare Pokémon or PokéStop, for example, attracting players who could then turnout to be paying customers.

"I don't see why 'Pokémon Go' can't make more thanevery other mobile game has made put together," Anderson said. "In asense, what they've done is built an entirely new world, and the possibilitiesto generate additional revenue within a world are plentiful."

It remains to be seen how much of this money winds up withNintendo. The company does not fully own the Pokémon franchise, but holds a 32%share in The Pokémon Co., whose co-owners also include Japanese companies GameFreak and Creatures. Moreover, while mobile gamemaker Niantic both Nintendo and ThePokémon Co. among its investors, it remains more closely tied to Google, Warmannoted.

"Nintendo probably gets a premium cut of up to a thirdof revenues coming into Niantic," Warman said. "This would mean thatNintendo gets just short of 25% of what consumers spend in the app."