Like so many others, I have spent my share of time walking around like a mindless zombie hunting Pokémon with my cell phone this summer. The game was an instant hit with both gamers, being the fastest growing mobile game of all time as well as with investors as Nintendo stock leaped 25 percent at release.
The enthusiasm was fueled by projected revenues from in-game transactions as well as the belief that the release of one of Nintendo’s strongest franchises on smartphones marks a new era for the company.
However, the financial optimism was short-lived, as investors soon realized that the development of Pokémon Go was done by as a joint venture between Niantic and The Pokémon Company. Even though Nintendo is a shareholder in both companies, the estimated effective economic stake is only 13 percent. Combined with decreased revenues and weak YTD sales numbers for both the Wii U and the 3DS, the stock dropped 18 percent in a day. But, despite disappointing quarterly results, the stock is still up almost 50 percent YTD.
Is this wishful thinking from Nintendo fans with money to invest, or will Nintendo be able to bounce back again?
In order to look at this, it might be a good idea to just exclude Pokemon Go as a standalone game from the equation, as one mobile game alone will not be sufficient to generate sustainable revenues. Nintendo has announced a wearable accessory to the game that will retail at $34,99, but this will not be available until September. The life-cycle for mobile games is becoming shorter, and Pokemon Go has already reached its user plateau.
Nintendo is well known for creating strong franchises based on its IP and has announced two Pokémon games for the 3DS this fall. Even though sales of the 3DS is on the decline, Nintendo has amassed an installed base of 60 million units. Some interesting metrics to observe for an indication on cross-platform synergies would be how many copies of Pokémon Sun and Moon that will sell in 2016, as well as whether 3DS sales will rise again as Pokémon as a franchise gains new popularity.
If this is Nintendo’s strategy, it makes sense that both Animal Crossing and Fire Emblem will launch as free-to-play mobile games later this year, with four more titles scheduled for 2016. Are Nintendo’s mobile games just a part of a cross-platform franchise strategy? It is also confirmed that the Nintendo NX will be a hybrid between a traditional home console and portable gaming machine. This is a bold move by Nintendo that will make the console stand out something completely different from the PS4 or Xbox One.
Nintendo is also seeking to cash in on nostalgia by releasing the NES Classic, which will definitely become a hit with everyone who grew up with Nintendos classic games. I’m getting one for sure!
Nintendo is a fascinating company that has been a creative force in the gaming industry for decades. But in order to stay creative, you should expect some failures along the way. Nintendo has created legendary game franchises like Super Mario Bros, The Legend of Zelda, Metroid and many more, as well as ushering in many of todays industry standards like rumble controls and analogue sticks. But in order to stay creative there must be an acceptance for failure, and Nintendo excels at creating spectacular failures like the Robotic Operating Buddy, the NES Power Glove or The Virtual Boy.
Even though millions of gamers is running around outside hunting Pokémon, it isn’t the first time Nintendo got gamers out of the lounge chair. Ten years ago Nintendo got us out of the couch to play Wii Sports in our living room, but the motion control hype died off and now seems more like a one trick pony. Regardless of whether AR is the new motion control, Nintendo need to capture a new generation of fans in order to stay in the spotlight. So far it looks like they are doing a fairly good job this round.