Nintendo will have had few annual financial reports that attracted as much interest as this week's release, with key details on game release windows, E3, mobile plans and a launch window for NX all coming out. In general the response was a mix of understanding, surprise and disappointment, depending on the topic, and now the dust has settled we can see some initial fallout.
First of all, in the first full day's trading following the announcements Nintendo's share value took a hit of over 8%, falling to 15,155 Yen. You can see the scale of the drop below, and it's the lowest the value has been since the start of April.
Bloomberg focused on Nintendo's mobile announcements in its reaction piece, namely the confirmation that Animal Crossing and Fire Emblem will be heading to phones and tablets this Autumn / Fall. Hideki Yasuda, an analyst at Ace Research Institute in Tokyo, stated that the absence of Mario and Legend of Zelda in smartphone plans won't go down well with everyone.
Investors are not going to like. With the titles coming later in the year, earnings for the first half don't look so good. And people who expected NX to launch this year will also be disappointed.
It's also highlighted in that article, however, that Animal Crossing and Fire Emblem are franchises with notable strengths and target varied demographics. Pelham Smithers, from a London-based equity research firm, made the following point about the common sense in avoiding Mario for the time being.
If Mario is available on smartphones, then why buy into the closed world of Nintendo handheld gaming? Nintendo is going to delay releasing a Mario smartphone game until proven that it's the only way to monetize its key intellectual properties on mobile.
Gamesindustry.biz has also discussed key topics with industry analysts. IDC Research Director Lewis Ward, like many others, highlighted the Zelda Wii U delay as a tactical decision to push the focus onto NX.
It's a bit of a half-step approach, but it's understandable since Nintendo's console business has to be focused on making the NX a success at this point. The Wii U didn't meet expectations, and I don't blame Nintendo for shifting gears and trying to come as strongly out of the gate with NX as possible. Having a great Zelda title on day one will help.
Yes, the Wii U catalog is looking thin this holiday, but at this point I think Nintendo and everyone else can see the handwriting on the wall and it is pivoting towards whetting the appetite of its faithful fans for the NX.
SuperData's Joost van Dreunen echoed others in saying that these are challenging and slightly unpredictable times for the company. He's also made the key point, however, that Nintendo shouldn't be underestimated.
Historically, Nintendo has been in control of most of the value chain, integrating both hardware and software into a single ecosystem, but now that situation has changed. For one, digital distribution takes up almost one-fifth of software revenue (19%), and continues to grow year-over-year. In addition, its success with new revenue streams like the amiibo is growing, even as US sales for the toys-to-life category have started to flatten out. That provides necessary income in the midst of a volatile period, but it cannot cover the whole. Nintendo's international success - with Fire Emblem selling more outside of Japan (1.06M units compared to 780K) - has a greater exposure to currency fluctuations. And, finally, both of its key titles, Fire Emblem and Animal Crossing, were initially conceived as console titles but have found their greatest degree of success on handhelds.
It shows that the games industry is, in fact, so volatile that even a powerhouse like Nintendo is not impervious to it. Nintendo's current game plan is likely to provide enough runway to develop a full strategy and rollout that capitalises on the current market changes. The thing to remember about Nintendo is to never count it out.
Overall, the general narrative is certainly that 2016 is a tough year for Nintendo in the console space, but there's interest in the planned Animal Crossing and Fire Emblem smart device releases. There's also understandable uncertainty about the prospects for NX, but that's inevitable due to the fact that we know next to nothing about the system that's coming in March 2017. Outside of speculation and rumours there are no solid details.
How do you feel about these issues around mobile, NX and the Legend of Zelda delay? Sound off in the comments.