Pokemon GO

When Pokémon GO launched last week it prompted a climb in Nintendo's share value, which was unsurprising considering its high profile status. Yet as the days have progressed the app has gone viral in many ways, and the stock market in Japan has reacted accordingly.

At the close of the Tokyo exchange on 11th July Nintendo's share value recorded a staggering 24.52% increase, settling on 20,260 Yen; that's the highest value since 29th October 2015. As you can see below, the climb has been significant since GO arrived in Japan (where it has since been removed), Australia, New Zealand and the US.

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The impact of Pokémon GO is evident in this chart of share prices over the past month

Analysts are also queuing up to share their perspectives on its early success. Serkan Toto, founder of consultant Kantan Games Inc. and a familiar name here on Nintendo Life, is quoted as follows on Bloomberg.

This is some Nintendo magic. It's the first time a mobile game has created a buzz like this at least in the U.S. This is basically what Nintendo is all about.

When I ask my friends in the industry if they can remember another occasion when a mobile game shot up to the number one grossing position that quickly, no one can remember another case like this.

Amir Anvarzadeh, manager of Japanese equity sales at BGC Partners Inc, said the following in a note to clients.

Clearly Nintendo has managed to pull off something very special that has created a craze in the mobile-gaming market in a matter of days. This game may not be big enough to move the earnings dial in the short term, but sentiment-wise it could prove very potent at this stage for Nintendo when hopes of major success on mobile have been very deflated since last year.

Nintendo's history is peppered with big comebacks, when all seems lost and we have much respect for its developers to argue with these early signs of Pokemon euphoria. Although the game is free to download, it looks well structured to potentially monetize on its early success through in-app purchases.

Though analysts typically tie the success of Pokémon Go to Nintendo as a business, it's important to remember that Nintendo is one of multiple investors behind developer Niantic, with others including The Pokémon Company and Google. Even with its shares in The Pokémon Company, profits for Nintendo from GO - despite its impressive performance in being a top-performing grossing app - are unlikely to be game changing. They are, however, a pointer to the potential of smart device apps on the company's bottom line. Macquarie Capital Securities Analyst David Gibson has said that the most popular Pokemon GO item in Australia is currently $0.99 worth of in-game currency, meaning the game's App Store ranking "is being driven not by big spenders but by a large number of users."

As users build their Pokemon inventory, spending money becomes needed to store, train, hatch, and battle.

We presume that out of every 100 units earned at the App Store, 30 would go to Apple, 30 to [software developer] Niantic, 30 to Pokemon and 10 to Nintendo. Hence, we don't think Nintendo will earn much directly from the game. However, Nintendo will earn income from its equity-accounted income of owning 33 percent of Pokemon Company.

Deutsche Bank AG Analyst Han Joon Kim is glowing in his assessment, admitting that while Pokémon GO may not be a huge earner for Nintendo it can be a "leadoff hitter" in a "transitional/watershed year" for the company.

Pokemon Go has gone beyond success to become a phenomenon, topping the revenue grossing charts in the three regions into which it has been launched: the U.S., Australia and New Zealand.

If nothing else, Pokemon Go has shown that there are 'dormant' Nintendo fans eager to trial its content for smartphones. By the fall, Nintendo expects to bring proven content, such as Animal Crossing and Fire Emblem — and the blend of strong IP, Nintendo's distribution power and proven content could lead to financial success .

All told there's a lot of excitement about the impact that success on mobile can have for Nintendo on a financial and brand awareness level. While Pokémon GO seems to have hit upon a perfect storm of IP and demand, there's certainly plenty of potential for the likes of Animal Crossing and Fire Emblem to also achieve success in the future.

[source bloomberg.com]