It's now been over a month since Nintendo and DeNA announced their major corporate partnership, with one relatively short presentation blowing away the big N's apparent reticence and minimalist approach to bringing games to smart devices. The announcement brought a marked shift in strategy - we went from expecting a Mii-based app that would encourage people to buy Nintendo systems to a deal that will bring us multiple Nintendo games on phones and tablets. No IP is off the table, and it'll be fascinating to see what the partnership with DeNA will yield.
It's no secret that a number of investors and shareholders had been wishing for Nintendo to take the leap into smart devices for some time - though the iOS and Android markets (in particular) are growing in the West, revenues have been especially buoyant in Japan. Square Enix, Capcom, Sega, Level-5 and more developers and publishers in the country have been aggressively expanding their offerings on these platforms, and a number of people felt that Nintendo was lagging behind.
The announcement had a predictable side-effect, then, as Nintendo and DeNA share prices skyrocketed on the Tokyo Stock exchange. Though still well down on the glory days of the Wii and DS, Nintendo suddenly saw its company value jump by a reported $6 billion in just a couple of days. This is off the back of an investor's presentation and mere potential, remember, not any firm details.
You can see the extent of this jump below, but what intrigued us today - yes, your humble writer's rather nerdy about these things - is the fact that Nintendo's share value has actually held up while also slowly increasing further. You can see the monthly graph showing that slow climb, and the yearly line that shows a sharp jump that accompanied the DeNA reveal - all data via Bloomberg.
While we're hardly stock market experts here at Nintendo Life, we're a little surprised that the price hasn't started to fall away a little, settling on a more modest increase. Nintendo did, after all, reveal very little beyond the fact it's bringing games to mobile platforms, and the consensus within the financial media was that boosts in share price were more about DeNA than the early announcement of the 'NX' platform. With so little said, what exactly is breeding this investor confidence?
There were voices of caution shortly after this spike, reflecting the reality that bold ambitions for smart devices don't always easily convert into handsome profits. Published a month ago on Bloomberg, some investors were urging caution. Hideki Yasuda, a Tokyo-based analyst at Ace Research Institute, said the following:
This is an extremely difficult market that calls for a very different business mode. Investors' expectations for massive short-term profits are causing the shares to overheat.
Similar warnings came from SMBC Nikko's Maeda.
Whenever there is a surprise announcement, the valuations tend to stretch a bit. At this point, it's too difficult to tell if people's expectations are overshooting or this could really help take profit beyond 100 billion yen in the next two to three years.
Of course, Nintendo and DeNA are talking up their prospects, with DeNA talking about potential revenue of around $25 million a month. Yet we're dealing in so many unknowns; will Nintendo be able to sustain its existing console businesses to the levels needed, and will it even successfully monetise smart device apps and games? We mentioned a number of companies in this article's opening that have gone big on mobile, but results are often mixed. The iOS and Android markets are so crowded, with prices that have raced to the bottom, that an app needs to go viral to make serious money. Of course Nintendo can achieve this, but other huge brands have expected levels of success that have proven to be fleeting or non-existent. Smart devices are truly a Wild West of unpredictability.
Yet, despite the lack of detail and such uncertainties, we haven't seen Nintendo's share value settle down to nearer its pre-DeNA level. While that's a positive for Satoru Iwata and his management colleagues, it brings pressure - the company is clearly expected to move towards 'Nintendo-level' profits. In other words, profits that prompt images of happy investors rolling around in mounds of cash, or diving into a sea of golden coins in true DuckTales style. Until the 3DS and then the Wii U era, Nintendo was wallowing in more cash every year; clearly, some want a return to days that, if not quite that grand, will nevertheless boost some bank balances.
With that in mind, Nintendo's upcoming end-of-year financial reports will be absolutely fascinating - no, really, they will. We'll gain a sense of how much money Nintendo thinks it can make in the next year, with smart device revenues no doubt playing a part. They'll also tell us much about the ambitions for Wii U and 3DS. Last May we wondered how on Earth Nintendo planned to shift 12 million 3DS systems based on the trends of the time - yes, it'll miss those targets, but it pointed to the fact that the New Nintendo 3DS was coming, even if we were all oblivious. There'll be plenty of clues to consider in Nintendo's projections.
As a result we'll gain a sense of the company's confidence in upcoming smart device content. We've been told to expect multiple arrivals in 2015, so we're no longer gazing into a distant future; in the next eight months we should have played Nintendo's first smart device games and / or general apps, while we'll have a cross-platform Club Nintendo replacement to ponder. It's exciting but also a little daunting.
Based on steady trading of the past month, those with money to invest clearly believe Nintendo has good times coming. We'll see how that optimism holds after Nintendo's annual financial reports on 7th May; the perspective you hold today is somewhat a matter of faith. Your glass is either half-full and you believe investors know a good thing when they see it, or there could be concerns that - not for the first time in recent years - Nintendo could set bold goals and fall short.
No pressure, Iwata-san.
Comments 32
Exciting times, indeed. I think the stock price may have been lower specifically BECAUSE Nintendo had no plans to expand into smart phones. Now that they do have those plans, more investors are interested in the company's future propsects, prompting a more extended raise in price.
Buy the rumour, sell the news. May 8th will be a better indicator.
But until then, go for it Nintendo.
https://www.youtube.com/watch?v=r5KeGccP9Jk
The stock market seems to love web and mobile stuff. (Huge valuations for companies that are not and have not ever made any money).
The iOS / Android markets are crowded for companies without a known IP. (Sega / Square Enix etc usually have a few in the top paid sections).
Square Enix charges more than VC for the better old games. (That model must be viable or they wouldn't keep using it).
The stock is going to drop the second they see the games that are released. People are expecting them to release a full fledged Pokemon game or something, but that's not going to happen. They are going to be simple money grabbing mobile games with Nintendos face on it. Just used to advertise their actual console hardware.
I'm quite confident Nintendo are going to make huge amounts of money with these mobile games. Figures rivalling the Wii and DS era of 'printing money'. Just look at how much money is being made in that market. The one risk is, that nobody notices your game, but the big companies like Nintendo don't even have that problem.
Is that success good though? Despite what some would love to believe, Nintendo are in this for the money. That's their number one priority. When they can have a handful of guys churn out a game in months or even weeks and have it pull in more than their 3DS and Wii U games that they've spent 2 or 3 years paying huge teams to make... what do you think they're going to do? A lot of people are holding onto the hope that they'll use the mobile money to fund console games, but it doesn't work like that. A company doesn't make money to spend it like you or I.
I'll be curious to see how this play out. As a purely anecdotal story my eight y/o nephew got an iPod touch for his birthday to play games on instead of always using my sisters phone. It will be interesting to see if Nintendo's offerings will appeal to him since he just plays free to play. No in-app purchases for him .
I want to see a WarioWare game developed for mobile. I think that could be really interesting, even if most of the minigames (or should I say microgames?) are based on the gyro and touch controls.
As I said before as long as they keep making consoles.
@Peach64 Sure Nintendo is in it for the money but Nintendo likes to make money with a certain quality of games. They only need to look to the west and see how being solely in it for the money will bring, like Activision or EA and Ubisoft. They all chose quantity over quality and brought the biggest failures of game history. It's a fine line they are going to walk trough a treacherous bog.
I always hope for the best with Nintendo but they have made silly? mistakes in the past.
@khululy "They only need to look to the west and see how being solely in it for the money will bring, like Activision or EA and Ubisoft. They all chose quantity over quality and brought the biggest failures of game history."
What? This couldn't be further from the truth. Your opinion maybe, but nothing near the truth.
@gatorboi352 I don't know, this was a pretty big fail:
I hope E3 will bring us first glimpse of some of their mobile endeavours. Morbidly curious on that front.
@Peach64 Your comments regarding Nintendo being just another cold corporate entity striking at only the richest vain, strike no balance. You're talking about the company that still produces hanafuda cards. I don't believe Nintendo would accept losses in producing console experiences, but I do believe there is some flexibility with modest profits to preserve a more traditional and core experience for its still profitable fan base which includes its own passionate staff.
To continue: I mean, just look at the 3D Classics project from Sega and M2 for 3DS. A company already earning probably more from its most popular Sonic mobile app than those re-releases. That is a passion project for M2 while also being given the go ahead with the expectation of modest profits for each party involved.
Cash spin is pretty common for most businesses, so in many ways, they probably WILL use at least a fraction of the funds they make on mobile to do their console games. Of course, what percentage that is is anyone's guess, but it'll still help for a short amount of time. I say that because people will see Nintendo games on mobile and feel they have no incentive to buy its consoles. I disagree with the notion of Nintendo going mobile, and will happily avoid those games, I refuse to encourage that move.
@DarthNocturnal
Agree 100%. I do have some reserved confidence in DeNa. Record Keeper is pretty sweet for a free to play game and if they do premium games I imagine the quality is going to be a big thing. I can't see Nintendo allowing their brand to be tarnished by cookie cutter mobile games with pallette swaps of their characters. But who knows I could be 100% wrong.
@IronMan28 - So which version of SSB didnt sell b/c people bought it on the other console? Last I checked both MK7 and MK8 sold fairly well.
You say you will avoid the app games? Well so will many other gamers. Know who will play the app games? The 90 million people who bought the Wii but not the Wii U.
The 10 million people who bought a Wii U will buy an NX for Smask, Kart and Zelda. I cant imagine the Nintendo fan base, which seems like all Nintendo has left anyway, abandoning Nintendo hardward just to play a Mario endless runner.
Nintendo has already launched an wireless pokemon in Japan with Pokemon Crystal version. It was an service that allowed people to trade and play against each other via their cell phones but never was brought to the United States. pieces of the code are in the game but never used in the west at all.
The way I see things is that Nintendo will probably do the same exact thing and have some sorta thing that works with cell phones but never ever abandon the consoles.
Why? Without the consoles Nintendo can never release HD or 3d or even 2d type stuff at all to the market.
More importantly all my GCN games for example would be valuless to own if such thing was to occur. Just having an machine around is good enough.
I'm more interested in what the next club Nintendo will look like.
This is some birdman logic at best, this isn't going to spell success in any stretch of the imagination. The cellphone gaming market is overbloated, it'll over-inflate and then collapse in on.
It is over saturated with garbage free games that people would rather download, low tier games that took a weekend to make with cellphone games made by big companies getting lost and making almost no money.
I've seen this happen to other companies that though cellphone gaming was where the money was at, they invested all sorts of cash into it and fell flat on their faces.
If Nintendo and DeNA make it work, kudos to them.
Personally, I don't have much investment in mobile gaming because my phone is an older smartphone, so it likely wouldn't be able to run any of Nintendo's offerings as it doesn't run other companies games very well.
I'll continue to support Nintendo by buying their games and consoles as long as they're still top quality.
@rjejr
"So which version of SSB didnt sell b/c people bought it on the other console? Last I checked both MK7 and MK8 sold fairly well."
Fair point, but I was more getting at Nintendo not using that money to fund development of games, handheld and console, in the long term. Hopefully, they do use that money and hopefully new entries in storied franchises do not take sales from their "dedicated games devices," which you seem to believe. I hope I'm wrong with my assumption about this meaning the end for Nintendo consoles, but I do see that happening with moves like acquiring stock in DeNa.
"You say you will avoid the app games? Well so will many other gamers. Know who will play the app games? The 90 million people who bought the Wii but not the Wii U."
True, and that's perfectly okay in my book. I'm not trying to say I'm the most important customer in the world, but I ain't partaking in the mobile festivities. And yes, I do buy many games on mobile. Additionally, I don't think it'll help those who bought Wii U very much. I wish it would, but how Nintendo spins cash earned from apps will be interesting. An unfortunate, but a likely scenario is they use the cash from apps to make more apps and not so much on making games for handhelds or their home console, I hope I'm very wrong with this. Let me put it this way, as a Wii U owner, I don't feel good about this move.
" I cant imagine the Nintendo fan base, which seems like all Nintendo has left anyway, abandoning Nintendo hardward just to play a Mario endless runner."
Err, that isn't what I was trying to say. I was saying there are non-Nintendo hardware owners who want Nintendo games on other consoles and they'll be the ones who will buy Nintendo games on mobile and avoid Nintendo consoles with even more fervor. Nintendo sees the demand is there, and people who actually want the hardware will be left in the dust. That's just how I think it'll end up playing out, then my decision to stick with Nintendo devices as my main consoles will end up being made for me. By that, I mean the choice to buy their consoles won't exist anymore if the situation occurs how I think it will.
We already have examples of smart phone like Nintendo games.Pokemon Shuffle, Pokemon Rumble World,Rusty's Real Deal Baseball, and Steel Diver Sub Wars.Those should give us some thing to base our guesses on.
I just want to hear about the new loyalty program. It is likely they will save that for E3 though.
I can only hope that they make games that fit into the touch screen and don't use virtual pads to move in platformers and such.
If you read more about the stock market, the mobile and social media/tech industries are in a gigantic bubble right now and all investors are throwing money at almost any app idea that could be the next instagram or Facebook. This is almost a carry over of that. But I have faith in Nintendo. This ain't no Candy Crush Saga one hit wonder game maker.
I'm very interested in the 'complimentary applications' Nintendo and DeNA develop for smart phones. I am ECSTATIC for their inter-functionality with either Wii U/3DS or NX whatever that may be. I personal enjoy and entertain the idea of small experiences benefiting my more desired sit down experiences at home on my couch.
Ok, two things: one, the stock price had less lower lows on multiple timeframes. Any boost, like the one dena had, will look good to any technical analysis, which is a profitable way of timing the spike as technicalities will show a possibly healthy stock to invest in with nintendo within now and, say, 18 months. Combine this with the expected timing of announcements and you’ll see a very tactical timing in the reveal, also mappong out certain milestones in their timeline already: nx, mobile offshoots, e3 next year - they’re all on the charts.
Second, nintendo will probably not become a mobile only company even if the mobile divisions have gigantic, over the top success. Why? Simple market dynamics - nintendo needs a platform to control, which could be facilitated in external hardware even though the platform will be more software based, but most importantly, nintendo needs a premium market catalyst. Mobile only would hollow them out in time which is bad business altogether, and only makes sense to "american mentality” shareholders, as this reasoning is known in the market - profit and sales over investment and dynamics.
That doesn’t mean nintendo will never drop out of dedicated game machines, but it does mean nintendo will probably never drop out of dedicated gaming hardware. So the worst you could get is a smart device from any manufacturer that only allows nintendo games to be played when you link a proprietary nintendo controller, for instance. But that concept would be pushing it for nintendo with the market it is in and the position it has.
Whatever hardware, a nintendo platform is going to be a reality one way or the other, while premium quality gaming experiences will always be facilitated because they need either that to be the business or that to be the catalyst. It’s not rocket science, and Iwata is doing an excellent job in managing this to be honest.
I get the feeling the market is expecting fully blown Nintendo games on mobile, however I don't think this will be the case. More like bite-sized games that include Nintendo's IP.
Could be wrong of course!
If this were another company, I'd be excited. Since it's Nintendo, meh: we'll see what comes of it. This should be a big move, full of exciting possibilities. But this is the Iwata-led Nintendo: over-promise, under-deliver as well as confusing, perplexing, backwards decisions. I'm a Nintendo fan but... we'll see.
@IceClimbers why? Cause ever reviewer and critique says so. Maybe they make a new IP based on WarioWare stlye gameplay. Maybe the make a mobile Nintendo land as those games are Tablet based. I see Pikmin coming out as one of the first titles next to Animal Crossing and A smash bros. Mobile App.
@IronMan28 - OK, think I got it. The shrinking Nintedo fanbase won't spend as much money on hardware and software as the non-Nintendo fans do on it's app games, slowly steering Nintendo in that direction more and more, until that's all Nintendo is. Can't argue w/ that scenario, seems likely, inevitable even. Guess I just hope it takes long enough that my kids and I no longer care when the end comes.
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