Nintendo’s market capitalisation surged by more than $7bn on Monday as investors continue to translate the white-hot popularity of Pokémon Go into a massive bet on the Japanese company’s future in smartphone games.

Some have dubbed the game the potential saviour of a company that has been the clear loser to Sony in the latest generation of console wars. It may not make Nintendo much cash, say analysts, but it shines a spotlight on a market the Kyoto-based company is better positioned than its competitors to dominate.

After gaining 9 per cent on Friday, shares in Nintendo leapt 25 per cent on Monday on the heels of an unusually energetic weekend for hundreds of thousands of gamers, and a frenzy of activity that kept Pokémon Go at the top of the highest-grossing charts in the US for a third day running.

The game, in which smartphone users physically seek out and collect a pantheon of virtual monsters around real-world locations, has topped the “most downloaded” charts for both the Android and Apple app stores faster than any other game in history. Nintendo’s market value now stands at ¥2.9tn ($28bn).

Analysts at Jefferies, eyeing those numbers and referring to a previous Nintendo favourite — and one of the best-selling video game titles of all time — described Pokémon Go as “like Wii Fit, but more addictive”.

And, as with Wii Fit, Nintendo is once again pioneering a crossover between online games and physical exertion. Rivals have tried with much less success, and analysts say Pokémon Go is a reminder that Nintendo holds some of the most valuable character intellectual property in the world.

The presence of games guru Shigeru Miyamoto — the brains behind Mario, Zelda and other Nintendo blockbusters — at the Pokémon Go announcement event last September added to the sense that conservative Nintendo has finally embraced the smartphone as a legitimate medium for its genius.

“Nintendo is not the main developer of Pokémon Go, but seeing Miyamoto there indicates that he was part of the process of setting the tone. That is much more important than it sounds, and . . . a big part of Pokémon Go’s success,” says Serkan Toto, a Tokyo-based games industry consultant.

Analysts predict an even greater surge in usage as summer holidays make their mark, but they note the early Pokémon Go numbers suggest the game is a hit with both children and adults. Its wild success in the US has sharpened the focus on how the game will perform in Japan — a smartphone games market that, according to Yano Research, still surpasses China as the most valuable in the world with annual sales of around $9bn.

The speculation now is that Pokémon Go will launch in Japan on July 16 to coincide with the three-day holiday weekend.

Pokemon Go is displayed on a cell phone in Los Angeles on Friday, July 8, 2016. Just days after being made available in the U.S., the mobile game Pokemon Go has jumped to become the top-grossing app in the App Store. And players have reported wiping out in a variety of ways as they wander the real world, eyes glued to their smartphone screens, in search of digital monsters. (AP Photo/Richard Vogel)
Pokémon GO © AP

“Last Friday’s jump in the shares was about Pokémon Go hitting the number one position in the US. On Monday, people have woken up and realised that it is going to be number one in Japan too and what a significant impact that could have on earnings,” says David Gibson, an analyst at Macquarie Securities. “Added to that is people now revising up their expectations for the other five games Nintendo has said it is going to have on the smartphones by next March.”

Social media has exploded with stories and commentary about Pokémon Go’s qualities and quirks. Many users have posted images of the elusive Pokémon turning up in unusual or embarrassing contexts, while others have griped that it has made their legs ache from unfamiliar amounts of walking.

Still, the financial impact of Pokémon Go is more difficult to calculate in spite of Nintendo’s rocketing share price.

“The most-downloaded charts are good, but what the industry really cares about is the grossing charts and the fact that this has been well monetised, and that all the buzz we are seeing around the game is actually making money,” says Mr Toto.

Pokémon Go was produced jointly with US-based Niantic, a developer in which Nintendo invested $30m last year and which has scored a huge hit in Japan with another “augmented reality” game called Ingress. That game has allowed Niantic to pioneer a variety of tie-ups with convenience stores and banks that coax Ingress players to those locations: the potential for similar marketing deals with Pokémon Go, say analysts, is huge.

Analysts at Macquarie calculate that Nintendo’s investment in Niantic means it is making about 10 per cent of the Apple and Android store revenues churned out by Pokémon Go. Nintendo also holds a 33 per cent stake in the Pokémon Company, which receives about 30 per cent of the game’s revenues.

Assuming Pokémon Go generates monthly gross revenue of ¥10bn, JPMorgan analysts calculate the game would boost Nintendo’s annual profits by less than ¥10bn.

Morgan Stanley says the game would need to reach a minimum monthly turnover of ¥15bn-¥20bn or more to have a meaningful impact on Nintendo’s final earnings.

But the bet being placed by the market is on the potential future of smartphone outings for Mario, Zelda and other Nintendo characters.

“This has been a reminder that Nintendo is sitting on some incredibly powerful intellectual property. Given that strength, we have been saying for a while that, in the longer term, the best relationship might be some sort of joint projects between Nintendo and Disney,” says Macquarie’s Mr Gibson.

Fickle fads: four crazes and how they fared

Tamagotchi: Before there were smartphones, there were not-so-smart digital pets cared for in a computer the size and shape of an egg. The animals needed to be fed and kept happy or risk premature death. Bandai, the company behind the original Tamagotchi, has revived it as a standalone device and an app for iPhone and Apple Watch.

Beanie babies: Made by Ty Inc, these super-soft cuddly toys proliferated in bedrooms, car boot sales and even auctions in the 1990s. As toys were sometimes suddenly retired, collecting rare versions became a craze as people dreamt of owning a million -dollar teddy. The ‘boom’ lasted from 1996 to 1999, when Ty said all beanie babies would be retired.

Candy Crush Saga: The online chase for sweets busied fingers on smartphones and tablets across the world, with 93m people playing every day by the end of 2013. It also contributed 78 per cent of revenues for owners King Digital Entertainment, prompting fears that it would flail as the band of Candy Crushers dwindled. King was bought by Activision Blizzard for $5.9bn last year.

Draw Something: Zynga, the online game maker most famous for the purple cows of FarmVille on Facebook, bet $200m that Draw Something would become its next big hit. Zynga acquired OMGPOP, maker of the Pictionary-style app, after it saw instant success, with 35m downloads in the first six weeks. But it ended up writing down OMGPOP’s value by $90m six months later, as Draw Something’s popularity faded.

Additional reporting by Hannah Kuchler in London and Kana Inagaki in Tokyo

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