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Pokémon Go’s success adds $7.5 billion to Nintendo’s market value

Nintendo’s stock continues to skyrocket following the release of Pokémon Go. After an increase of 9.3 percent with the game’s launch last week, the company’s share price rose 24.52 percent on Monday to ¥20,260 ($ 193) — its highest one-day surge since 1983, adding $ 7.5 billion to the firm’s market value. The game has topped app download charts in the US, Australia, and New Zealand, and according to some market researchers, has already been installed on 5 percent of all Android smartphones in America.

That’s a pretty substantial win for Nintendo, but it’s worth remembering that the game is not solely made and overseen by the Japanese gaming company. The app is created by Niantic, an augmented reality game maker spun off from Google in October 2015, and it was built in collaboration with the Pokémon Company. Nintendo is an investor in both Niantic and the Pokémon Company (which receives around 30 percent of Pokémon Go‘s revenue, says The Financial Times), but the app is free to download, with Nintendo’s revenue generated by in-game microtransactions.

According to one equity analyst, Pokémon Go will need to create around $ 140 million to $ 196 million in turnover each month to have a significant impact on Nintendo’s profits. Mia Nagasaka of Morgan Stanley told CNBC that Pokémon Go is estimated to have made $ 3.9 million to $ 4.9 million on its first day of release, suggesting that the game will need to keep near the top of the app charts pretty consistently to be a signifiant earner. Revenue can come through microtransactions, but also marketing tie-ins — drawing users to businesses with the release of location-specific pokémon, for example.

Whether the current interest in Pokémon Go is sustainable then, is the key question. Bloomberg‘s Tim Culpan has drawn comparisons between the game’s release and the launch of the Nintendo Wii in 2007, with the latter helping the company’s stock price soar to heights of ¥67,600 before falling back to more normal levels two years later. The release of a new hardware ecosystem is going to sustain growth for longer, though, and Culpan adds that a better comparison might be mobile hits such as Words With Friends, which go viral for a few weeks before users lose interest.

Pokémon Go certainly has potential. It’s part of one of the best-known and best-loved gaming franchises in the world, and its current popularity comes from a release in only three markets. (Launches in other countries, like the UK, have been “paused” as Niantic’s servers struggle to keep up with the game’s popularity.) The app’s current implementation is also fairly straightforward — there’s certainly room to create a richer, more engaging experience.

That said, Niantic’s inability to keep up with the game’s current influx of users isn’t encouraging. And although players are happy with the title now, if new features aren’t added, will many stick around in the coming weeks and months? Along with this year’s release of social app Miitomo, Pokémon Go is showing Nintendo the massive untapped potential of the mobile market, something it has avoided for years. More Nintendo mobile titles are slated for release later this year, but the company first needs to prove it can produce sustained interest — and profit.


  • Source: CNBC

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