Pokemon Go and Nintendo’s Future

Pokemon Go and Nintendo’s Future

What can we say about Pokemon Go that hasn’t already said? Where do we start? You only need to walk around Sydney to see that everybody is currently gripped with Pokemon fever (including the RetailOasis office). But before we talk about Pokemon Go, it’s probably worth looking at the history of the Pokemon brand and at the past decade’s performance of Nintendo to see why this story is so interesting.


Nintendo have notably had a few bad years, both across their home and handheld consoles. Their last few home consoles (especially the most current, the Wii U) have underperformed – both financially and critically. Despite the initial hype and success around the Wii in 2006, sales declined as they were overtaken by stronger more powerful competitor home consoles Sony Playstation and Microsoft Xbox. 
Whilst Nintendo have traditionally been a dominate player in the handhold gaming industry (Nintendo 3DS), sales have sharply tapered off over the past few years as gamers moved to cheaper and quicker mobile gaming on their smartphones.


Until recently this trend looked like it was going to continue. At the recent E3 conference in Los Angeles (the biggest video gaming conference in the world), Nintendo’s up-coming release schedule was considered lacklustre by many in the industry and was easily eclipsed by the likes of the big boys Sony and Microsoft. 
What has helped support Nintendo however has been their underlying exclusive software (and the fans who support this). Nintendo have a number of strong software franchises such as Mario and Zelda, which are arguably considered some of the most recognisable in the gaming industry. The Pokemon franchise was first launched on the Nintendo Game Boy back in 1998 to much initial fanfare (and controversy at the time – specifically around exposing children to animated violence). Pokemon has always been a success for Nintendo, although probably wasn’t supported as well as their other gaming franchises.


The recent move across to mobile gaming is actually quite big for those who follow the performance of Nintendo. It’s the first time (that we’re at least aware of), that Nintendo have released one of their major franchises on a hardware device not created by Nintendo. And the strategy looks like it has paid off. It’s still early days, but Nintendo’s share price has jumped over 50% since Pokemon Go has been released. Although it’s interesting to note that not all of the revenue from the app is attributable to Nintendo, with revenue expected to be split across Apple, Google and it’s creator Niantic.


Pokemon Go is free to pay, however users can make “micro” transactions anywhere from $1 to over $150. Whilst these transactions aren’t necessary to play the game, to speed up your progress in the game players will need to purchase. It’s here where the game makes money. Currently analysts are predicting that the game is making in excess of $2 million revenue per day from these transactions, making it the most profitable mobile game in history (the record was previously held by Candy Crush). It’s still early days for the app as well, expect as players begin to progress and want to ‘catch em all’ these instances of micro transactions will increase into the future. And not to mention all the additional sales of related Pokemon licensed merchandise in stores.


Currently the game has only limited release in Australia, New Zealand and North America. The game has been that much of a success that Niantic have held off from releasing it to other countries until server issues can be fixed. The game originated from Japan and is a distinctly Japanese phenomenon, however the game hasn’t even been released in Japan (we’re guessing because of the massive demand they’re expected to place on the server). When it does we expect revenue to increase substantially. And few haven’t even talked about the monetary potential of the real-time GPS database of players the company now has access too or additional advertising opportunities that could be placed within game.


Many businesses have also taped into the phenomenon to get customers in-store, offering mobile phone charging stations for players and providing lures (think of it as bait for Pokemon) to drive consumers in store. Our favourite though would have to be a few savvy real estate agents, listing a property’s proximity to certain Pokemon as a selling point. Yes, we are not joking…


On initial observation Nintendo’s move to mobile cross platform gaming has been a huge success; the key for Nintendo is to now maintain this momentum. However
 we can’t help but wonder whether the strategy risks the potential cannibalization of their existing handheld offering. And whilst Pokemon Go’s gameplay transfers well across the medium of mobile, when rolling out their mobile strategy across other software franchises it is questionable whether they’ll have the same success. Would a Mario game work as well in augmented reality?


Is Pokemon Go a fad? Probably. But there’s no denying that it has helped push Nintendo and mobile gaming into a new era.

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