In just over a week, the smartphone game “Pokemon Go” has become a giant hit, turning millions of people around the world into monster hunters.
Given the game’s promising start, investors are taking another look at Nintendo Co., whose value has shot up by about ¥1.5 trillion since “Pokemon Go” was released on July 6 in the United States, Australia and New Zealand.
Nintendo had been struggling in recent years as people shifted to playing games on smartphones rather than home or hand-held consoles, and the Kyoto-based game innovator was reluctant to enter the field. But last year, Nintendo finally announced it would jump into the smartphone fray.
In that sense, some may wonder whether the early success of “Pokemon Go” is a prelude to Nintendo’s return to the top of the video game heap. But it’s not that simple.
Analysts said the frenzy does not necessarily promise a bright future because the game was not directly developed by Nintendo, which also means its contribution to earnings also will remain unclear.
“Pokemon Go” is a GPS-based game that allows players to capture augmented-reality Pokemon monsters that appear on their smartphone cameras when they are walking around in their real-world surroundings.
“I think the success of ‘Pokemon Go’ doesn’t mean that Nintendo’s smartphone games from now on will also be popular, or that the company has gained the know-how for making smartphone games,” said Shinichi Mizuno, chief analyst at SMBC Friend Research Center.
This is because “Pokemon Go” was mainly developed by U.S.-based Niantic Inc., a Google spinoff, and The Pokemon Company. Nintendo’s role was just to create a special watch-type device that works with the game, not the game itself.
The location-based elements are critical to the game, and Niantic had a big role in development because it developed “Ingress,” another popular GPS-based game.
It is unlikely that Nintendo’s development team is learning anything about how to make smartphone games from this business, Mizuno said.
The Pokemon Company is a Tokyo-based firm that manages Pokemon-related businesses and is 32 percent owned by Nintendo, which has a stake in Niantic as well.
When it comes to making its own smartphone games, Nintendo is collaborating with Tokyo-based mobile game maker DeNA Co. Their first game, Miitomo, was released in March with two more titles planned for release this fall.
Although “Pokemon Go” may not help Nintendo learn the myriad tips needed to make smartphone games, it has at least proved that its characters still appeal to the smartphone crowd, Mizuno said.
“There is no doubt about that,” he said.
Also, the fact that Nintendo shares have been rising shows expectations are high among investors who are hoping Nintendo will make further inroads into the smartphone game market.
Yet Akira Morita, chief researcher at Kyokuto Securities Research Institute, said he is still unsure how serious Nintendo is about the smartphone game business.
Nintendo’s primary strategy is still based on its game consoles, so “I don’t think Nintendo is that focused about making profits from smartphone games,” said Morita.
Nintendo was reluctant to enter the smartphone market because its business model is based on letting people play for free but charging if they want to advance quickly or acquire their favorite characters. This type of business model is often said to be problematic because it stimulates a gambling spirit among players and prompts some of them to shell out big money to stay ahead of the serious players.
Analysts aren’t sure how much “Pokemon Go” will boost Nintendo’s profit margin, but they do say the game needs to earn well to have a major impact.
“Pokemon Go” is free to play but makes use of a virtual currency called Pokecoins, which players can use to buy items usable in the game. The coins can be obtained by playing the game but can also be purchased at an in-app store with credit cards or gift cards.
SuperData, a U.S.-based video game market researcher, said Monday that “Pokemon Go” racked up sales of $14 million in just four days — a staggering figure compared with “Ingress,” which took 940 days just to reach $1 million.
But since the game is being sold on the Google and Apple app platforms, 30 percent of the revenue is diverted to those firms.
Details on how Niantic, The Pokemon Company and Nintendo will split the remainder remain unclear, which makes it difficult to predict what “Pokemon Go” will do for Nintendo’s earnings, analysts said.
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