Nintendo’s (7974.JP) mobile gaming business has been playing second fiddle to Switch in recent months as the hit console powered shares of the Japanese gaming company to their highest level since 2008.
But Jefferies analyst Atul Goyal urges investors to pay close attention to mobile gaming as Nintendo is doubling down on the business and making prudent changes to its mobile game plan:
Learning from its experiences of the last 6 months, Nintendo mobile game plan is changing / evolving (and will continue to evolve over next 2-3 years as it learns more): While most of the investors (we met on a recent roadshow) believed that Nintendo is slowing down / dialing down on mobile games), our meeting with Nintendo management convinced us that Nintendo is all the more committed to mobile-games.
Six months back it had launched its first mobile game – (SMR) Super Mario Run with a Premium price model. That simply failed due to pricing model. And then it launched Fire Emblem with Freemium price model. That game did really well in the first month, but users used up all the content in less than a month. This was its first inning (out of 9). It is now working on more mobile games and addressing issues that it identified earlier (like pricing model or the depth of the game at initial launch). For its next game, Nintendo is working to make sure that the content is extensive enough at the starting point. We believe Nintendo’s mobile games will go from strength to strength.
A big test for Nintendo’s mobile gaming business is the relaunch of Pokemon Go.
With Pokémon Go, TPC (The Pokémon Company) and Niantic had a huge hit on their hands in July last year. But they also have taken time to evolve the game. It was relaunched last week. The latest update includes: 1) gym features significantly updated to add the all-new motivation system; 2) added new Gym Badge feature; 3) added Raid Battles, a new cooperative gameplay experience. It may not reach the viral proportions, but we recommend investors keep a close eye on the revenue rankings of this game to see how these companies are learning and evolving. It will be a huge mistake to write off Nintendo’s IP. That is the real value. That is the treasure trove.