Pokémon Go Gives Big Boost to Nintendo

July 14, 2016

Since Pokémon Go’s launch last week, the mobile app has rapidly grown into a phenomenon with millions of wannabe Pokémasters around the world. In this “augmented reality” game, players literally roam streets, parks and landmarks on a search for the famed “pocket monsters” of the Japanese franchise. When one of these creatures appears on a user’s smartphone screen, they can then capture it to add to their collection. The ultimate goal for players is to abide by Pokémon’s longstanding slogan, “Gotta catch ‘em all.”

While all this may seem baffling to the uninitiated, millions of others have become transfixed by the app’s combination of real world exploration and simple smartphone game dynamics. In fact, for the past week nearly every social media platform has been flooded with chatter about Pokémon Go, a trend that has been picked up by media outlets worldwide. The explosion of interest has been a blessing for the game’s publisher Nintendo. For years the company steered clear of developing mobile games due to fears that they could tarnish the brand’s reputation and harm their bottom line. Those apprehensions have since flown out the window like an uncaged Pidgey: Nintendo’s stock price has surged in the last week and pushed its market capitalization to more than $30 billion.

This increased investor interest depends on the assumption that Nintendo will soon rake in heaps of profits from Pokémon Go. According to experts, however, it remains unclear exactly how much of the app’s revenue will flow to the Japanese company. Although Nintendo publishes  Go, the California firm Niantic developed and distributes the game. Like many startups the ownership of this company is undisclosed but Nintendo is reportedly a large investor. The situation becomes even murkier with the involvement of The Pokémon Company, a firm that controls merchandising for the franchise and lists itself as a “producer” of Pokémon Go. While Nintendo owns a 32 percent stake in The Pokémon Company, its unexplained association with the app makes it even more difficult to predict how profits will be distributed. For now, though, thanks to Pokémon Go Nintendo is worth $12 billion more than it was last week.

 

Questions:

  1. Will “augmented reality” games like Pokémon Go be the future of entertainment or just a fad?
  1. What could happen to Nintendo’s stock price and market valuation if its Pokémon Go profits appear lackluster to investors?

 

Source: Akashi Mochizuki, “In ‘Pokémon Go’ Craze, How Much Profit Does Nintendo Capture?” The Wall Street Journal, July 13, 2016. Photo by Jordan Bajc.

Leave a Reply