Narrative: Nintendo's Mobile Renaissance
Each narrative page (like this) has a page describing and evaluating the narrative, followed by all the posts on the site tagged with that narrative. Scroll down beyond the introduction to see the posts.
Narrative: Nintendo’s Mobile Renaissance (Dec 27, 2016)
Updated: January 31, 2017
Until 2016, Nintendo has always shunned the mobile gaming market, and instead focused on its dedicated home and portable game consoles. However, that began to change in 2016, as Nintendo first licensed some of its Pokemon intellectual property as part of the massively successful Pokemon Go launch, and then took a more direct role in launching a mobile game with Super Mario Run for the iPhone in December. The popularity of Pokemon Go seems to have finally convinced Nintendo management that its combination of familiar characters, gameplay expertise, and an ability to trade on nostalgia can be powerful and lucrative in mobile gaming.
However, Nintendo was only a minority partner in Pokemon Go, taking home far less money than some less savvy investors originally believed it would, and there are lingering questions over its staying power with large numbers of users. Super Mario Run was highly anticipated, but Nintendo’s attempt to break the in-app-purchase model which dominates mobile gaming seems to have backfired, resulting in terrible reviews.
In late January 2017, it also became clear that the business model wasn’t paying off in a big way, delivering a higher conversion rate (though on a basis that isn’t really comparable to other big games) and lower revenue per paying user than competitors.
I continue to believe that Nintendo is absolutely right to invest much more heavily in mobile gaming, and will likely have several more massively popular games in the coming years, but it needs to tread carefully and not assume that its brand and other assets will allow it to break the mold in mobile gaming.
Nintendo Sells 2.74m Switch Units in First Month (Apr 27, 2017)
In case there was any doubt, Nintendo has a hit on its hands with the Switch, its hybrid console/portable gaming system. It sold 2.74m units in the first month after launch, which is apparently roughly the same number that the earlier Wii U sold in its first year, and 20% of total sales to date of the Wii U. That’s not hugely surprising – reviews were mostly decent, the device has been out of stock off and on since it debuted, and the company had already upped its production. That was enough to generate almost exactly a billion dollars in revenue, or a little over 20% of the company’s entire revenue for the fiscal year which ended last month. The company’s forecast for the new financial year, which ends next March, is 10 million unit sales. Remarkably, Nintendo has sold ever so slightly more copies of the Zelda game that’s the standout title for the device at launch than of the console itself, which might just be a reflection of those supply constraints. In total, Nintendo appears to have sold around twice as many software units as hardware units in the Switch category, suggesting that people have bought an average of two games from Nintendo for every console. Together with Nintendo’s belated push into mobile gaming, it’s doing pretty well at the moment, though that mobile push is still generating much less revenue – the category which includes smartphone gaming only generated around $200 million in revenue for the year.
Nintendo Kills off NES Mini but May be Working on SNES Mini (Apr 19, 2017)
Nintendo to Double Production of Switch Console – WSJ (Mar 17, 2017)
Another sign that the Switch is a hit, despite some fairly mixed initial reviews: Nintendo is reportedly doubling its production run for the console from eight to sixteen million, which would put it on pace to match the initial sales of the Wii, and well ahead of Wii U sales. It should also help prompt more game makers to produce titles for the console, which is a good thing since lack of games was one of the big criticisms at launch. That will, of course, take time, so it’s not an instant fix by any means, but it looks like Nintendo finally has another hardware hit on its hands after a tough few years. Alongside a long-awaited push into mobile gaming, that could mean a good period of growth for Nintendo is coming, assuming they learn the lessons from their Super Mario Run launch.
Nintendo Switch Reviews Suggest Excitement About Model, Less About Actual Performance and Games Available (Mar 1, 2017)
The review embargo for the new Nintendo Switch console seems to have lifted overnight, and the reviews that have resulted are mostly pretty mixed. There’s quite a bit of excitement for the concept and some of the execution, but every review I’ve read so far highlights hardware bugs, performance lags, frustrations with Bluetooth and cramped controllers, and especially a lack of games at launch. It appears that Nintendo mostly allowed reviewers to demo one game – a pretty good new Zelda title – and a package of mini games called 1-2-Switch which seems mostly intended to show off various game modes rather than provide hours of entertainment. As such, this seems like an in-betweener for Nintendo – neither the big hit the Wii and DS were, nor the obvious flop the Wii U was. In time, it’s possible that software updates and more games will push it over into the hit category, but it certainly doesn’t look like it’s there yet. All this is, of course, interesting in the context of Nintendo’s simultaneous push into mobile gaming through smartphones, which has also been a mixed bag so far.
This is one of two quick pieces from Axios on apps that I’m going to cover this morning. This one shows that Pokemon Go has had a little resurgence off the back of the new characters it released recently, making it a top app again on iOS. To my mind, that again reinforces the point that Nintendo has done far better with the app it only owns a minority share in than with the app it owns outright (Super Mario Run) and likely even makes more money from Pokemon Go despite that minority share. That’s something it’s going to have to think hard about as it prepares to launch additional mobile games in the coming months.
I’m including this today mostly because it’s an interesting counterpoint to the Nintendo results and related data about Super Mario Run from earlier. There’s such an interesting juxtaposition between the $53 million Nintendo has generated from Super Mario Run so far, and this billion-dollar gross figure from Sensor Tower for Pokemon Go since it launched. On the one hand, Nintendo only owns a minority stake in Pokemon Go, but the game has probably still generated more revenue overall for Nintendo than Super Mario Run, which it owns outright. And of course Pokemon Go’s business model is much more along the lines of the fairly standard in-app purchase model. It’s still early days for Super Mario Run, but it’s interesting for Nintendo that the game which appears to have been a far bigger success on mobile is the one it doesn’t own outright, and which adopted the standard IAP model rather than something different.
via Sensor Tower
This is the first real indication we’ve had directly from the source of how Super Mario Run has performed for Nintendo since it was released in mid-December, and it came in the context of Nintendo reporting its results for the December quarter. Overall revenue for the quarter was 174 billion Yen, or around $1.5 billion, while total revenue from Super Mario Run so far (including January) is around 6 billion Yen, or $53 million. So even though Super Mario Run has done well in its own right, it’s a drop in the bucket in terms of Nintendo’s overall business. The other key number is that around 5% of those who have downloaded the game have paid $10 to unlock the full functionality. As a frame of reference, King (maker of Candy Crush) reports that around 2% of its monthly users make some kind of payment, with the average paying user spending a lot more than $10 per month. Zynga sees a conversion rate of just under 2% and again sees spending per paying user per month well above $10. So although a 5% conversion rate may seem high, that’s a one-off payment, whereas competing game maker’s smaller number of paying users pay repeatedly over a period of time for a much larger total amount. So far, Nintendo’s business model, which attempted to buck the usual IAP model for games, has both annoyed some users while delivering a lower payout than competing games. I’m not convinced it’s done figuring out the right business model for its mobile offerings.