Nintendo's shares soar with wildly popular Pokemon Go

Analysts watch for impact on the gaming company's financials, expect shake-up of industry

TOKYO • Shares of Japan's Nintendo have soared nearly 60 per cent since the release last Wednesday of its instant hit mobile game Pokemon Go, as analysts keenly watch how the game's popularity will boost the financial performance of the Japanese company as well as the gaming industry.

Nintendo shares closed at 22,840 yen in Tokyo yesterday, nearly 13 per cent higher than its previous close but lower than the day's high of 23,045 yen.

The location-based mobile game which had begun as an April Fool's joke continued to attract legions of fans in the countries of its release - the United States, Australia and New Zealand - raising hopes that the game will inspire copycat versions and probably help reshape the US$25 billion (S$34 billion) mobile gaming industry.

Within days of its introduction, the game has already surpassed eyeball time on other social media apps like WhatsApp and Instagram, according to data provider SimilarWeb. The game, released for iOS and Android, has added US$9 billion in market value to Nintendo.

"This is probably the first smartphone game that has spawned a social phenomenon," said Mr Hideki Yasuda, an analyst at Ace Research Institute in Tokyo.

"The key thing is that this is happening globally. And Nintendo has proven that it can still come out with hits that have broad appeal and can earn money."

The technology comes from Niantic, a company founded by Google and spun off last year.

Google had unveiled "Pokemon Challenge" in 2014 for Google Maps, inviting users to find and capture the cutesy fictional "pocket monsters" within the application. The feature was active for a short while before it ended. Niantic chief executive officer John Hanke took the idea forward, teaming up the concept with Nintendo's Pokemon, introduced nearly 20 years ago.

A ready-made generation of fans, nurtured on Pokemon playing cards, video games and cartoon shows and familiar with the storyline of finding, training and pitting the monsters against each other, were encouraged to traverse their physical surroundings, phone in hand, to find new characters.

The success of the application has been phenomenal.

"As I look towards Pokemon Go and beyond, I am as excited as I was on Day One about how the idea of 'Real World' games can help us meet new people and forge connections," Mr Hanke said.

But for Nintendo, Pokemon Go may not prove an immediate boost to its bottom line. Analysts presume that out of every 100 units earned at the App Store, 30 would go to Apple, 30 to Niantic, 30 to Pokemon and 10 to Nintendo.

Deutsche Bank analyst Han Joon Kim sees Pokemon Go as "unlikely to materially impact on Nintendo's financials", but believes the game is a "lead-off hit" in the category that could herald a "watershed year" in the offing for the company.

However, with Mr Masashi Kawashima, Niantic's Asia-Pacific director, saying a debut in other countries would happen "as soon as possible", analysts were hopeful.

The game's No. 1 ranking in the US market could add up to 15 per cent to Nintendo's net profits, estimates Macquarie Capital Securities analyst David Gibson, while a No. 5 ranking in Japan could boost profits by up to 10 per cent.

Other gaming companies probably will seek to replicate Pokemon Go's achievement, said Mr Joost van Dreunen, who runs SuperData Research. If the Pokemon Go juggernaut continues, he said, developers of other top-grossing mobile games, such as Supercell Oy's Clash of Clans or Activision's Candy Crush, could be encouraged to add a location component to existing games.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on July 13, 2016, with the headline 'Nintendo's shares soar with wildly popular Pokemon Go'. Print Edition | Subscribe