by Brad Moon | August 30, 2013 7:00 am
Should Nintendo (NTDOY) be making games for Apple’s (AAPL) iOS and Google’s (GOOG) Android mobile platforms?
The question has been asked repeatedly over the past several years as the veteran game maker struggles. Its Wii U video game console has been less than a stellar performer while casual gaming on smartphones and tablets eat into the portable console market Nintendo has owned since the late 1980s.
Making things worse are ominous rumblings of set-top boxes from Amazon (AMZN), Google and Apple that would let consumers play those inexpensive mobile games on their TVs as well. All of these developments have added some urgency to the argument that if Nintendo were to release games for the competing app stores, the move would be a cash windfall for the company.
A lot more people own smartphones and tablets than own Nintendo portable game consoles like the 3DS. When someone has already forked out the cash for a smartphone, tablet or an iPod Touch, it can be tough to convince them that they should also spend $170 or more on a dedicated portable game console.
The sell gets even tougher when the potential customer sees that Nintendo’s game library consists of a few hundred titles (including compatible titles developed for earlier systems) that go for $30 or $40 a pop. Apple’s App Store, by comparison, offers hundreds of thousands of games, including titles from top game publishers like Electronic Arts (EA), many of them free to play, and the rest costing no more than a few dollars.
There are a massive number of mobile devices out there, and owners have a habit of buying lots of those 99-cent and $1.99 games. As a result, game sales through Apple and Google are four times those reported for handheld game consoles. That handheld market isn’t just Nintendo, but also shared with rival Sony (SNE) and its PS Vita portable console.
Actually, Sony presents an interesting case study in attempting to capitalize on your iconic video game characters through an iOS/Android release. In partnership with Coca-Cola (KO), it released All Star Island, a free platform game that features the character “Drake” from its best-selling Uncharted series of games for the PS3 and Vita. Other iconic Sony game characters like Ratchet and Clank can also be unlocked.
It’s too early to tell if this strategy has affected console versions of games with these characters (I suspect not), but the Coke tie-ins (players collect Coke Zero drops and Coke product logos) aren’t likely to win over any fans. Still, Sony is at least testing the water.
In the face of predictions that classic Nintendo games released for mobile platforms could be a $400 million yearly revenue boost for the company, let’s not forget the cautionary example of Rovio, the game developer behind the smash hit Angry Birds franchise.
Angry Birds games have amassed 1.7 billion downloads, making them hugely successful — they hold the first and fifth spots in Apple’s top five best-selling iOS games of all time. Most titles are pay (although there are free versions and occasional free promotions), yet Rovio’s profit for 2012 amounted to $72 million, nearly half of which was merchandise sales.
In other words, even if Mario and company were to make the transition to smartphones — potentially cannibalizing Nintendo’s existing portable business — the potential payoff isn’t necessarily a pot of gold.
Nintendo certainly doesn’t think its future lies in Mario running across the display of an iPhone or Nexus. In a 2011 interview, Nintendo’s president said “That is absolutely not under consideration.” When asked earlier this month by CVG, he again brushed off the possibility of app store sales:
“If I was to take responsibility for the company for just the next one or two years, and if I was not concerned about the long-term future of Nintendo at all, it might make sense for us to provide our important franchises for other platforms, and then we might be able to gain some short-term profit. However, I’m really responsible for the long-term future of Nintendo as well, so I would never think about providing our precious resources for other platforms at all.”
Price cutting has helped to spur 3DS sales (the Nintendo handheld has been the top-selling video game console in the U.S. for the past three months) up 14% year over year, and as Adam Benjamin points out, the company’s stock has responded even though Wii U sales remain disappointing.
Rather than cave in to pressure to release its games for mobile, Nintendo has just announced its latest strategy to fight back on its own terms, a new portable gaming device aimed at those smartphone and tablet owners.
The new 2DS offers the same dual-screen play mechanics as its 3DS (minus the 3D capability), is compatible with 3DS games, but comes in a small tablet form factor and at $129, shaves $40 off the price of the cheapest 3DS.
A few years ago, Wired’s Chris Kohler said “We’re never going to see Super Mario Bros. on the iPhone, no matter how much Nintendo’s investors may clamor for it,” and I suspect he’s right.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
Source URL: http://investorplace.com/2013/08/nintendo-still-wont-make-a-cash-grab-for-mobile-games/
Short URL: http://invstplc.com/1fCLZj6
Copyright ©2016 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.