Nintendo shares plummet after it points out it doesn't make Pokémon Go

Nintendo Gameboy

Nintendo’s share price on the Tokyo Stock Exchange has plummeted 17% in one day, apparently due to investors belatedly discovering that the company doesn’t actually make Pokémon Go, the latest mobile gaming phenomenon.

The company is still buoyant, though: Since the game launched in mid-July, Nintendo’s share price has more than doubled.

The cause of Monday’s decline was seemingly a statement put out by Nintendo after the close of trading on Friday, the day Pokémon Go was finally released in Japan.

The statement pointed out that, despite the long-running association of Nintendo with Pokémon – an association which seems to have driven investors’ movements – it neither makes, nor owns, Pokémon Go. That fact was never hidden by any of the companies involved, and has been noted in some reports on Pokémon Go, but the fact seems to have taken investors by surprise.

Nintendo’s statement clarified that Pokémon Go “is developed and distributed by Niantic, Inc”, an independent company spun off from Google in August 2015. Both Google and Nintendo hold stakes in Niantic. It added that Nintendo owns 32% of the voting power within the Pokémon Company, which itself will receive “a licensing fee and compensation for collaboration in development and operations”.

Because of those facts, Nintendo concluded, “the income reflected on the company’s consolidated business results is limited”. It will make more direct income from Pokémon Go Plus, a peripheral due to be released this summer which will allow partial interaction with the game without the need to turn on the phone, but that income too is already reflected in the company’s predictions for the 2016–17 financial year.

Taken as a whole, the statement is clear: Nintendo’s not getting rich from Pokémon Go anytime soon.

Is Pokémon Go good for your health?

But while the direct income streams are limited, there are still reasons for investor positivity in the company following Pokémon Go’s success. Nintendo has already released one smartphone game directly, Miitomo, but its longstanding refusal to allow its largest properties to leave its own hardware ecosystem has left shareholders concerned. The Wii U holds a distant third place in the home console market, and while the New 3DS is the leading portable console, it is dwarfed by the size of the mobile phone gaming market.

Even if Nintendo doesn’t take much cash home from Pokémon Go, the game’s success could convince the company to put more efforts into its home-grown smartphone development. If it does, that could signal a longer term reversal in the company’s fortunes than any one game could ever provide.

The company is already moving forward with another partnership, with Japanese mobile developer DeNA, which will provide it with a more direct income stream from mobile games. The first two games from that partnership will be based on the company’s b-tier franchises Animal Crossing and Fire Emblem.

Powered by Guardian.co.ukThis article was written by Alex Hern, for The Guardian on Monday 25th July 2016 10.11 Europe/London

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