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Mario may win many races, but Nintendo has been slow when it comes to mobile gaming. The planned release of Mario Kart Tour and Dr. Mario on mobile this summer will be a big test for the company, long a dominant player in the video-game console and game software markets.

Nintendo’s strategy of integrating characters core to its legacy in mobile is a hesitant step for a company that appreciates the value of the smartphone industry but is cautious of “letting go” of one of its most valuable assets, said Joost van Dreunen, SuperData founder and CEO. But van Dreunen thinks this time there is a good chance Nintendo gets it right.

“Nintendo’s ecosystem relies on its IP and its subsequent fan loyalty. … If it were to sell away titles to mobile, they would effectively be selling away control of its greatest asset,” van Dreunen said.

Its experiments in mobile to date have had mixed results. Augmented reality phenomenon PokemonGo! attracted millions of fans but was part of a larger strategy to convince consumers to buy the Pokemon console games that were introduced a year after the mobile release. The game itself was developed by Niantic, a gaming start-up that was spun out of Google and in which Nintendo is a strategic investor. Nintendo also is a part owner of Pokemon, and the mobile game allowed Nintendo to experiment with the Pokemon IP, said GamesIndustry.biz writer Rebekah Valentine, noting that it “included several mechanics that were tested out and included in the console version.”

Nintendo’s Super Mario Run was a free mobile game based on the Super Mario franchise that required users to pay for additional levels. The move got a mixed reaction from players, with only a small portion of gamers opting for the pay-to-play option.

The release of Dr. Mario and Mario Kart Tour on mobile already was postponed once in 2019, from March. It comes at a crucial juncture for the company.

Nintendo stock has fallen by roughly one-third in the past year. In recent history its shares fluctuated around the release of its blockbuster Switch console, a hybrid console that can be played on the move or connected to a TV. A huge revenue driver for Nintendo since its release, tens of millions of Switch units have been sold since its March 2017 release. Switch was the bestselling video-game console in the U.S. in 2018 and reached the highest annual sales for any hardware platform since Sony’s PS4 in 2015. After its first year on the market, Nintendo had to double Switch production.

The launch of the Switch in March 2017 triggered a major move up in Nintendo shares that peaked in early 2018, but the shares have given back most of those gains as even the juggernaut Switch sales slowed. Shares recently rallied after the Wall Street Journal reported that Nintendo is set to release two new versions of Switch “as early as this summer.”

Meanwhile, the “smartphone, royalty and other revenue” category detailed by Nintendo in earnings reports has at most made up 6 percent of Nintendo revenue in recent years. Hardware has ranged on a quarterly basis from 49 percent to 67 percent of revenue in recent quarters, with software making up the difference. Its share of the top 20 bestselling console and PC games market dipped from roughly 30 percent in 2017/2018 to an estimated 24 percent in 2019, according to Deutsche Bank estimates.

In a recent recommendation of Nintendo shares to investors, Deutsche Bank cited the two smartphone game titles slated for mid-2019 as one of the drivers, but said the moves come amid a softer overall market for games software, and “after a dry spell and substantially diminished investor expectations.” The bank’s analysts added that investors’ expectations are so low that “mobile gaming can be considered an incremental positive.”

Nintendo declined to comment ahead of the planned summer release.

Nintendo has many titles that are a good fit for mobile, said Carl Livie, managing director at AppLovin, Dr. Mario and Mario Kart among them. Dr. Mario fits the Candy Crush model as a puzzle game, while Mario Kart fits well within the 5- to 10-minute play time for mobile gaming experience. Dr. Mario mirrors the Candy Crush style of game play, but it also brings the brand name and recognition of a video game legend, which will allow it to quickly gain a large audience, especially with women over 25, Livie said. Once thought to be a peripheral demographic, women between 25 and 65 have catapulted Candy Crush to r revenue over $1 billion in 2018.

Nintendo has a strategic issue that some of its largest competitors do not: The console remains its financial driver, whereas huge technology companies have grown gaming as one among many business efforts, and niche game developers don’t rely on the console to drive revenue. Microsoft and Epic have released big console game titles, Minecraft and Fortnite, on mobile to huge success, but van Dreunen said he does not think popular Nintendo console titles such as Legend of Zelda will be showing up on mobile in the next few years.

The competition for control of the gaming platform of choice continues to grow. Netflix and Hulu already changed the role of mobile devices in streaming content by allowing users to seamlessly move from watching a movie or show on their home TV, mobile device and laptop. Gaming is going through a similar evolution. Microsoft‘s new xCloud will let users play Xbox games on Android phones, and Alphabet‘s new Google streaming game service, Stadia, has a similar focus. Apple is releasing Arcade, a gaming subscription service for use on PCs, mobile and in living rooms. Amazon also is at work on a streaming service.

Adam Bankhurst, a writer for gaming industry publication IGN, said part of Nintendo’s strategy is to offer companion games for mobile devices that will pair with console games. Bankhurst believes that this is both an opportunity to prep development teams for eventually moving their more complex titles to mobile and also creating a seamless playing experience where players can unlock characters and missions only from the mobile game. Bankhurst pointed to Nintendo’s Animal Crossing as a recent example and suggested that we may see a Dr. Mario console game come out soon with similar features.

“As cloud computing allows for increasingly advanced games to be played on mobile, the opportunity for Nintendo to add its more complex titles to mobile increases, but so does the competition in the mobile gaming sector.”

Newzoo analyst Guilherme Fernandes said Nintendo’s partnership with LINE to co-develop Dr. Mario and other projects “strongly hints at the company’s mobile strategy going forward.”

The question for Nintendo going forward is how much of its IP is it willing to put on mobile, and how much success they can expect.

“Nintendo may be slow to the game, but when they get there … they’re going to kill it,” van Dreunen said.

By Christopher Chutko, special to CNBC.com

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