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Summary

Japanese gaming giant Nintendo has announced a partnership with mobile gaming company DeNA to offer games featuring Nintendo characters on smartphones and tablets. The two companies are also entering a capital alliance in which each will purchase a share of the other, which will help them create a membership service that users can access across all their devices, whether PC, smartphone, gaming console, or handheld console.

Not abandoning consoles

Nintendo CEO Satoru Iwata was at pains to stress that the company was not abandoning its traditional business of games for own-branded home and handheld consoles; he also said that Nintendo isn’t porting its library of games to smartphones. Instead, the strategy will be to port existing characters to new games for smartphones and tablets, which will both create a new income stream and drive customers back to the traditional platform of Nintendo-branded handheld and home consoles.

The question is: Will it work? Nintendo’s fortunes have lagged since the heyday of the Wii, with successor console the Wii U selling less than Sony’s PlayStation 4 and Microsoft’s Xbox One. Nintendo’s sales in handheld gaming, traditionally an area it dominated, have also slowed, though it did score wins in 2014, with five 3DS titles selling over 2 million copies each in the last half of the year.

The problem is that the Wii did well because it targeted players outside the traditional gamer demographic of young, single men, and these casual gamers are now more likely to download apps for their smartphones than to buy dedicated handheld or home consoles. At the same time, the Wii U has lagged behind rivals in terms of technical specs, with the PlayStation network and Xbox Live also providing services such as Netflix.

Nintendo’s main advantage, then, is its stable of characters that are recognizable to players of a variety of ages. The company is banking on this name recognition to help its mobile games stand out from the ever-increasing crowd, and on DeNA’s experience in building mobile experiences that will make users keep playing.

Those expecting to see classic NES games on their iPhones will be disappointed, but it’s clear that Nintendo still regards that option as the last resort. Instead, it’s doing well to add mobile as another area in which it has a presence, and use it to strengthen its core video game business.

Appendix

Further reading

“Nintendo says it can survive without releasing its games library on mobile devices,” ME0002-000513 (March 2014)

Building digital audiences: How to attract young consumers, ME0002-000553 (December 2014)

Author

Francesco Radicati, Senior Analyst, Digital Markets

francesco.radicati@ovum.com

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