In 2012, Nintendo reached a historic low point whenwhen the company failed to make profit and saw its net salesdeclining by 36.2% Nintendo, consequently making a loss ofmore than US$400million that year. This could be explainedby slow sales for both software and hardware outside the US.In 2013, Nintendo made a mere profit ofUS$68million. However, it did not last long as the followingyear, Nintendo lost more than US$200million.Analysts have not exactly figured out yet what theexact reason was for the decline of Nintendo, but a popularexplanation is that ever since the introduction of thesmartphone in 2007 there has been an increasing popularity ofmobile-gaming. Not only do consumers spend more moneyon these competing products, they also spend more time onthem. Profit since 2015After the disappointing previous years, Nintendo finally became profitable again in 2015. According toNintendo, their financial success is partly due to "depreciation of the yen against the U.S. dollar at theend of the period compared to the exchange rate at the end of the previous fiscal year”4. In the annual report of 2016, the company notes that net sales decreased because of the decline inNintendo 3DS hardware and software sales. However, due to a decrease in overall costs such asadvertising and administrative expenses, the company managed to increase its operating income by 32.7%on a year-to-year basis.
Impact of Pokémon GoLast summer the augmented reality game “Pokémon Go” gained unprecedented popularity all over theworld. The enthusiasm for the mobile-game triggered massive buying in Nintendo shares. Nintendo'smarket price rose by $7.5 billion on July, 11th 2016, the day the free-to-play app went public. At its peakNintendo's stock almost doubled as a result of Pokémon Go, adding $17.6 billion (roughly Rs. 1,18,468crores) in market capitalization.However, following this steep rise, Nintendoannounced that: "Because of (Nintendo’s equity in ThePokémon Co.), the income reflected on (Nintendo’s)consolidated business results is limited". As a result on thefirst trading day after the announcement went public,Nintendo's stock fell 18%, which is the steepest hit to thecompany's shares since 1990, resulting in a loss of $6.7billion in Nintendo's market value. However, because thesteep rise few days before, the less steep fall was notconsidered a disaster. As Fig. () illustrates Nintendo indeeddoes not directly profit from the revenue made throughPokémon GO. The exact economic stake Nintendo has is unclear as the amounts invested are undisclosed.However, it is known that the Pokémon Co. receives licensing fees from Niantic, of which Nintendo onlyreceives 32%. Additionally, Nintendo, Pokémon Co., andGoogle invested an aggregate of 30 million in Niantic in2015. It is important to note that the financial benefit“Pokemon GO” has on Nintendo is not limited to this.
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- Fall '15
- Business, Wii, Video game console, Nintendo, Nintendo Co.