Nintendo Switches Its Perspective on Mobile Gaming, Pulling Out of the Industry
After the failure of the Wii U in late 2012, Nintendo needed something, anything, to pull them back up from the ground. Unable to clear their name in the console world, the video game giant transitioned over to mobile gaming in 2015, partnering with DeNa, a huge mobile platform developer in Japan.
Click to enlargeTheir first big success came in 2016 when they released Super Mario Run, which made about $56 million in its first year. However, this success would be short-lived, as the app didn't perform as well in the long-term, as it led to a huge drop in stocks for both Nintendo and DeNa in the weeks after its release. In 2017, Nintendo reported only 5% of its 78 million players paid for the full version of the game, as the company did not make it necessary to pay to play its games. This is because Nintendo was hesitant to adopt the freemium models that other app developers had been embracing for years.
Click to enlargeInstead, Nintendo wanted players to have good relationships with all of their games and characters, and in doing that, they wanted to put a lot of thought into their mobile market. Unlike most mobile developers, Nintendo wanted people to use their mobile games as a gateway into their console releases. Their apps were not designed to replace their game library, but rather to advertise it.
In 2017, both Fire Emblem Heroes and Animal Crossing: Pocket Camp were released to huge success, at least by Nintendo's mobile gaming standards. Fire Emblem Heroes made $300 million in revenue during its first year, whereas Animal Crossing Pocket Camp made $50 million within its first ten months.
Click to enlargeAlso during 2017, Game Freak and Niantic released Pokémon Go to worldwide success. Although this app was not directly developed by Nintendo, it brought the company massive profits and put their mobile games on the radar for many consumers. In fact, many people were rediscovering the joy of Pokémon after years, prompting them to buy Nintendo consoles to relive the games alongside their Pokémon Go adventures. Many gamers refer to July 2017 as a “happier time,” as they were going outside more with their friends, catching new Pokemon, and competing in gym battles. The rise of Pokemon Go led to more of a focus on mental health in gaming, as companies like Nintendo saw what a positive impact their games had on the player base.
Click to enlargeAfter the massive success of their 2017 mobile releases, President Shuntaro Furukawa promised that two or three mobile games would be developed each year. In an effort to keep this promise, Nintendo released Dragalia Lost in 2018 and both Dr Mario World and Mario Kart Tour in 2019. Dragalia Lost, an action RPG, developed by Nintendo and Cygames, made over $100 million in revenue, whereas Mario Kart Tour was downloaded more than 10 million times on its first day, surpassing Pokemon Go's world record of 6.7 million.
Click to enlargeThese numbers seem impressive on their own, but in comparison to other mobile apps on the market, they are but a small ripple. Nintendo knew this, which is why they dedicated fewer resources into making mobile games and more into making their most recent console release, the Nintendo Switch. This divide between their mobile and console legacy became extremely obvious to Nintendo during COVID-19, where most of the industry saw gains in their mobile revenue, and Super Mario Run saw double-digit losses.
Also during this time, Animal Crossing: New Horizons was released to worldwide acclaim, causing Nintendo's stocks to rise to a twelve-year high on the week of June 16. The Switch's success proved two things to Nintendo at this time: their console market was huge and extremely successful, and there was no longer a need to push for as much development in the mobile scene. Nintendo wanted to put all of its efforts into developing new Switch titles, rather than sharing revenue with Apple and Google Play to potentially have a few loyal mobile players convert to their console titles.
Click to enlargePresident Furukawa went from saying in 2018 that "smartphone games would be a $1 billion business with growth potential" to stating that Nintendo is not "necessarily looking to continue releasing many new applications for the mobile market." Despite the company's massive success on the Switch, shareholders were confused by this remark, as Nintendo had promised to remain in the industry to introduce a wider audience to its characters and IPs.
Click to enlargeHowever, when looking at the numbers, it becomes evidently clear why exactly President Furukawa made this dramatic statement. In comparison to mobile giants like Fortnite, PUBG mobile, and Roblox, Nintendo's applications just aren't performing. In fact, the Nintendo apps are suffering great losses, falling into the obsolete, where most apps are producing much more revenue than they ever have.
Click to enlargeThis year, with a huge boost from the COVID-19 quarantine, mobile gaming is supposed to account for half of the video game industry's overall revenue, coming in at a staggering $77.2 billion. The Nintendo Switch saw an increase in popularity during this time, returning to its listing price from several years ago and selling more than 200 million units in 2020 alone. Most three-year-old consoles don't see the long-term success that the Nintendo Switch has, which is making it a huge priority for Nintendo.
Click to enlargeUnlike mobile gaming, which has seen small returns, the Nintendo Switch is seeing massive profits and Nintendo is seeking to maximise them. Serkan Toto, a mobile game consultant in Tokyo stated that "In a sense, Nintendo’s enormous success on console reduced the need and the pressure to put resources into mobile."
In addition to its pursuit of console-based gaming over mobile, Nintendo's brand integrity also stands in the way of it becoming a massive iOS or Android developer. Instead of adopting a freemium or gacha model, which could have negative and sometimes addictive consequences, Nintendo doesn't want players to have to spend a lot of money to play their mobile games. Rather, they would rather help players to form lasting relationships with their characters by immersing them in exciting new worlds.
Click to enlargeInstead of freemium, Nintendo has opted to try the one-time purchase model with Super Mario Run and the subscription model for Mario Kart Tour. Neither app performed as well as Nintendo was hoping, barely making a dent in the industry in comparison to Tencent and Epic Games' giant mobile game presence, with titles such as Fortnite and Honor of Kings.
Click to enlargeDeciding to only focus on improving already-released mobile apps, Nintendo has decided not to release any new content, besides the Game Freak Pokémon releases, until 2021. Their 2019 fiscal year earnings for mobile were a shadow of what President Furukawa had set years before, only bringing in about 51 billion yen, which is equivalent to $477.4 million dollars. Both DeNa and Nintendo have not stated which apps are in development currently, however both companies have stated that mobile games would not be a priority until at least next year.
Nintendo believes that its titles shine brightest on consoles and with Nintendo controllers, rather than on a touchscreen-based smartphone. It is for this reason that the game giant wants to maximise the Switch's impact and pull back on developing for mobile games. Unlike the Wii U, the Switch is exceeding expectations and now, Nintendo doesn't need an alternate source of income. They would rather not share revenue with Apple or Google Play, converting players on their own platforms and shops, rather than through a third-party company. Only time will tell what Nintendo's next app release will be, but mobile gamers shouldn't get their hopes up for an upcoming release.
Images via Nintendo | Bloomberg | Statista
