Nintendo loses billions in market value after stating it would not directly profit from the game
26 Jul 2016
Pokemon Go, which scored an unprecedented hit with gamers is not likely to benefit Nintendo. Nintendo admitted it would not directly profit from the augmented reality game, which eroded $6.7 billion from Nintendo's market value yesterday.
Nintendo's market value increased by $7.5 billion on 11th July, just after Pokemon Go went public and became an instant, massive hit across the globe (See: Shares of Nintendo more than double market cap; overtake Sony ).
Since its launch, Pokemon Go had added nearly $12 billion to Nintendo's market value, meaning the fall though sizable was not a total disaster for the company.
Nintendo published a letter to investors on 22nd July clarifying the nature of the company's involvement in Pokemon Go. Nintendo did not develop or publish the game, rather Nintendo had a 32 per cent stake in The Pokemon Company, the business that markets and licenses the Pokemon franchise to outside developers.
The Pokemon Company would receive licensing fees and compensation for collaborating with developer Niantic on Pokemon Go, and Nintendo would receive only a thin slice of that revenue.
"Because of this accounting scheme, the income reflected on [Nintendo]'s consolidated business results is limited," the company wrote. It added, it would not modify its financial forecast.
Yesterday, the first trading day after its letter went public, Nintendo's stock plummeted as much as 18 per cent.
A Forbes columnist said the massive success of Pokémon GO did not necessarily mean an enormous windfall for Nintendo, given how much of a stake it actually had in the game.
Nintendo had been no stranger to such smash hits, earlier with Wii, Ninetendo had hit a hundred million console sales. Now, with Pokémon GO becoming the biggest mobile game of all time in a matter of weeks, many thought it was a repeat success.
However the success had little to do with Nintendo, and the company was getting far too much credit for Pokémon GO from the start, writes Tassi. It had been their ''big comeback story,'' but now investors had started to realise that that was not necessarily the case.