Nintendo Finally Crashes From Pokemon Go High

by Sohrab Osati | Jul 25, 2016 | 3 comments
Sohrab Osati

Nintendo_Stock_Pokemon_Go

It’s rather surprising that it took financial markets and tech pundits this long to catch on to the whole Pokemon Go phenomenon that’s pushed Nintendo’s valuation up by nearly $12 billion. But now that both sides have gotten their heads around it, that Pokemon high is coming to an end.

After all, for the past week, there has been no shortage of coverage around how Nintendo is now valued above Sony which is ludicrous no matter how you look at it.

 Nintendo recently admitted it won’t directly profit from the augmented reality game, leading to a loss of $6.7 billion in Nintendo’s market value on Monday. Nintendo’s market value rose by $7.5 billion on July 11th, just after Pokemon Go went public and became an instant, massive hit across the globe. 

So why the crash? Jessica Conditt writing for Engadget:

 Namely, it didn’t develop or publish the game. Instead, Nintendo has a 32 percent stake in The Pokemon Company, the business that markets and licenses the Pokemon franchise to outside developers. The Pokemon Company will receive licensing fees and compensation for collaborating with developer Niantic on Pokemon Go, and Nintendo will see just a sliver of that revenue 

In short, despite popular belief, Nintendo doesn’t and has never owned Pokemon. They simply hold a 1/3 ownership of that company. Adding to it all, Nintendo also didn’t develop Pokemon Go as that was handled by Niantic which must pay 20 to 30 percent of its earnings to Google and/or Apple, leaving not a lot of cash for Nintendo at the end of the day.

Is Pokemon Go a success? Absolutely, but a $12 billion success? Not a chance. Plus, I’m not convinced that Nintendo will have learned the right lessons from this whole ordeal.

Discuss:

Do you think Pokemon Go is a wake up call to Sony, if not PlayStation, that they need to consider mobile more seriously?