source from:WSJ
TECH
Pokémon-Chasing Investors Send Nintendo Shares Soaring
Craze added 9 billion dollars in market value to gaming company
By TAKASHI MOCHIZUKI in Tokyo and SARAH E. NEEDLEMAN in New York
Updated July 11, 2016 5:56 a.m. ET
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A new smartphone game that has fans chasing Pokémon characters through real-life city streets has turned into an unexpected craze and added 9 billion dollars worth of market value to Nintendo Co. in just a few days.
Nintendo shares surged 25% in Tokyo trading Monday following rises Thursday and Friday, giving the company a market capitalization of nearly 28 billion dollars.
After the disappointing launch of its first mobile app, Miitomo, in March, the popularity of Pokémon Go has provided a much-needed jolt to Nintendo’s stock, which had tumbled on concerns about its outlook. Much has been riding on Nintendo’s foray into mobile games, which have accounted for the bulk of the videogame industry’s growth in recent years, as the company’s traditional console game business struggles.
The game lets players scour parks, buildings, subway stops and other natural habitats for cute characters such as Pikachu. The game is an example of “augmented reality,” blending a person’s view of the real world through the smartphone’s camera with digital images of the colorful characters.
Pokémon Go is a joint project by The Pokémon Company, which is 32%-owned by Nintendo, and Niantic Inc., a spinout from Google parent Alphabet Inc. The game has been available in the U.S., Australia and New Zealand since last Wednesday and people familiar with plans for the game said it would likely be available in other regions, including Europe, Japan and other Asian nations within a few days.
Sudden crazes are nothing new for Nintendo and its characters, and this one—if it continues—could provide the company with another lucrative way into users’ wallets.
That is because the smartphone game app, while free to download, brings in revenue by selling in-game add-ons, such as balls costing 1 dollar and higher that help catch the animated creatures.
It took less than a day from the introduction for Pokémon Go to become the most downloaded and highest-grossing app in the countries where it is available, according to market-data provider App Annie. Data firm SimilarWeb said Monday the app is about to surpass social-networking service Twitter among Android users in the U.S. as far as the number of daily active users.
Aside from the risk that Pokémon Go will turn out to be a short-lived fad, analysts said one of the main challenges for the game is overcoming some safety issues that have emerged. Police in the U.S. and Australia issued safety warnings, saying game-players should be aware of their surroundings.
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A spokeswoman at the headquarters of The Pokémon Company in Tokyo said: “We are so grateful to our fans for turning this game into such a trend. We hope everyone will follow guidelines to play it safely and observe good manners.” Nintendo referred questions to The Pokémon Company.
One of the first visuals players see after downloading the game is a warning to be careful. That didn’t help Dakota Schwartz, a 27-year-old technology worker who has caught about 100 digital creatures since downloading the game.
He sprained his ankle at a public park trying to capture a particular Pokémon—a brown dinosaurlike beast wearing a skull for a helmet.
“I knew there was a Cubone over by the tennis courts,” he said. “I looked down at my phone at the wrong time.”
Pokémon is a role-playing game first made in 1996 for Nintendo’s Game Boy hand-held device by game designers including Shigeru Miyamoto, the creator of Mario the plumber. The Pokémon Company was set up in 1998 to manage Pokémon-related businesses, and it says the franchise has since then earned 4.6 trillion yen (45.6 billion dollars) in revenue globally through videogames, trading cards and other merchandise.
John Seo, a longtime Pokémon fan from Closter, N.J., saw a young woman capture a Pokémon when he was playing the game with friends in Brooklyn, N.Y. The two quickly struck up a conversation, he said. “I just asked her out toward the end,” said Mr. Seo, 25. “I’ve never met a stranger and felt so connected.”
Kyoto-based Nintendo’s business has been struggling recently, owing to challenges from smartphone games and console rivals Microsoft Corp. and Sony Corp. The initial success of Pokémon Go suggests that Nintendo may have a path forward with smartphone games that competitors will have trouble matching.
“Pokémon Go is a one-and-only game because it is a marriage of famous characters that everyone knows and the cutting-edge technology powered by Google,” said longtime industry analyst Hirokazu Hamamura, a director at Kadokawa Dwango Corp.
Both Google and Nintendo are investors in Niantic, the co-developer of Pokémon Go.
This month, Nintendo plans to release an optional 35 dollars portable device called Pokémon Go Plus that is designed to help game players capture “pocket monsters” more easily with the push of a button rather than with a tap on a smartphone. Also coming are new Pokémon games for Nintendo’s popular but aging hand-held 3DS game device.
Mr. Hamamura, the industry analyst, said the videogame market today is “all about establishing a solid player community,” and Pokémon Go bodes well for Nintendo’s own smartphone games planned in coming months.
Nintendo, together with its partner DeNA Co., plans to release Animal Crossing and Fire Emblem for smartphones this fall. Both titles, previously sold for a range of Nintendo game devices, are among the company’s most popular.