Super Mario's iPhone Surprise Fuels Hopes for Nintendo

By Reuters
September 08,2016
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A woman walks past a figure of "Mario", a character in Nintendo's "Mario Bros." video games, at a Nintendo centre in Tokyo July 29, 2015. REUTERS/Thomas Peter

By Makiko Yamazaki

TOKYO (Reuters) - Nintendo Co's surprise announcement that its popular game franchise Super Mario Bros would debut on Apple Inc's new iPhone propelled its shares sharply higher on Thursday on hopes the firm had at last embraced mobile gaming.

Investors are betting the new game, Super Mario Run, will be another mobile hit for the Japanese company akin to the wildly popular Pokemon GO, as it moves away from its console-focused strategy and embraces on-the-go gaming.

"Launching a well-known Nintendo character on the globally penetrated iPhone is one of the best scenarios that investors have hoped for," Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities, said.

Nintendo said it would launch the game initially on Apple's App Store in December. The Kyoto-based firm with a market capitalisation of $39 billion did not say when it would be available for Android devices.

Nintendo shares jumped 13 percent to close at their highest since late July, adding $4.5 billion to the company's market value, following the announcement at Apple's iPhone launch event. The broader TOPIX index edged down.

Shigeru Miyamoto, the creator of the puppet-inspired Mario character more than 35 years ago, gave a demonstration of the game at the iPhone launch on Wednesday.

Players control Mario through a series of obstacle courses while collecting coins along the way. In higher levels, players can compete with other players' scores and create their own "kingdom".

Miyamoto said Super Mario had "evolved whenever he has encountered a new platform".

"For the first time ever, players will be able to enjoy a full-fledged Super Mario game with just one hand, giving them the freedom to play while riding the subway or my favourite, eating a hamburger," he said in a statement on Thursday.



As games such as Candy Crush Saga and Angry Birds captured the casual gaming population and Nintendo's console sales struggled, investors began questioning Nintendo's strategy of focusing on consoles at all costs.

Nintendo for years resisted introducing mobile games with its best-known characters in an effort to protect its console business, even as the strategy produced a string of operating losses.

It finally yielded to investor calls to release games for mobile devices last year when it announced a tie-up with mobile specialist DeNA Co.

"It shows the company is now allowing licensing of their characters, which is two-fold," said Gavin Parry, managing director at Parry International Trading in Hong Kong.

"It means the internal philosophy is changing and opening up, and it also means they're going to get additional income streams, as opposed to their internal or organically generated revenues."

Nintendo and DeNA jointly developed Super Mario Run, with Nintendo in charge of content and DeNA responsible for back-end operations such as servers. Shares in DeNA also jumped 11 percent on Thursday.

Questions remain however about how Nintendo will make money from its mobile games. Despite Pokemon GO's success, the firm in July warned that it would have a limited impact on earnings and later booked a first-quarter operating loss.

Cosmo's Kawasaki said that unlike Pokemon Go, from which Nintendo profits mainly through its investments in co-developer Niantic and Pokemon Company, sales from Super Mario Run would directly benefit Nintendo.

"I expect it to impact on Nintendo's earnings," he said, adding that the push into mobile would also open up emerging markets where consoles had struggled to take off.

Nintendo declined to comment on how revenue from the new game - which is free to download and play but some content has to be purchased - would be shared with DeNA.

DeNA said earlier that it wants its deal with Nintendo to yield titles that bring in over 3 billion yen ($29.5 million) a month.

The duo plans to launch two more mobile games in the year to March - Animal Crossing and Fire Emblem.

($1 = 101.6600 yen)


(Additional reporting by Ayai Tomisawa and Lisa Twaronite; Editing by Miyoung Kim and Stephen Coates)