Nintendo (NTDOY US)

Bull case:
• Digitalisation
• Monetising IP
• Mobile games
• China market
• Switch OLED
• Hidden assets

Bear case:
• Console cycle
• COVID-19 end
• Playstation 5
• Hit game reliance
• Weak game pipeline
• Capital allocation


Link to the full write-up here: The bull & bear case for Nintendo
Bull 

To my knowledge, Nintendo and Microsoft in the 1980s were probably the first software 'platform monopolies' which demonstrated how a monopolistic position can be leveraged to squeeze both the consumer and the supplier.

The rewards enjoyed by Nintendo's early console conquest attracted the likes of Sega, Sony, Microsoft, and even Panasonic/Matsushita, to enter the fray. And for awhile, these players (with the exception of the last) shared the spoils of the video gaming market (some more than others, of course).

But producers and consumers of video gaming have much more options now than before. Before, there was console and PC. Now you have mobile phones too, and that has made games more accessible to both developers and consumers. For traditional video game purveyors like Nintendo, holding onto market share (and squeezing developers and consumers) has thus become more difficult.

Given the much more egalitarian access that both developers and consumers has to the video game market, I will argue that the greatest asset of Nintendo is its IP (as it is for probably all other entertainment companies). But if the data from fritz's presentation is accurate -- that Mario-related games are not selling very well -- then this IP may not be worth very much.

Mario/Nintendo theme parks might sell tickets. But the success of Mario movies look less likely. Blizzard's Warcraft had a very rich story and that didn't stop their first movie from flopping. Maybe there's Mario manga or cartoons, but if so, it is probably not widely circulated.

Even as the market has become more competitive, for console purveyors, the success formula has not changed. Only a great hit can create the positive flywheel effect needed to drive hardware and software sales. For Nintendo, it was Mario; for Sega, it was Sonic; for Xbox, it was Halo; for Sony, it was probably Final Fantasy. Somehow, somewhere, a great hit will be born. But to whom will it belong? And how long will it last?

(10-07-2021, 12:01 PM)karlmarx Wrote: Mario/Nintendo theme parks might sell tickets. But the success of Mario movies look less likely. Blizzard's Warcraft had a very rich story and that didn't stop their first movie from flopping. Maybe there's Mario manga or cartoons, but if so, it is probably not widely circulated.

Even as the market has become more competitive, for console purveyors, the success formula has not changed. Only a great hit can create the positive flywheel effect needed to drive hardware and software sales. For Nintendo, it was Mario; for Sega, it was Sonic; for Xbox, it was Halo; for Sony, it was probably Final Fantasy. Somehow, somewhere, a great hit will be born. But to whom will it belong? And how long will it last?

Noting that this was written in 2021. The trailers for the Mario movie is out and so far it is looking good. Of course, only time will tell if the movie flops or not. Illumination studios has a good track record with children's movies.

The 2nd part is a little over-simplified. While Nintendo is closely associated with Mario, it certainly is not the only recognizable IP linked to it. Don't forget Zelda, Pokemon.

https://www.nintendo.co.jp/ir/en/finance...index.html

The Super Mario Bros movie opened this week. Some prelim projections roughly in the 80 to 100 million range, for US domestic. Metacritic score not so good at 47 but if we compare to other similar films, it is not alarming.

Sonic the Hedgehog (2020)

Metacritic: 47

Box office:

Domestic opening: 58 million

Total worldwide receipts: 319.7 million

Sonic the Hedgehog 2 (2022)

Metacritic: 47

Box Office:

Domestic opening: 72 million

Total worldwide receipts: 405.4 million

Minions The Rise of Gru (2022)

Metacritic: 56

Box Office:

Domestic opening: 107 million

Total worldwide receipts: 939.6 million


https://adragonhoard.blogspot.com/2023/0...ening.html

Konichivalue on Substack on Nintendo.
Note: this was written before the move premiered.

https://www.konichivalue.com/p/nintendo-...uper-mario

(13-04-2023, 08:11 PM)EnSabahNur Wrote: Konichivalue on Substack on Nintendo.
Note: this was written before the move premiered.

https://www.konichivalue.com/p/nintendo-...uper-mario

I get wary on XXX whenever someone says "XXX is going to be the next YYY" where YYY is the incumbent leader.

Disney had successfully forged a "Cinematic Universe" in the last decade but I am not sure if the same thing will still work in the next decade? For example, it pains me to witness Warner Bros trying to do it with their DC Comics characters. If Disney, as the incumbent cannot create more success with the "Cinematic Universe", then what makes us believe that other entertainment companies can overtake Disney who are also masters of their own invented game?

Maybe the real question should be "Has the "Cinematic Universe" peaked already?"

Nonetheless, I do agree that Nintendo has plenty of IP that it can monetize, not necessarily through the "Cinematic Universe" route though.

I also share the same skepticism. Just to get something out of the way, it sounds like the DC issues are execution rather than anything wrong with the IP. So I am optimistic that can be fixed with the right person at the helm.

Anyway back to Nintendo, I have a feeling a lot of investors looking at Nintendo are looking at them through a very commercial lens, so their expectations are for them to follow the tried and tested models. As you mentioned, the MCU is a big success, so everyone should follow their strategy. If mobile is the next big thing, then everyone should start expanding to mobile.

However as Matthew Ball has pointed out, Nintendo basically does things their way. It is very hard to know what they will do in the future. 

So I am pessimistic about those views that hope for big profits from Nintendo going big into mobile/Nintendo Cinematic Universe or whatever others are doing. The only thing we can really expect them to do is to churn out good game content and do weird things with their hardware.

It's not that they can't change, but their changes are held back/shaped by their company culture. I also do not know if it is wise to want them to, because they seem to have found a niche for themselves in a world of FPS games, brutal competition between PS and Xbox. Even the FTC complaint against the Activision Blizzard - Microsoft merger acknowledges that Nintendo is just in their weird category.

Sorry for the long post. Basically yes, let's not expect a NCU.  

Back to the MCU, it does feel like it has peaked a little because the movies do not seem to generate the same excitement as before. I have a question though, what is a Cinematic Universe? It feels like this termed is used very loosely. Is it just a series of movies and/or shows that are tied together in one common/shared universe?
If so, it sounds like another tool that can be used to extract more $$$ from the IP, so maybe there is room for multiple CUs to exist. Maybe there isn't a need to beat Disney at their own game.

Early critics' reviews for Legend of Zelda: Tears of the Kingdom are very very positive.

https://adragonhoard.blogspot.com/2023/0...tendo.html

(vested)

The Legend of Zelda: Tears of the Kingdom first 3 days sales figures

- sold over 10 million units worldwide, becoming the fastest-selling game in the history of the Legend of Zelda series.

-comparison to Hogwarts Legacy sales of 12 million units in 2 weeks, 10 million Tears of the Kingdom units sold in 3 days.

https://adragonhoard.blogspot.com/2023/0...ngdom.html

A round-up of Nintendo Switch successor rumours.

It is possibly launching in 2024.

https://adragonhoard.blogspot.com/2023/0...mours.html