Pokemon Go – everybody loves Pikachu…

Pokemon Go - Nintendo's pivot to smart phones?

Pokemon Go is great – but will it bring another Nintendo boom as in 2009? or even exceed 2009?

Google spin-out Niantic Labs’ augmented reality smartphone game booms to the top of charts

Niantic Labs is specialized on augmented reality games. In a previous game, Ingress, players selected about 15 million memorable locations globally. Niantic picked about 5 million of these crowd source generated locations, placed characters out of 740 Pokémon characters at such Pokéstops. Using smartphones, GPS, cameras and their avatars, players hunt Pokémon characters placed at Pokéstops, bring them to arenas/gyms and let their Pokémon characters fight for arenas/gyms. Thats just the beginning, and we can imagine many ways to expand this basic game structure, for example Pokéstops and Gyms sponsored by stores or corporations.

Overcoming Galapagos

Pokémon Go’s success is also significant, because the fundamentally Japanese Nintendo and The Pokémon Company are overcoming the Japan-Only Galapagos Syndrome by cooperating with Google and San Francisco based Google spin-out Niantic.

At the same time, Pokémon Go is also an indication of the power Nintendo can achieve in the smart phone sector. Will Nintendo dethrone current smart phone game kings Mixi and Gung-Ho in Japan?

Everybody loves Pikachu… No. 25 of currently 740 Pokémon characters

For the open day at my older son’s high school, kids made posters introducing their country: the highest mountain, the most characteristic flower, and the most famous person.

One Japanese student writes: “The Prime Minister is the most famous person in Japan, because he decides everything”.

Another Japanese student writes: “Pikachu is Japan’s most famous person, because everybody loves Pikachu”. Which of the two Japanese students knows more about his own country?

Pikachu is No. 25 of currently 740 Pokémon characters, and represents electricity with his zig-zag lightening bolt tail, and bright yellow color.

Pokémon character developer The Pokémon Company estimates the global market for Pokémon characters to be US$ 48 billion.

Nintendo market cap increases from US$ 20.3 billion to US$ 31.5 billion from 6 to 13 July, 2016

Nintendo shares rise from ¥14,055 in the morning of July 6, 2016 to ¥21,830 at close on July 13, 2016

Nintendo market cap rises from ¥ 2.56 trillion (US$ 20.3 billion) in the morning of July 6, 2016 to ¥ 3.09 trillion (US$ 31.5 billion) at close on July 13, 2016

Nintendo boomed around 2009 by disrupting the game world with motion sensing Wii and two-screen handheld DS game consoles. Smartphone disruption reduced Nintendo to pre-2006 size in sales, and profits did not yet recover to pre-boom levels.

Nintendo revenues peaked in 2009, and are now back to where they were before 2006
Nintendo revenues peaked in 2009, and are now back to where they were before 2006
Nintendo income peaked in 2009, and just recently recovered from losses - has not yet reached pre-2006 levels
Nintendo income peaked in 2009, and just recently recovered from losses – has not yet reached pre-2006 levels

Unexpected consequences- The Bank of Kyoto booms, and Bank of Kyoto’s 4.5% holding in Nintendo is worth more than 1/2 of Bank of Kyotos market cap

The Bank of Kyoto owns 4.5% of Nintendo, at close on July 13, 2016, this holding is worth YEN 139 billion (US$ 1.4 billion).

The Bank of Kyoto (TSE Code 8369) at the close on July 13, 2016 has a market cap of YEN 274 billion (US$ 2.64 biliion)

Thus Bank of Kyoto’s holding in Nintendo corresponds to more than one half of its value. This also means that Nintendo is worth about 10 times as much as the Bank of Kyoto.

The Pokémon Company – global market size estimate for Pokémon characters estimate: US$ 48 billion

The Pokémon Company manages and develops the currently 740 Pokémon characters.

The Pokémon Company is a private company owned in equal 1/3 parts by Nintendo KK, KK Game Freek and KK Creatures. KK Game Freek and KK Creatures are both privately held game development companies

More details and analysis in our Report on Japan’s game markets and makers.

Niantic Labs

Niantic Labs, focused on augmented reality games, is a Google spin-out founded in 2010, headed by John Hanke, one of the founders of Keyhole, which is at the basis of Google Earth.

Niantic Labs had staged initial funding of US$ 90 million equally from Google (1/3), Nintendo (1/3) and The Pokémon Company (1/3), and since then an additional Series A round in February 2016, plus we assume that Founder John Hanke, maybe Google at spin-out, other founders likely also own equity. So its not clear to us how much exactly Nintendo owns of Niantec, either directly or via its holding in the Pokémon Company.

There was a augmented reality company in Japan, Tonchi-Dot 頓智ドット株式会社(トンチドット) which created a augmented reality app called Sekai-Camera during i-Mode and Galake-Phones, but it ended all services on January 22nd, 2014.

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