Sector Report

Japan gaming – Mario’s China jump

by Jay Defibaugh / Nov 8, 2019


Overview of Nintendo
Nintendo is undoubtedly Japan’s best-loved video-game maker: at the core of its popularity and its success is a wide array of fully owned IPs, nurtured over decades, which are among the most well-known, beloved and popular in the history of the video-game industry. These IPs typically form the basis for its best-selling games.

Survey results suggest significant opportunity for Nintendo in China
Our proprietary survey of Chinese gamers helped to uncover attitudes towards the Nintendo brand, familiarity with the game maker’s vault of intellectual property (IP) and openness in China to an unproven business model for game consoles. Some 76% of respondents have already heard of Switch, and, among those, 74% indicate an intention to buy the console when it is released.

Nintendo business prospects bright
Nintendo has a very attractive growth profile stemming from its currently minimal exposure to the industry’s growing segments (mobile, online) and virtually untapped geographies (China, emerging markets). We assess its overall prospects by looking at its two key business lines – console business currently centred on Switch and the mobile app games business – with an overlay from China for both business lines.

Attractive mix of catalysts and valuation
Investors can look forward to continued growth for the Switch platform, the rollout of Switch in China and a subsequent partnership with Tencent in mobile games, as well as new releases of smartphone games that incorporate a newfound aggressive attitude towards mobile game monetisation.