Will Pokemon Go sustain a turnaround for Nintendo's brand?

The Pokemon Go app launched in Japan on Friday, having already become a phenomenon in 35 countries and doubling Nintendo’s value to more than US$39 billion, overtaking Sony, according to Bloomberg.

Bloomberg reported that upon launching in Japan, shares increased by nearly 7 percent. Having struggled for a prolonged period, things do suddenly look much better for Nintendo. At the same time, the company apparently suggested to Bloomberg that longer-term financial impact from Pokemon Go would be “limited”, and indeed on 25 July, shares fell again by 18 percent.

It’s important to remember that Pokemon Go is not a Nintendo property, although the company is a stakeholder in Pokemon and Niantic, which is also the developer of the popular Ingress game. With Pokemon ultimately operating separately, the question is whether the positive impact on Nintendo’s brand will be lasting, or simply a flash in the pan.

Daizo Nishitani, managing director of Essence in Japan, said he believed the game, and tangential new opportunities to grow revenue, are likely to have a long-term positive effect on the Nintendo brand.

Gamers have in the past criticised Nintendo for its rigid approach to IP and unwillingness to separate its hardware from its software. Pokemon Go could signal a welcome change of direction.

“The greater the short- to medium-term success of Pokemon Go, the more it will force the Nintendo brand and products to evolve even further from a console focus to experiential smartphone-based gaming,” said Christer Eriksson, Asia-Pacific managing director of strategy at R/GA.

Eriksson noted that Nintendo had typically been wary of the smartphone space, but said Pokemon Go would likely spur other gaming companies to sign licensing deals or use owned properties to become part of augmented reality (AR)-based games. “How Nintendo fares in this land grab, including how much they use their own properties, will define their brand makeup further,” he said.

Anthony Baker, technology director also at R/GA, said Nintendo had succeeded in putting the spotlight back on AR, which has seen limited uptake despite having existed for a number of years. Something that could prove a game changer, he said, is that Pokemon Go “might provide a new business model where Nintendo not only earns revenue through in-app purchases, but also monetises foot traffic as an offering for businesses”.

Pokemon Go’s launch in Japan is supported by McDonald’s, which as well as merchandising has turned a number of its restaurants into physical spaces for gameplay. Of course, the partnership is with Niantic rather than Nintendo, but there is nothing to stop Nintendo pursuing similar initiatives in the future. Nishitani said Pokemon Go offered potential tie-up and marketing opportunities for a range of sectors, from convenience stores to car dealers, travel bureaus and drug stores.

“It is still to be seen if Nintendo manages to retain consumer interest after the novelty rubs off, and if the company is able to create a sustainable business model out of it,” Baker said. “But one thing is certain: Nintendo has proven that AR applications can captivate the interest of consumers on a global scale, and disrupt the way people interact with the physical world on a daily basis. With the current technology advancements, it is quite possible that this is just the beginning of a hyper-reality global transformation.”