Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
A customer, left, walks past Animal Crossing video game characters at a Nintendo store in Tokyo on June 10. Photo: Agence France-Presse

Nintendo chills mobile gaming ambitions after Animal Crossing success

  • In the period from February through May, when other studios were posting record earnings, marquee Nintendo mobile games like Super Mario Run plummeted by double digits
  • At the same time, Nintendo’s own Animal Crossing: New Horizons powered the Switch console to new heights of popularity

Nintendo is retreating from the US$77 billion mobile gaming arena after disappointing results deflated once-lofty ambitions, ending a multi-year effort just as the market goes through an unprecedented Covid-19 era boom.

Company president Shuntaro Furukawa proclaimed two years ago that smartphone games would be a US$1 billion business with growth potential, building on his predecessor’s promise that Nintendo would release two to three mobile titles each year. That spurred hopes among investors that the gaming powerhouse could carve out a substantial slice of the market.

In May, however, the president adopted a markedly different tune, as he said: “We are not necessarily looking to continue releasing many new applications for the mobile market.”

Nintendo’s shares slid 4 per cent the day after that remark. Close observers might have sensed Nintendo was growing disillusioned with the mobile realm even earlier. Its smartphone games project was born out of necessity to shore up the bottom line amid the Wii U’s failure. Now, riding a surge in Switch popularity and investor confidence, the Kyoto-based company appears to have reassessed the mobile business and narrowed its focus to its own console gaming ecosystem.


Nintendo’s Switch console and ‘Animal Crossing’ game smash sales records amid pandemic

Nintendo’s Switch console and ‘Animal Crossing’ game smash sales records amid pandemic
In the period from February through May, when other game studios were posting record earnings alongside Covid-19 lockdowns, Sensor Tower data showed marquee Nintendo titles like Super Mario Run plummeting by double digits. At the same time, Nintendo’s own Animal Crossing: New Horizons had just become the quintessential haven from virus anxiety, powering the Switch console to new heights of popularity and pushing the company’s share price to a 12-year high last week.

Mobile games are expected to make US$77.2 billion this year, which would account for half of the overall video game industry’s sales, according to research from Newzoo. But “since the release of Mario Kart Tour in fall 2019, Nintendo’s mobile pipeline is empty,” said Serkan Toto, a mobile games consultant in Tokyo. “In a sense, Nintendo’s enormous success on console reduced the need and the pressure to put resources into mobile.”

Most of the top-ranked mobile games adopt a freemium model, in which playing is free but gamers are pushed to spend on upgrades or mighty weapons to advance. That approach is coming under scrutiny with regulators clamping down on exploitative freemium mechanics that force players to pay to win. In Japan especially, gacha – a lottery system where gamers pay in hopes of scoring rare loot – invited controversy because of its addictive aspects.

Nintendo’s Switch console shines after Animal Crossing game smashes records

Fearing that it would harm the brand equity of its franchises, Nintendo asked its mobile development partners not to force players to spend a lot in games, according to people at those companies, who asked not to be identified as the matter is private. A Nintendo spokesman declined to comment.

Nintendo has tested various revenue models for its smartphone games, including one-time purchases for Super Mario Run and subscriptions for Mario Kart Tour. Both apps have fallen short of market expectations in terms of revenue, according to Kazunori Ito of Morningstar Research.

For the company’s current financial year ending in March, Nintendo said it would focus on already released mobile apps and does not foresee revenue from that business rising much. The company earned 51 billion yen (US$477 million) from smartphone games and other licensing in its past financial year, up just 11 per cent from the year-earlier period and still only half of the way to the objective that its president had once set.

Nintendo’s enormous success on console reduced the need and the pressure to put resources into mobile
Serkan Toto, mobile games consultant

Nintendo has not announced what apps it will release next, but the chief of its mobile development partner, DeNA Co president Isao Moriyasu, has said not to expect new apps from it until near the end of the current financial year. That suggests a long wait until Nintendo’s next smartphone game.

Ace Research Institute analyst Hideki Yasuda said that, in Japan especially, gacha remains the only lucrative business model in mobile games. But even if Nintendo were willing to go down that path, it would be unsuccessful, he added.

“You need an active long-running franchise with hundreds of attractive characters to make a good gacha game and then you’d need to keep adding new characters each month to retain players,” Yasuda said. “Fire Emblem is the only Nintendo franchise capable of doing that.”

Nintendo’s peers offer clues as to why cracking the smartphone market is not always straightforward.

Square Enix Holdings, whose Dragon Quest Walk has grown into a huge hit, has taken another route to maximising game revenue. The publisher monetises its franchises by making them popular on high-definition home consoles first and then steering players to smartphone apps and having them spend money there – not just once, but repeatedly.

Gaming leads entertainment industry, from Call of Duty to Candy Crush, as millions stay in

Square Enix has so far released more than a dozen Dragon Quest mobile apps and more than three dozen Final Fantasy games for smartphones, showing the scale of investment required. Both franchises have legions of characters and by releasing multiple titles from each set of lore, the company prompts players to keep spending to obtain their favourite heroes for each game.

Nintendo’s Animal Crossing mobile app saw a 45 per cent uptick in earnings, as the Switch game was released, per Sensor Tower’s data, but the company does not find the Square Enix model appealing. Unlike video game studios who have to pay a platform fee whether on console or mobile, Nintendo has a strong incentive to focus all gamer spending on its own platform, where it does not have to share revenue. Its goal is to send customers from smartphones to consoles, not the other way around.

Animal Crossing players organise virtual vigils for the Tiananmen Square crackdown

Sony Corp’s PlayStation unit has also struggled to penetrate the mobile gaming arena. It has a smartphone division called ForwardWorks Corp, which has released eight games mostly based on inactive PlayStation franchises that have failed to gain traction without cross-promotion.

Nintendo’s dimmed enthusiasm for smartphone games is driven not only by disappointing revenue and unsatisfying monetisation options, but also by the limitations of the platform. The company believes its franchises shine brightest when coupled with designed-by-Nintendo controllers and it has never been fully comfortable with the touch screen-only interface of a smartphone.

“New smartphone games will come, but it’s very likely these will be just alibi releases to appease shareholders,” said games consultant Toto.