Pokémon Go’s revenues are ‘unprecedented’ and show Nintendo’s brand power

As people around the United States gather at parks and other public spaces to capture and train their augmented-reality creatures in Pokémon Go, the three companies responsible for the the mobile app are probably having a difficult time counting all of their money.

Pokémon Go debuted on Wednesday in the United States after launching in Australia and New Zealand the night before, and by Thursday, it was the top downloaded and top-grossing iOS and Android game in all three markets. This sort of debut never happens. Game of War: Fire Age was the No. 1 top-grossing game on Google Play in the U.S. before the release of The Pokémon Company’s GPS-powered location-based monster-catching game, and it took more than a year and tens of millions of dollars in marketing for it to overtake Clash of Clans and Candy Crush Saga. While the mobile gaming market is $36.9 billion, a handful of games and developers have dominated that space for multiple years in a row. Nintendo could have the brand recognition to disrupt that balance.

Developer Niantic produced Pokémon Go on the technology it used to make its Ingress GPS game. The studio worked with The Pokémon Company, which controls the popular brand when it comes to licensing and merchandise. Nintendo, Game Freak, and Creatures, Inc. — the three companies responsible for creating Pokémon — each own approximately a third of The Pokémon Company.

“Pokémon Go doing so well initially should not be a surprise: It is one of the most enduring and widely popular game franchises in the world.” SuperData Research analyst and chief executive Joost van Dreunen told GamesBeat. “It has produced no fewer than 18 full feature films, a cartoon series, trading card games, and a slew of swag. More so, even though Pokémon is operated independently, it is part of the Nintendo empire, which saw a similar consumer response with Miitomi. You cannot underestimate the strength of this Japanese giant and its assets, even if contenders have emerged in the last few years.”

So while Nintendo is only a minority stakeholder in The Pokémon Company, its future is heavily invested in Pokémon Go. The publisher owns an undisclosed portion of Niantic and Creatures, Inc., and it even has renowned Mario and Zelda creator Shigeru Miyamoto help design the app. Pokémon Go is also representative of what a big Nintendo franchise can do in the mobile market. Due to these factors, Nintendo’s share price is skyrocketing on the Tokyo Stock Exchange. It jumped 25 percent today.

Now, Nintendo has every reason to believe in mobile, and you can expect its first upcoming games (following the social platform Miitomo) to try to capitalize on this later in 2016.

A tectonic shift

Pokémon Go is making $1.6 million every day from iOS devices in the United States alone, according to Sensor Tower. It is the top-grossing game in all three of its active territories (U.S., Australia, New Zealand) on both iOS and Android. Nintendo is seeing this data, and despite what SuperData’s van Dreunen says, gaming-industry analyst Serkan Toto thinks this is all coming as a shock to the Japanese publisher.

“They probably can’t believe their eyes,” Toto said. “This is unprecedented.”

Pokémon Go’s success is not a different take on the familiar winning formula of building a midcore military strategy game or match-three puzzler and then spending a 100x the game’s budget on advertising. This is something new for The Pokémon Company, for Nintendo, and for the mobile market at large. The enormous business of mobile gaming was experiencing significant growth over the last several years, but that was primarily due to fresh markets coming online with smart devices, like China. But the same games, like Clash of Clans and Candy Crush Saga, have dominated the charts since 2012.

The only debut releases to break into the top-grossing charts recently are Mobile Strike and Clash Royale. Mobile Strike is the the latest game from Game of War developer Machine Zone (under its Epic War division), and it is a military strategy game with similar mechanics to its other app. Clash Royale is a head-to-head competitive take on the megapopular Clash of Clans. Mobile Strike and Clash Royale both have big marketing campaigns. Machine Zone spent millions of dollars on TV ads featuring Arnold Schwarzenegger.

But even Clash Royale, which debuted to a significant amount of hype, needed 57 hours before it reached No. 1 on the highest-grossing chart in the U.S.

Pokémon Go got to No. 1 in only 13 hours.

App market has been frozen in stasis since 2013 – match 3 puzzles and war strategy games have dominated sales. Pokemon Go ends that era.

— Tero Kuittinen (@teroterotero) July 11, 2016

While Pokémon Go has had some marketing, The Pokémon Company has not spent money on television or on YouTube influencers, as some other mobile companies. What’s even crazier is that Pokémon Go was an immediate success without some of the basic boosters that every developer relies on. Sensor Tower points out that Apple and Google have yet to feature Pokémon Go on the homepage of their respective app markets.

The implication here is that Pokémon is this massively appealing thing, and it is serving a portion of the market that does not want more match-3 puzzle games and military (fantasy, sci-fi, or modern) strategy games for the midcore audience. We’ll see if Go can maintain this momentum, but it has almost certainly changed the mobile gaming landscape.

“The initial audience response is more telling of the increasingly lethargic mobile games market,” said van Dreunen. “With its growth slowing, it takes an established franchise like Pokémon for the numbers to suddenly, and likely briefly, flutter before reestablishing its previous equilibrium.”

Nintendo is coming

In addition to Miitomo, Nintendo plans to release four mobile apps before March 31, 2017. It already announced that the next two are in its Fire Emblem and Animal Crossing brands, which are each franchises that have sold multiple millions of copies on Nintendo handhelds and consoles. The publisher has previously said that it will try to generate money from these games while also attempting to funnel new players into its traditional gaming platforms, like the upcoming NX dedicated game platform.

But Nintendo’s stock price isn’t skyrocketing because of what Pokémon Go means for the NX. Clearly, the market sees that something like Pokémon can turn into a profound success on mobile, and it’s possible that could convince Nintendo to embrace mobile as a stronger pillar of its business.

“I seriously think Nintendo doesn’t really care about mobile at the moment,” said Toto.

As the publisher sees the daily revenue numbers, that attitude could change fast. That could convince the company that its other top brands, like Mario and Zelda, could bring it back to levels of income it hasn’t seen since the early days of the Wii.

At the same time, the company would likely want to wait and see the long-term trends for Pokémon Go.

“What will be critical is the coming period,” said van Dreunen. “Can Pokémon Go keep its momentum and cultivate a loyal following. Just like every other mobile game, it will have to face the retention figures after 7, 30, and 90 days.”

The SuperData analyst thinks that Pokémon Go could end up as something of a summer jam that loses its appeal after a few months. If that’s the case, it’s not exactly a revolution for Nintendo or mobile.

For Toto, however, this is all going as expected.

“I have been saying this for one and half years now,” he said. “Nintendo will make billions of dollars every year on mobile eventually.”