Pokémon Go has Nintendo looking vibrant again, but the company doesn’t want you to get big ideas about what Pikachu is doing to its bank account.
In a note to shareholders, Nintendo president Tatsumi Kimishima explained that the publisher will only get a minor bump in its income from the mega-lucrative Pokémon Go. The company is not revising its financial forecast for the quarter that it previously set on April 27. Nintendo’s stock price has more than doubled to $265 a share since Pokémon Go debuted earlier this month. The GPS-powered location-based game is the top-grossing iOS and Android app in the $36.9 billion mobile gaming industry, but the company wants investors to know that several other entities have rights to that money before it’ll see it.
[aditude-amp id="flyingcarpet" targeting='{"env":"staging","page_type":"article","post_id":2010965,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,games,","session":"B"}']“This mobile game application is developed and distributed by Niantic, Inc,” reads Kimishima’s note. “The Pokémon Company, which is an affiliated company of Nintendo Co., Ltd., holds the ownership rights to Pokémon. The Pokémon Company is going to receive a licensing fee as well as compensation for collaboration in the development and operations of the application. [Nintendo] owns 32 percent of the voting power of The Pokémon Company.”
Nintendo reports earnings from The Pokémon Company using the equity method. Put simply, this means Nintendo won’t report direct profits from that minority-owned subsidiary. Instead, the publisher’s financial reports will show an increased value in the share of The Pokémon Company that it owns. Here’s an example of how that works: If The Pokémon Company generates a net income (not revenues or sales) of $10 million, Nintendo would report $3.2 million, 32 percent, of that as revenue.
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“Because of this accounting scheme, the income reflected on [our] consolidated business results is limited,” said Kimishima. “Taking the current situation into consideration, Nintendo is not modifying the consolidated financial forecast for now. [We] will make a timely disclosure when [we need] to modify our financial forecasts.”
The publisher did note that it will release a special pedometer peripheral called the Pokémon Go Plus that connects to the game. It is “scheduled for release,” according to Nintendo.
While Nintendo is responding to investors doubling the company’s value, many people buying the publisher’s stock are likely aware that Pokémon Go will only have a minor impact on the company’s next financial report. Instead, many people investing likely see Pokémon as the first example of what Nintendo properties can do once they are on iOS and Android. Additionally, the popularity of the pocket monsters on mobile could feed back into Nintendo’s console and handheld games as new, core versions of Pokémon — like the upcoming Sun and Moon — launch to consumers.
If Kimishima and Nintendo cannot execute on a followup strategy to Pokémon Go, however, then it may find itself in a situation where investors begin bailing on it once again.
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