Investors realize Nintendo didn’t develop Pokémon Go, Nintendo loses billions in value

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Pokémon Go is an unprecedented success, but Nintendo recently admitted it won’t directly profit from the augmented reality game, leading to a loss of $6.7 billion in Nintendo’s market value on Monday. Nintendo’s market value rose by $7.5 billion on July 11th, just after Pokémon Go went public and became an instant, massive hit across the globe. Since its launch, Pokémon Go has added nearly $12 billion to Nintendo’s market value, meaning today’s dip, while sizable, isn’t a total disaster for the company.

Nintendo published a letter to investors on July 22nd offering a reality check on the company’s involvement in Pokémon Go: it didn’t develop or publish the game. Instead, Nintendo has a 32 percent stake in The Pokémon Company, the business that markets and licenses the Pokémon franchise to outside developers. The Pokémon Company will receive licensing fees and compensation for collaborating with developer Niantic on Pokémon Go, and Nintendo will see just a sliver of that revenue.

“Because of this accounting scheme, the income reflected on [Nintendo]’s consolidated business results is limited,” the company wrote. Nintendo said it would not modify its financial forecast.

 

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On Monday, the first trading day after its letter went public, Nintendo’s stock fell as much as 18 percent. It’s the steepest hit to the company’s shares since 1990, Bloomberg reports.

Many people associate Pokémon with Nintendo, and for good reason: The company has published the games since their inception in the 1990s and it owns a third of The Pokémon Company itself. However, Nintendo simply didn’t have a hand in developing or publishing Pokémon Go. Nintendo and Google did invest roughly $30 million in Niantic as it worked on Pokémon Go.

Nintendo will produce and distribute the Pokémon Go Plus accessory, a plastic wearable that connects to a smartphone via Bluetooth, and then lights up and vibrates when players encounter PokéStops or Pokémon in the wild. Pokémon Go Plus will cost $35 and Nintendo had already rolled any potential revenue from the peripheral into its financial forecast ending March 31st, 2017.

 

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