Bad morning for investors that still had positions in Nintendo. Shares drop almost 20% in Tokyo.
Pokemon Go's viral success drove up shares of Nintendo since the launch on July 6. Now Nintendo jumped on the breaks with a statement about the limited financial impact of Pokemon Go. I really never understood why Nintendo's shares rose as much as 100% over the past week. Nobody knew exactly how much Nintendo would make from the in-app sales of Pokemon Go, but it was clear that it is not much.
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Apple is making much more from Pokemon Go with the 30% share the app store takes. The other 70% are basically split between Niantic and the Pokemon Company.
Nintendo makes this clear now saying that Pokemon Go is developed by Niantic. The Pokemon Go company receives a licensing fee as well as compensation for collaboration in the development and operations of the app. This sounds like that Pokemon Go is not directly participating in the scale of the revenues. It sound like a fixed fee.
Nintendo states the company owns 32% of the Pokemon company, but because the share is accounted by the equity method the revenues will have limited impact on Nintendo's financials.
Nintendo also mentions in the statement the Pokemon Go Plus bracelet and confirms that the company is producing and distributing it. So they will make some money from this Pokemon Go accessory directly.
The Japanese video game maker ends the statement that the company is not adjusting their forecast for now. Shares of Nintendo dropped 17.72% in Tokyo on Monday. We expect a further drop this week.
Nobody at Niantic even expected Pokemon Go to become this huge. Nintendo also did not see it coming, else they might have struck a different deal and take more financial interest in the startup. Nintendo has invested in Niantic, which the company did not mention in the statement. There are over 20 million daily users alone in the United States.