Nintendo's ambitious bet on smartphone apps isn't paying off

  • Nintendo is shutting down Miitomo, its freemium social-networking app.
  • It has previously said “Super Mario Run” hasn’t made enough money.
  • “Animal Crossing: Pocket Camp” doesn’t appear to be performing well either.
  • But the Nintendo Switch is a smash hit that makes up for all of it.

Nintendo has been trying to add a suite of “freemium” smartphone games to its list of titles – but it looks as if the company is struggling to make its strategy pay off.

The company announced on Wednesday that it would close its Miitomo social-networking app on May 9, just over two years after the app launched. While Miitomo was more of a social network than a traditional game, the app still followed a freemium monetisation strategy, in which it was free to play but dedicated players could spend money for extra features.

So, Miitomo was a failure. Fine, Nintendo can cut its losses and move on. But its two big-ticket smartphone games aren’t performing well either.

‘Super Mario Run’ isn’t making enough money for Nintendo’s liking

Take “Super Mario Run,” the company’s attempt to bring its “Super Mario” series to smartphones using a freemium model that gives players a handful of free levels to play before they have to pay up for the entire game.

For Apple, “Super Mario Run” was a major triumph. Here was a new game in a beloved series from perhaps the world’s best-known video game developer, launching first on the iPhone. It was such a big coup that Apple invited Shigeru Miyamoto, the Nintendo executive who created “Super Mario,” onstage at its September 2016 keynote to announce it.

Shigeru Miyamoto and Tim CookStephen Lam/Getty ImagesShigeru Miyamoto and Apple CEO Tim Cook in 2016.

But this past October, just over a year after “Super Mario Run” was released, Nintendo acknowledged that the game just hadn’t met expectations. “Although we have not yet reached an acceptable profit point,” Nintendo said in its earning presentation, “we have learned a lot in terms of game development that we want to take advantage of moving forward.” Translation: We haven’t earned enough money yet, but it was a useful experiment.

That’s backed up by data from the mobile-gaming analytics firm Newzoo. It estimated that Nintendo had brought in only about $US30 million (£21 million) from people paying $US10 (£7) each for the full “Super Mario Run” game. Newzoo estimated Nintendo’s conversation rate for players paying to upgrade to the full game to be just over 3%.

‘Animal Crossing: Pocket Camp’ isn’t a smash hit either

Nintendo had another go at making its smartphone-game strategy work in October when it released “Animal Crossing: Pocket Camp.” Unlike “Super Mario Run,” the freemium mechanic of this game wasn’t a one-time payment. Instead, players are regularly encouraged to pay for bundles of bonus items as they play through the game.

But data from the app-analytics company App Annie shows that “Animal Crossing: Pocket Camp” hasn’t set the US App Store on fire.

Here’s the US App Store rank history over the past 90 days for “Animal Crossing: Pocket Camp”:

Animal Crossing Pocket Camp US App Store rankingApp Annie

The game had an impressive launch and was at the top of the overall US App Store for a time, but last week it cratered to as low as 823rd before recovering to 391st. It’s not a particularly impressive position, especially when compared with “Super Mario Run”:

Super Mario Run US App Store rankingsApp Annie

“Super Mario Run” has stayed among the top 200 apps in the US App Store – and this is the app that Nintendo said wasn’t making enough money.

But let’s look at Apple’s grossing ranks for the US App Store, which sorts apps by how much money they’re bringing in.

Here’s “Animal Crossing: Pocket Camp”:

Animal Crossing Pocket Camp gross US App StoreApp Annie

Now let’s compare that with “Super Mario Run”:

Super Mario Run US App Store grossingApp Annie

“Super Mario Run” is hovering relatively steady over time between the Nos. 300 and 400 positions. But “Animal Crossing: Pocket Camp” has seen a pretty big decline in just two months, meaning its earnings are dropping. It’s not looking good.

‘Pokémon Go’ won’t be Nintendo’s smartphone saviour

It must be worrying for Nintendo that the only Nintendo-related smartphone game that has truly become a hit, “Pokémon Go,” wasn’t even made by Nintendo. Instead, it was made by the US startup Niantic.

Sure, Nintendo earns money from licensing out the Pokémon brand, but it has said the revenue from “Pokémon Go” has only a “limited” impact on its business, and it hasn’t prompted the company to adjust its earnings forecasts. Instead, Niantic gets the lion’s share of “Pokémon Go” revenue – and Apple takes its cut of that. Nintendo is largely left out of the phenomenon.

Maybe it’s only the Nintendo Switch that matters

Nintendo’s stagnant smartphone games shouldn’t be a sign to investors that the company is doomed. Instead, just look at the Nintendo Switch, the company’s latest games console. In short: It’s a smash hit.

The Nintendo Switch is the fastest-selling video game console in US history, selling nearly 5 million units in the US alone since its launch in March. It’s selling so well that Nintendo had to revise its year-one international sales estimates upward to 14 million from 10 million.

And those sales don’t include Labo, Nintendo’s new plan to sell cardboard kits that expand how people can play with their Switch. Those kits will sell for $US69.99 (£49.03) and $US79.99 (£56.04) in the US, giving the company more revenue from new and existing Switch customers.

The success of the Switch has prompted Nintendo to raise its full-year operating-profit forecast for 2017 to 120 billion yen ($US1.1 billion, £773 million). That makes the estimated $US30 million it earned from “Super Mario Run” look insignificant in comparison.

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