NTDOY - Nintendo

[Jurgis]

Somewhat OT:

 

I agree that augmented reality will be huge at some point. I think Google was stupid to abandon Glass (even though I won a prediction I made couple years ago that Glass won't be a huge replacement for mobile phones - Glass bulls just piled on me when I made it).

 

I think Microsoft is making the same mistake by (mostly) abandoning Kinect. They should have tried to improve it and push it much more instead of just rolling over.

 

I think Pokemon Go is a fad, but it will depend a lot on the company. They might be able to make it Warcraft level success if they make it fun and attractive long term. Right now I think it's somewhat bleh, though I might be wrong demographics: e.g. I start it when I go for a walk, but I won't go out of my way to get to a Pokegym (and it told me that I am too low level anyway...  :'( ). The fact that some Pokemons show spawned on private property kinda concerns me: is this invitation to get on my lawn?  :o Also if this becomes hugely pay to win, that could make it crash too (although it will make bunch of money in the meantime).

[rkbabang]

Somewhat OT:

 

I agree that augmented reality will be huge at some point. I think Google was stupid to abandon Glass (even though I won a prediction I made couple years ago that Glass won't be a huge replacement for mobile phones - Glass bulls just piled on me when I made it).

 

I think Microsoft is making the same mistake by (mostly) abandoning Kinect. They should have tried to improve it and push it much more instead of just rolling over.

 

I think Pokemon Go is a fad, but it will depend a lot on the company. They might be able to make it Warcraft level success if they make it fun and attractive long term. Right now I think it's somewhat bleh, though I might be wrong demographics: e.g. I start it when I go for a walk, but I won't go out of my way to get to a Pokegym (and it told me that I am too low level anyway...  :'( ). The fact that some Pokemons show spawned on private property kinda concerns me: is this invitation to get on my lawn?  :o Also if this becomes hugely pay to win, that could make it crash too (although it will make bunch of money in the meantime).

 

It's early yet for AR.  Being too early is the same as being wrong.  Pokemon might be a fad, but it doesn't mean you can't make money with NTDOY.  Look at the chart I posted, for those who knew that Wii was a fad and sold after the run up they did great.  Those who thought Wii was going to change video gaming forever and held for 5-10 years, they didn't do so great.  The question is how much higher will it go? Where is the top before the fad goes away?  It is up a lot already, is there still plenty of room or not?  I don't know the answer to those questions.  I wouldn't buy NTDOY and expect to hold it for 5+ years based on Pokemon Go though.

 

[Packer16]

I think this a marketing bonanza.  Imagine the ability to bring folks into your store looking for Pokeman or whatever else.  My kids now go for walks looking for Pokeman when before it was impossible to get them to do this, they are teenagers.

 

Packer

[fareastwarriors]

I think this a marketing bonanza.  Imagine the ability to bring folks into your store looking for Pokeman or whatever else.  My kids now go for walks looking for Pokeman when before it was impossible to get them to do this, they are teenagers.

 

Packer

 

The game should be tracking steps/miles  strava/fitbit style. Hit 5 miles? get a item or something like that.

[CorpRaider]

Nice job of not anchoring Picasso.  I can't seem to do it but I think you will likely do very well with this one.

[ragnarisapirate]

This last week strikes me as super interesting for a lot of reasons. Not sure that this really addresses anything in this thread, but, I wanted to jot these ideas down and see what others think.

 

1) Pokemon is relatively old IP. I remember it from when I was a kid, and, it was in Japan even longer than here, if I recall correctly. Pretty impressive that they figured such a unique way to monetize. Nintendo probably couldn't have done it with Mario. Pokemon was PERFECT for this type of game- Nintendo investors probably could not have valued Pokemon any more incorrectly than they did (insert number of years ago).

 

2) What was readily considered weird (say, playing live action RPGs in parks) is really popular now. I could totally see something like this with Zelda... Heck, World of Warcraft working out something similar isn't totally crazy.

 

3) This is based on a game called Ingress, that a banker (of all things) I am friends with, turned me onto a few years ago. I didn't play very much, but all the locations that are used in Pokemon have come about because of a bunch of geeks making portals and such over the past 4 years in Ingress. Most interesting to me, is that Pokemon needed Ingress to succeed, because the "work" that the Ingress gamers was critical to get Pokemon to be a hit.

 

4) This really makes me wonder what kind of tricks all the tech companies out there have coming, based on the data that we have been giving them on our electronic devices. It also makes me a lot more sympathetic to companies that are reinvesting in their businesses in ways that the public doesn't see immediately. (The parallels here to what Uber, Facebook, Google, and the like are doing/have done could be pretty compelling)

 

5) $5-freakin-billion dollars in Nintendo market cap has come about in the past few days from not this game, but, the whole business line. And if I am correct, Nintendo only owns 1/3 of this game business...

 

6) Wii was revolutionary, and frankly, a precursor to this game (think about how it got people to like the idea of playing games that use a gyroscope as a main means of control). This is probably just another stepping stone to so many other lines that us mere mortals can't see.

 

7) What will the effects of weather be on this game line? I don't see people wanting to play it when it's 15 degrees outside... And, think about it- if you go 4 months without playing a game, do you really play it again? Then again, EA has made a business out of selling the same game over and over again (football, baseball, basketball, etc)

 

Basically, this is probably some sort of stepping stone. But the real fun is getting to see it all take place. It's kind of impressive that such an old school company like Nintendo is able to work up such a hit when everyone thinks the company is dead in the water.

[Patmo]

I mean sure, GO is a surprise hit, but with Nintendo's roster, was it really a surprise that the company would come out with popular mobile games?

 

 

[wachtwoord]

I feel very stupid for downloading this from day 1 and not connecting it to putting some money in NTDOY. I'm just not a momentum investor at all I guess. No way I'm toucing it now after such a run-up.

 

I still think glasses are next, followed by contacts, followed by implants.  The glasses/contacts might interact with the smartphone in your pocket at first, becoming standalone later on.

 

I don't think this I know this. I've been saying this for many years. Google glasses was the mp3 player (Zune perhaps), we're still waiting for the iPhone variant: Exactly the same product, but shiny, more expensive and timed properly. Google was just unlucky (like MSFT).

[ragnarisapirate]

I mean sure, GO is a surprise hit, but with Nintendo's roster, was it really a surprise that the company would come out with popular mobile games?

 

It's about how they did it, tho.

[eclecticvalue]

 

 

I don't think this I know this. I've been saying this for many years. Google glasses was the mp3 player (Zune perhaps), we're still waiting for the iPhone variant: Exactly the same product, but shiny, more expensive and timed properly. Google was just unlucky (like MSFT).

 

I think what has replaced the google glass is the DSLR camera. There is a genre of YouTube videos called vlogging and the best vloggers uses DSLR Cameras, or regular cameras to record footage of their everyday lives and upload it. I think it gives the creator a controlled way of doing it. Since they can edit it before uploading.

[rkbabang]

 

 

I don't think this I know this. I've been saying this for many years. Google glasses was the mp3 player (Zune perhaps), we're still waiting for the iPhone variant: Exactly the same product, but shiny, more expensive and timed properly. Google was just unlucky (like MSFT).

 

I think what has replaced the google glass is the DSLR camera. There is a genre of YouTube videos called vlogging and the best vloggers uses DSLR Cameras, or regular cameras to record footage of their everyday lives and upload it. I think it gives the creator a controlled way of doing it. Since they can edit it before uploading.

 

Recording video isn't really the killer app for the glasses.  Augmented reality is.  Google wasn't unlucky, but simply way too early.  Maybe in 3-7 years when Apple does it right it will catch on.

 

[eclecticvalue]

Maybe glasses isn't it. It'll be in the watch because the one feature with the glass majority of the people didn't like was recording video.

[DCG]

 

I didn't comprehend how big this has gotten until I was downtown in my city last night. A friend & I were hanging out on a roof-top patio at a bar that overlooks part of downtown. All of the sudden about 40 people showed up in the parking lot below us staring at their phones. Then 10 minutes later, there were about 20 people standing on the opposite street corner. We even saw 2 groups of people walk pretty much directly into each other while staring at their phones.

We then went to a different bar across the street where we know the bartenders, and one of them placed a bunch of lures (or whatever they're called) on their patio. A few minutes later a group of people showed up, and actually ended up staying and ordering drinks and food.

It's a great idea - although It seems like the last thing society needs is another reason for people to walk around staring at their phones. Seems like people will walk into the road and get hit by a car. Is it true that they built in functionality to prevent it from working at certain speeds? Because having everyone driving around playing this stupid game seems dangerous as hell.

Seems like the real winners will be the cell phone carriers as everybody's going to rack up huge data plan charges.

[Jurgis]

Maybe glasses isn't it. It'll be in the watch because the one feature with the glass majority of the people didn't like was recording video.

 

No. It has to be glasses or embedded in retina. The watch has the same problem as the phone: if you are walking and looking at it, you are not looking at the world. Pokemon Go shows that clearly: you are much more likely to run into people and trees and whatever because you are looking at the phone while walking and not looking where you are going. It's a very very crappy substitute for augmented reality.

 

We will get there though. Hopefully 5-10 years.

[rkbabang]

 

I didn't comprehend how big this has gotten until I was downtown in my city last night. A friend & I were hanging out on a roof-top patio at a bar that overlooks part of downtown. All of the sudden about 40 people showed up in the parking lot below us staring at their phones. Then 10 minutes later, there were about 20 people standing on the opposite street corner. We even saw 2 groups of people walk pretty much directly into each other while staring at their phones.

We then went to a different bar across the street where we know the bartenders, and one of them placed a bunch of lures (or whatever they're called) on their patio. A few minutes later a group of people showed up, and actually ended up staying and ordering drinks and food.

It's a great idea - although It seems like the last thing society needs is another reason for people to walk around staring at their phones. Seems like people will walk into the road and get hit by a car. Is it true that they built in functionality to prevent it from working at certain speeds? Because having everyone driving around playing this stupid game seems dangerous as hell.

Seems like the real winners will be the cell phone carriers as everybody's going to rack up huge data plan charges.

 

I was at a family event on Sunday in a small town in Massachusetts.  They rented the basement of a church located on a non-busy side street for the event.  When we first got there, the first thing my son did was go for a walk in the parking lot to get some Pokemon Go thing.  After the event was over we were standing in the parking lot for about an hour and a half talking before making the trip back to NH.  And we saw one car after another pull in, stop, people inside play with their phones, then leave.  It was non-stop, car after car after car, the entire time.  Sometimes two cars where there at once.  Sometimes there was one person in the car, other times the car was full of young people.  This is a small town nowhere near a major city (~60 miles from Boston, ~20 miles from Providence).  That's when I realized this must be huge, I can't imagine what it is like in the large cities.

 

[fareastwarriors]

 

I didn't comprehend how big this has gotten until I was downtown in my city last night. A friend & I were hanging out on a roof-top patio at a bar that overlooks part of downtown. All of the sudden about 40 people showed up in the parking lot below us staring at their phones. Then 10 minutes later, there were about 20 people standing on the opposite street corner. We even saw 2 groups of people walk pretty much directly into each other while staring at their phones.

We then went to a different bar across the street where we know the bartenders, and one of them placed a bunch of lures (or whatever they're called) on their patio. A few minutes later a group of people showed up, and actually ended up staying and ordering drinks and food.

It's a great idea - although It seems like the last thing society needs is another reason for people to walk around staring at their phones. Seems like people will walk into the road and get hit by a car. Is it true that they built in functionality to prevent it from working at certain speeds? Because having everyone driving around playing this stupid game seems dangerous as hell.

Seems like the real winners will be the cell phone carriers as everybody's going to rack up huge data plan charges.

 

I was at a family event on Sunday in a small town in Massachusetts.  They rented the basement of a church located on a non-busy side street for the event.  When we first got there, the first thing my son did was go for a walk in the parking lot to get some Pokemon Go thing.  After the event was over we were standing in the parking lot for about an hour and a half talking before making the trip back to NH.  And we saw one car after another pull in, stop, people inside play with their phones, then leave.  It was non-stop, car after car after car, the entire time.  Sometimes two cars where there at once.  Sometimes there was one person in the car, other times the car was full of young people.  This is a small town nowhere near a major city (~60 miles from Boston, ~20 miles from Providence).  That's when I realized this must be huge, I can't imagine what it is like in the large cities.

 

I'm in SF and my FB feed is blowing up with people doing pokemon go crawls (bars, parks, beaches, etc.)

[Patmo]

I mean sure, GO is a surprise hit, but with Nintendo's roster, was it really a surprise that the company would come out with popular mobile games?

 

It's about how they did it, tho.

 

I think it speaks to the quality of the IP that such  an unpolished game popped off, if that's what you meant. They can just polish it now, and learn and execute a bit better on future titles. We are talking Nintendo here, they are not reputed for ubisofting.

[ZenaidaMacroura]

So Niantic is still (at least partly) owned by Google?  This is piggybacking off Maps right?

 

Also, the point about Ingress is great.  What if Google could use games to compel people to collect valuable data? (in this case the data was used to situate pokestops and gyms). 

[fareastwarriors]

So Niantic is still (at least partly) owned by Google?  This is piggybacking off Maps right?

 

Also, the point about Ingress is great.  What if Google could use games to compel people to collect valuable data? (in this case the data was used to situate pokestops and gyms).

 

Take a look at the chart accompanying this article.

 

In ‘Pokémon Go’ Craze, How Much Profit Does Nintendo Capture?

Questions linger on potential profit gains from smartphone game; Nintendo’s shares soar

http://www.wsj.com/articles/pokemon-go-fueled-nintendo-just-keeps-going-1468302369

 

 

Niantic Inc., a closely held company in California that was spun out from  Alphabet Inc. ’s Google last year, is the developer and distributor of the game. The startup said in October 2015 that it had raised $20 million from Tokyo-based Pokémon Co., Google and Nintendo, with an additional $10 million investment possible if it achieved certain milestones. As is typical with startups, Niantic didn’t disclose the precise ownership stakes held by its investors.

 

Nintendo may profit as a part-owner of Niantic, and Nintendo is also a 32%-owner of Pokémon Co., which has long controlled the merchandising of Pokémon characters and describes itself as the producer of the “Pokémon Go” game. In addition Nintendo itself plans to sell a $35 hand-held device called Pokémon Go Plus that would make it easier to catch the digital creatures in the game.

[ZenaidaMacroura]

So Niantic is still (at least partly) owned by Google?  This is piggybacking off Maps right?

 

Also, the point about Ingress is great.  What if Google could use games to compel people to collect valuable data? (in this case the data was used to situate pokestops and gyms).

 

Take a look at the chart accompanying this article.

 

In ‘Pokémon Go’ Craze, How Much Profit Does Nintendo Capture?

Questions linger on potential profit gains from smartphone game; Nintendo’s shares soar

http://www.wsj.com/articles/pokemon-go-fueled-nintendo-just-keeps-going-1468302369

 

 

Niantic Inc., a closely held company in California that was spun out from  Alphabet Inc. ’s Google last year, is the developer and distributor of the game. The startup said in October 2015 that it had raised $20 million from Tokyo-based Pokémon Co., Google and Nintendo, with an additional $10 million investment possible if it achieved certain milestones. As is typical with startups, Niantic didn’t disclose the precise ownership stakes held by its investors.

 

Nintendo may profit as a part-owner of Niantic, and Nintendo is also a 32%-owner of Pokémon Co., which has long controlled the merchandising of Pokémon characters and describes itself as the producer of the “Pokémon Go” game. In addition Nintendo itself plans to sell a $35 hand-held device called Pokémon Go Plus that would make it easier to catch the digital creatures in the game.

My memory is super fuzzy (I owned Nintendo some years ago).  I vaguely remember that there are 3 companies that own "The Pokémon Company" and that Nintendo owns 32-33%, Game Freak owns a third, and Creatures Co owns another third.  I believe Nintendo is also a majority owner of one of the other "thirds" (Japanese Crossholding mess) and effectively own over 50%.  Is that right?

[Picasso]

well, I think a key difference is that Apple had SJobs back then, and I don't have that high regards for nintendo's current mgt

so maybe we shouldn't be that excited...

 

Picasso, what's the rough upside you see from this level? Maybe you see it as a long term compounder?

 

Well as long as everyone on CoBF thinks it's a fad, I think it's probably okay to buy NTDOY. <Insert passive aggressive smiley>

 

It seems obvious to me that it's going to be a smashing success and only get better over time.  This is probably one of the most valuable franchises in the world and mobile is getting to the point where they can really start to monetize it.  All the prior successful mobile games were garbage repetitive pecking cash grabs, like candy crush or whatever.  But now you have a real massive multiplayer mobile game that can actually take advantage of this massive character universe.  It's like Pokemon was made for the technology that we have today.  Plus all the consumers who loved Pokemon (insert other Nintendo franchise) actually have money to spend.  Which means this app has a ton of value in terms of the traffic it can drive to various venues. 

 

Now compare what Nintendo has sitting in its pockets to the valuations recently paid for Supercell or Dreamworks Animation.  But the commentary from the finance community reminds me of Apple back in 2003.... https://valueinvestorsclub.com/idea/Apple_Computer/996

 

 

I agree that the company has great products and fanatical loyalty, but the question is can this proprietary model which has higher gross margins offset entirely by higher R&D SG&A expense compete effectively with Dell? In other words, can this company ever get to a "normalized" level of profits given its relative cost disadvantage?

 

Also, I get feeling that this company is being run for the benefit of satisfiying Steve Job's whims and not for shareholders given: 1) hoarding cash for God knows what (Vivdendi or another value-destroying acquisition?) 2) lack of share repurchases/dividends 3) egregious compensation for Jobs (e.g. a $90m airplane given to him by the company in 12/99 and 5m shares of restricted stock in 3/03).

 

I just don't see a ton of downside.  I see what others are paying for less robust franchises (DWA, Supercell, King Entertainment) and it seems like $15 billion is a low figure for the enterprise value of Nintendo's franchise.  It's being hidden by the crappy hardware business. 

 

So say $15 billion baseline for the franchises here ($13/share) plus cash per share ($8) gets me to $21 as downside.  I'm (so far) long at $27 (hopefully I can buy more at a lower price) so say 22% downside to some rough estimate of fair value.  But at this point I think you can say that there's a high probability that fair value will quickly approach $27 and what will the market pay for a long time dead money stock that suddenly showing massive, long-term returns on invested capital?  *cough, Apple, cough* We saw what happened with the Wii, but this time they'll be bringing out their franchise into a global mobile market.  It can probably go parabolic at some point like it did with the more faddish Wii. 

 

The upside will be what it is.  I just think the downside isn't that big and the market is still slow to realize what's just happened because it's anchored to a long-time dead money stock.  Even if there's just a 20% chance this starts compounding I think it's worth going long.

 

And Pokemon Go may end up worth several tens of billions.  So whatever that stake is worth.  It may be trading at a discount to their "2017" Pokemon stake, plus cash and you get all the other future mobile outcomes for free.

[adesigar]

http://www.cnbc.com/2016/07/13/pokemon-go-now-the-biggest-mobile-game-in-us-history.html

 

Quotes from the article

 

"After three days of its release, "Pokemon Go" had attracted more users than Twitter, and rose to the top of the App Store's revenue charts."

"But the game is expected to pass Snapchat on Android in a few days, and it could surpass Google Maps itself as the largest user of Alphabet's mapping data. "

 

 

[DCG]

I feel like everyone is checking it out now to see what the hype is about, but it seems like people will stop using this in probably a month or so.

[Jurgis]

I feel like everyone is checking it out now to see what the hype is about, but it seems like people will stop using this in probably a month or so.

 

I hate being negative, so I think I should stop posting here and ... get off my lawn you Pokemon hunters!!!  >:( ... just kidding.  ;D

 

I read about the game more at http://www.pcmag.com/news/346042/pokemon-go-how-to-get-started-and-catch-em-all and it seems to be casual-solo-gamer unfriendly. I.e. by the time I get to level 5 - a month with my "turn on when I walk" schedule, everyone will be level 50 or whatever with uberleveled pokemons. So forget about winning in a gym unless you descend on it with a gang of friends. One solution is "pay to win", which is good for the company but may not be good for the game.

 

Other annoying drawbacks: weather was mentioned abovethread; annoying locations for pokemons - middle of intersection, etc; annoying milling around trying to find the pokemon after phone vibrates - couple times I had to spend couple minutes looking like a dork on a parking lot to find the exact spot where the pokemon appears; huge battery draw on the phone; other phone apps crashing/failing because pokemon is running; looking like a dork and being unsafe by watching the screen all the time while walking - this is alleviated a bit by the vibrate/sound alerts.

 

Overall, I still vote on fad. But this is not to say NTDOY is buy/sell/short/hold. I think publicity is good for the company and I think it could get some good business results out of this. I won't buy (most likely) but Picasso rationale makes sense.

 

And now ... get off my lawn you Pokemon hunters!!!

still kidding.  ;D

[Picasso]

I read about the game more at http://www.pcmag.com/news/346042/pokemon-go-how-to-get-started-and-catch-em-all and it seems to be casual-solo-gamer unfriendly. I.e. by the time I get to level 5 - a month with my "turn on when I walk" schedule, everyone will be level 50 or whatever with uberleveled pokemons. So forget about winning in a gym unless you descend on it with a gang of friends. One solution is "pay to win", which is good for the company but may not be good for the game.

 

I had those concerns at first, but they've made it really hard to maintain ownership of these gyms.  It's also nearly impossible to pay to win because the only thing you can buy are things like poke balls or lures to create more chances at leveling up.  So if a gym has three pokemon, you get to battle it with six.  And your friends can join in too, or anyone around you on the same team. 

 

The other thing is that it gets exponentially harder.  It's easy to go from level 1 to 20, but 20 to 50 will take a really long time.  Pokemon that appear once you are level 30 are very hard to catch so you might waste 30 poke balls to finally get it.  Which means the higher level folk will be spending a lot of cash to keep growing, unless they want to keep walking by poke stops. 

 

I think they've made it more about the social aspect, and to that degree they've only released a tiny portion of what should be coming out.  So far it's just Pokemon Red and Blue (which is why you see so many older people playing it), but there's gold and silver and ruby (hundreds of more Pokemon), etc.  Now add in trading and battling friends directly.  There's a lot that can be done here that isn't just about fighting and holding down gyms.