Analyst: Nintendo’s E3 Briefing and DeNA’s Investor Meeting
On Wednesday, we attended Nintendo’s (NTDOY.PK) E3 Analyst Briefing. We also hosted investor meetings with members of the DeNA, Electronic Arts (NASDAQ:EA), and Microsoft (NASDAQ:MSFT) management teams. Below, we have summarized the key topics discussed at each event.
Nintendo’s E3 Analyst Briefing
The presentation began with a discussion of the positive impact of Mario Kart 8 on Wii U hardware sales. Previously, on June 2, Nintendo announced that Mario Kart 8 sold over 1.2 million units during its first weekend, making it the fastest selling Wii U game ever. Over that three-day period, Mario Kart 8 had an attach rate of 18 percent, and Wii U hardware sales were roughly four times greater than they had been over the comparable period in the previous week. Management’s strategy for Wii U is centered around new IP (such as Captain Toad: Treasure Tracker, Mario Maker, Project Guard, and Project Giant Robot), new ways to play, and new product innovation (most notably the amiibo near-field communication-based line of figurines.)
Nintendo plans to develop an adapter for the 3DS that will allow the handheld device to leverage amiibo as well. On Wednesday, management described amiibo as a revenue stream that is incremental to what has already been disclosed. Management continues to see ways to drive handheld sales, despite holding a dominant market position. It will release Super Smash Bros. for the first time on a handheld in October. It is also introducing a new advertising campaign for the 2DS aimed at increasing interest in the device and Nintendo’s products among younger consumers. In the Q&A portion of the presentation, management disclosed that it does not have plans to introduce a discounted version of the Wii U that does not include the GamePad, despite Microsoft’s recent decision to launch a $399 Xbox One without Kinect. It also stated that it believes amiibo will be popular due to its functionality and the collectability of the characters. Towards the end of the presentation, management declined to provide an update on its overall mobile strategy.
DeNA Investor Meeting
The focus of the presentation was on DeNA’s strategy to develop new hit titles. The company is investing significant resources in new game creation and has planned roughly 30 new game launches in the near future. The games will have different game engines to test what gamers find most appealing. Once a successful game engine is identified, the company hopes to build new games upon the same engine. Management views this strategy as an iterative process: eventually, players get tired of a specific game genre and the company needs to continually be shifting focus to recapture players’ attention.
The company does not anticipate any significant increase in SG&A spend unless a surprise hit is identified and more marketing dollars are spent to promote the game. Other topics discussed during the meeting were the intricacies of the Japan free-to-play market where there are a higher percentage of paying players making the company less reliant on whales.
Michael Pachter is an analyst at Wedbush Securities.