Nintendo: A Look Into Nintendo And Its ESports Potential

According to statista The Esport market is growing with a CAGR of 22.3% and will reach a global Revenue of 1.8 billion in 2022. I played several video games during the last 15 years, some at a competitive level. Combined with my interest in the valuation of stocks, esports seems to be in my scope of knowledge. Therefore, I am taking a look at Nintendo's stance on esports and the future of gaming.

Nintendo (NTDOF, NTDOY) is the oldest gaming company founded in 1889, producing playing cards at that time. Now it is mainly focused on console gaming and addresses mainly a younger audience. The console gaming market is decreasing drastically. In 2008 90 million consoles were sold, in 2018 merely 50 million. Nintendo had and still has a huge market share, but their home console sales peaked in 2009, with the Nintendo Wii. And so did Nintendos Revenue, with $18 billion. Since then revenue dropped by approximately 40%. The switch picked up in sales, in comparison to the Wii U, but still did not came close to the Wii. The console in itself is a good console with well-known titles, but the interest is shifting away from console gaming.

Because of its brand recognition and complexity of some of its games, Nintendo could be strong in esports. But they don’t put in much effort to achieve that. Nintendo is not supporting its games with substantial prizes, they do not host tournaments, they do not sponsor players. But even with this minimal support of Nintendo, an esports community grew in the form of the Super smash brothers Community. Why is this interesting:

During the biggest fighting game event, EVO 2019, Smash Ultimate reached a peak viewership of 233.000. It was the most-watched game of the tournament.

The peak viewership of games on twitch during the last 365 days shows that Smash Ultimate is the 23rd game with close to 272,000 viewers. As a comparison, the game with the highest peak viewership is League of Legends, owned by Tencent (TCEHY) with 1,782million viewers.

Why are the games of Nintendo lagging behind in viewership?

The most-watched eSports are all played on a computer. Smash bros is played on a console, but the viewership numbers, participants and the community overall show that smash has huge potential. What has Nintendo done so far to achieve that and why do I think, that Nintendo and its shareholders are missing out on a lot of potentials?

While other companies and game developers are hosting tournaments, circuits and putting up prize pools of $100 million, Nintendo's efforts are pretty small.

Nintendo supports events that are hosted by other organizations and sent out players to these events. All these tournaments would have taken place without Nintendo's support and did so in the past. It is not mentioned if Nintendo will offer a prize pool or if they only supported the tournament organizers by sending a few consoles. At EVO Japan, while the other games had tens of thousands of dollars as a prize pool, Nintendo contributed only one Pro Controller for the winner. This equals approximately 60$.

This is not an exception. Nintendo never sponsored tournaments with a prize pool. In 2013 Nintendo lawyers even tried to shut down EVO, the biggest fighting game tournament, to protect their IP. Only after huge backlash by fans the tournament took place.

Further misplays of Nintendo in the growth market of online gaming, is the multiplayer of their games. They tend to be very laggy and are not working properly. This is not only the case for Super Smash Brothers Ultimate but also other games.

The internet is full of articles testifying the bad multiplayer of Nintendo games. All successful eSports titles like League of Legends, Counter-Strike, Dota 2, Hearthstone and Overwatch are solely based on a well thought out multiplayer.

Despite not being able to play properly online and having to travel to play and practice, no existing prize money and Nintendo trying to stop tournaments Smash brothers grew to be the biggest and most-watched fighting game ever.

If Nintendo would support the competitive community, Nintendos Revenues could pick up in growth again. Necessary actions would be hosting and promoting tournaments and providing prize money. An example of my life: most of my friends are big fans of video games and watch esports, but even most of them don’t know that there is a competitive Smash Brothers community. This is caused by the lack of support and marketing. There are many people with nostalgic connections to Nintendo titles.

Will Nintendo be more proactive regarding esports?

There is a slight improvement in Nintendo's actions to support Smash and its other titles, but they also did never provide any significant prize money or hosted a big tournament. Nintendos president gave the following statement after the media made fun of the EVO Japan price:

“Esports, in which players compete on stage for prize money as an audience watches, demonstrates one of the wonderful charms of video games. It’s not that we’re opposed to it. So that our games can be widely enjoyed by anyone regardless of experience, gender, or age, we want to be able to participate in a wide range of different events. Our strength, what differentiates us from other companies, is this different worldview, not an amount of prize money.”

Overall it seems that Nintendo's focus is not on esports or online play. But these two aspects are present and future growth catalysts for gaming. Offline gaming on a console is in the past and will continue to decrease, the gaming industry is moving on.

Nintendo will be the Nokia of the gaming industry and most likely end up being a small niche player.