GregLombardi
Member
I've tried to clarify the truth in my responses to posts on this forum, but I think it is time I post a thread about people's reactions to Nintendo. Full disclosure: I am a Nintendo shareholder, a Wii U owner, and a Playstation 4 / high end PC rig owning individual.
I have a lot to say on arm chair analysis, being a financial guy for over a decade and knowing that being an instantaneous reactionary-posting and thinking society in a digital age is how people get hurt, how you make terrible short term stock / option investment decisions [unless you are an absolute expert day trader], and even how we get Donald Trump as President.
Simply put: arm chair analysis backed with no expertise needs to stop. People do not know what they are talking about, and it shows. You cannot look at one fact or report on the internet and know enough to see exactly what the future holds. It can take years of study to truly understand even a simple asset / issue on which you aren't educated, never mind a complicated one such as an entire company, industry, or even political issue. Sometimes, it does not take years. But if we could all see the future without expertise, we would all be billionaires.
Let's talk about how this era of knee jerk reactions and their real effects applies to Nintendo and people's fast reading of situations that don't deserve a fast read.
It is true, as an investor when you are looking for a return on your investment, you are mostly concerned with those investments that will give you the largest return in the shortest period. This type of investor is more a day trader, and less a fundamental trader in my opinion. The day trader wants a quick return based on whatever method they find reasonable -- be it the ups and downs related to rumors and news, technical movements that have more to do with computer trading than with humans, or any number of other short term movements.
Many arm-chair analysts / day traders / investors get easily scared when they don't fully understand a company and hear some news that is less than pleasing. In my experience, people rarely take the time to truly understand situations in which they are investing. Again - how did we get the Donald as the free world leader? The large potential returns of a decision / reaction are the most exciting part for them, and usually make the decision for them. Even in the halls of complicated wall street finance, this is how decisions are sometimes made. In many ways, the way our society is going is to make big, sweeping decisions on things related to the instantaneous release of serotonin in our brains -- everything has become a gambling decision it seems. I think the internet is an amazing thing, but I also think it has been destructive to rational thought.
Let's take a look at some Nintendo news that has caused a variety of knee jerk reactions around this forum and in the digital world: Super Mario Run was downloaded 40 million times, but converted payers in only 4% of those downloads.
Reaction: NINTENDO IS DEAD. RUN FROM THE STOCK. INVESTORS ARE RIGHT, THEY MADE SUCH A MISTAKE. DISASTER.
But wait a minute, the fundamentals trader asks him or herself, are these reactions reality?
Mobile Mario has apparently been downloaded more times than any app in Apple store history, and has an equal or higher rate of conversion than other mobile games. Did Nintendo leave some money on the table with the way they handled the paywall? Yes, probably. Does this signify a guaranteed long term failure in the space? Absolutely not. The greatest strength that mobile software development offers is the ability to try new things, and change. All Nintendo has to do is flip a switch on their current Mario software, or develop a new Mario game with a new pricing proposition, and presto-chango - most of the history of their pay wall being a barrier to their profit in the mobile space is erased (even though currently they are at par or ahead of par with conversions, so one might argue they are doing fine). Consumers short term negative memories are replaced with a new game or pay structure that is completely acceptable and they forget it ever happened. Again, this is assuming that Mario was handled completely wrong, and the jury is still out a bit even on that.
Let's then look quickly at their position in the industry:
They just had a large failure in their home console ecosystem. As such, their financials are muted and not great recently but interest in the Switch is significant. It has been significantly more positively received as a system and as a value proposition (pending price) than the Wii U ever was. As such, it is reasonable to conclude that the Switch will do better than Wii U. They are investing in their brand and opening up other "faucets" of revenue via theme parks, brand sales, mobile Pokemon, Mobile Mario, Mobile Animal Crossing, etc., and each one represents a new potential revenue stream. Traditional pokemon software titles are doing better than they ever have and it appears Nintendo's mobile efforts contributed to that.
So let's generate a simple system of assessment of Nintendo's current situation, hopefully from a *rational* industry / shareholder perspective, relative to recent events:
Item of Consideration / Effect on Company Financial Position [+] / [-]
Nintendo on Smartphones [+]
Notes: I do not think anyone in their right mind would argue this is not accretive to Nintendo's financial / industry position, even if they aren't doing it perfectly. The investment has to be less than the return. Animal Crossing, Fire Emblem, hell even Mario Kart might be on the horizon. These games are going to be good.
Pokemon Go Success [+]
Notes: Evergreen with changes to the software and seasonality to playing and going outside.
Mario Mobile Success [+]
Notes: Nintendo can always make a new game, or change its pay structure. Also, it can add content which it is already doing, contrary to internet beliefs.
Wii U Failure [ - / Neutral]
Notes: As an investor, most of the effects of the Wii U failure have likely already been felt in Nintendo's financials, assuming Switch takes its place properly.
Switch Positioning Relative To Wii U [+]
Notes: Nintendo may not achieve greatness in their market share in the console space. But will it be better than Wii U? It seems it would be difficult for it not to be. As such, this is accretive to Nintendo's financial position relative to the current moment. If Switch does better than Wii U did in its "best" years, that will be accretive. And that's all I care about wrt to share price or market position.
Nintendo Theme Parks [+]
Notes: I think the brand knowledge among children can only improve at this point, since many children turned away from Nintendo during the Ipad age. As such, the investment will likely result in a modest return.
Exit from Handheld space? [?]
Notes: This is a tough call. Will handheld players be converted to mobile or to Switch comfortably? Their raw sales of handhelds have been challenged by other devices significantly. Time will tell.
These are only a few things one could consider about Nintendo's position, but generally they are in a position to do better than they have recently. Overall, across history, Nintendo has been known to be one of the most stable companies financially in history. This is not simply about their sales of consoles and game software, but also about how they comport themselves with investments. Even in years when they are having gang buster success, they are careful with their money. They are one of the last traditional conservative companies left on the planet. Their continued existence is never guaranteed, but after having watched them for decades I think they are very aware of that problem and continue to address it over time.
Even this post is not complicated enough to capture everything going on in the halls of Nintendo or in this industry, and yet is probably too complicated for most people to give more than a passing glance. And yet, instead of trying to understand all these things, people will superficially decide what the future will bring, and not be penalized for their errors in decisions. I feel strongly that the internet as a community and society as a running organism machine need to walk away from these principles if we are to move forward in a positive manner. And that includes the gaming community. Instantaneous conclusions have led to a snowball effect that have led to a lot of wrong and bad things IMO (see gamer gate, and other controversies). I also happen to believe this way of thought leads people to misinterpret what is going on with Nintendo, and since I happen to be passionate about them, I decided to post a thread.
Thanks for giving me some of your time and a piece of your brains for the day.
I have a lot to say on arm chair analysis, being a financial guy for over a decade and knowing that being an instantaneous reactionary-posting and thinking society in a digital age is how people get hurt, how you make terrible short term stock / option investment decisions [unless you are an absolute expert day trader], and even how we get Donald Trump as President.
Simply put: arm chair analysis backed with no expertise needs to stop. People do not know what they are talking about, and it shows. You cannot look at one fact or report on the internet and know enough to see exactly what the future holds. It can take years of study to truly understand even a simple asset / issue on which you aren't educated, never mind a complicated one such as an entire company, industry, or even political issue. Sometimes, it does not take years. But if we could all see the future without expertise, we would all be billionaires.
Let's talk about how this era of knee jerk reactions and their real effects applies to Nintendo and people's fast reading of situations that don't deserve a fast read.
It is true, as an investor when you are looking for a return on your investment, you are mostly concerned with those investments that will give you the largest return in the shortest period. This type of investor is more a day trader, and less a fundamental trader in my opinion. The day trader wants a quick return based on whatever method they find reasonable -- be it the ups and downs related to rumors and news, technical movements that have more to do with computer trading than with humans, or any number of other short term movements.
Many arm-chair analysts / day traders / investors get easily scared when they don't fully understand a company and hear some news that is less than pleasing. In my experience, people rarely take the time to truly understand situations in which they are investing. Again - how did we get the Donald as the free world leader? The large potential returns of a decision / reaction are the most exciting part for them, and usually make the decision for them. Even in the halls of complicated wall street finance, this is how decisions are sometimes made. In many ways, the way our society is going is to make big, sweeping decisions on things related to the instantaneous release of serotonin in our brains -- everything has become a gambling decision it seems. I think the internet is an amazing thing, but I also think it has been destructive to rational thought.
Let's take a look at some Nintendo news that has caused a variety of knee jerk reactions around this forum and in the digital world: Super Mario Run was downloaded 40 million times, but converted payers in only 4% of those downloads.
Reaction: NINTENDO IS DEAD. RUN FROM THE STOCK. INVESTORS ARE RIGHT, THEY MADE SUCH A MISTAKE. DISASTER.
But wait a minute, the fundamentals trader asks him or herself, are these reactions reality?
Mobile Mario has apparently been downloaded more times than any app in Apple store history, and has an equal or higher rate of conversion than other mobile games. Did Nintendo leave some money on the table with the way they handled the paywall? Yes, probably. Does this signify a guaranteed long term failure in the space? Absolutely not. The greatest strength that mobile software development offers is the ability to try new things, and change. All Nintendo has to do is flip a switch on their current Mario software, or develop a new Mario game with a new pricing proposition, and presto-chango - most of the history of their pay wall being a barrier to their profit in the mobile space is erased (even though currently they are at par or ahead of par with conversions, so one might argue they are doing fine). Consumers short term negative memories are replaced with a new game or pay structure that is completely acceptable and they forget it ever happened. Again, this is assuming that Mario was handled completely wrong, and the jury is still out a bit even on that.
Let's then look quickly at their position in the industry:
They just had a large failure in their home console ecosystem. As such, their financials are muted and not great recently but interest in the Switch is significant. It has been significantly more positively received as a system and as a value proposition (pending price) than the Wii U ever was. As such, it is reasonable to conclude that the Switch will do better than Wii U. They are investing in their brand and opening up other "faucets" of revenue via theme parks, brand sales, mobile Pokemon, Mobile Mario, Mobile Animal Crossing, etc., and each one represents a new potential revenue stream. Traditional pokemon software titles are doing better than they ever have and it appears Nintendo's mobile efforts contributed to that.
So let's generate a simple system of assessment of Nintendo's current situation, hopefully from a *rational* industry / shareholder perspective, relative to recent events:
Item of Consideration / Effect on Company Financial Position [+] / [-]
Nintendo on Smartphones [+]
Notes: I do not think anyone in their right mind would argue this is not accretive to Nintendo's financial / industry position, even if they aren't doing it perfectly. The investment has to be less than the return. Animal Crossing, Fire Emblem, hell even Mario Kart might be on the horizon. These games are going to be good.
Pokemon Go Success [+]
Notes: Evergreen with changes to the software and seasonality to playing and going outside.
Mario Mobile Success [+]
Notes: Nintendo can always make a new game, or change its pay structure. Also, it can add content which it is already doing, contrary to internet beliefs.
Wii U Failure [ - / Neutral]
Notes: As an investor, most of the effects of the Wii U failure have likely already been felt in Nintendo's financials, assuming Switch takes its place properly.
Switch Positioning Relative To Wii U [+]
Notes: Nintendo may not achieve greatness in their market share in the console space. But will it be better than Wii U? It seems it would be difficult for it not to be. As such, this is accretive to Nintendo's financial position relative to the current moment. If Switch does better than Wii U did in its "best" years, that will be accretive. And that's all I care about wrt to share price or market position.
Nintendo Theme Parks [+]
Notes: I think the brand knowledge among children can only improve at this point, since many children turned away from Nintendo during the Ipad age. As such, the investment will likely result in a modest return.
Exit from Handheld space? [?]
Notes: This is a tough call. Will handheld players be converted to mobile or to Switch comfortably? Their raw sales of handhelds have been challenged by other devices significantly. Time will tell.
These are only a few things one could consider about Nintendo's position, but generally they are in a position to do better than they have recently. Overall, across history, Nintendo has been known to be one of the most stable companies financially in history. This is not simply about their sales of consoles and game software, but also about how they comport themselves with investments. Even in years when they are having gang buster success, they are careful with their money. They are one of the last traditional conservative companies left on the planet. Their continued existence is never guaranteed, but after having watched them for decades I think they are very aware of that problem and continue to address it over time.
Even this post is not complicated enough to capture everything going on in the halls of Nintendo or in this industry, and yet is probably too complicated for most people to give more than a passing glance. And yet, instead of trying to understand all these things, people will superficially decide what the future will bring, and not be penalized for their errors in decisions. I feel strongly that the internet as a community and society as a running organism machine need to walk away from these principles if we are to move forward in a positive manner. And that includes the gaming community. Instantaneous conclusions have led to a snowball effect that have led to a lot of wrong and bad things IMO (see gamer gate, and other controversies). I also happen to believe this way of thought leads people to misinterpret what is going on with Nintendo, and since I happen to be passionate about them, I decided to post a thread.
Thanks for giving me some of your time and a piece of your brains for the day.
