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Apple Inc. (AAPL) Is Raking in More Cash With Pokemon GO Than Nintendo Itself

Apple Inc (AAPL) Pokemon Go App

Apple Inc. could earn 3 times more money from Pokemon Go than Nintendo itself. The Chart-topping performance of the hit game Pokemon Go have sent Nintendo’s stock soaring, adding more than $7 billion to its market cap. The Japanese gaming icon is, however, could be earning significantly less from its app related store than Apple Inc. – thanks to its App Store cut.

Apple Inc NASDAQ:AAPL

 

Thanks to Apple App Store

Nintendo’s shares are on a roll as they climbed more than 41% after the chart-topping performance of its mobile game Pokemon Go in the U.S. In the past two sessions, the firm has added at least $7.5bn to its market value while volume was at its highest on Monday since October 2015 high. Pokemon Go was jointly developed by Nintendo, Niantic and Pokemon Company.

In a note, Macquarie analyst David Gibson wrote, “it is unclear exactly what their economic interest is in the game, but we presume that out of every 100 units earned at the app store, 30 would go to Apple Inc. , 30 to Niantic, 30 to Pokemon and 10 to Nintendo. Hence, we don’t think Nintendo will earn much directly from the game.”

Gibson noted that it is still uncertain how much Nintendo would actually be earning from the success of the game. The Pokemon GO title is actually based on last work in augmented reality, which was developed by Niantic. Formerly, Niantic was part of the search giant Google.

Last October, Niantic was spun off into an independent company as the search giant restructured itself under the new name Alphabet. Niantic formed a $30 million partnership with the Pokemon Company and Nintendo, a joint venture developed to license Pokemon characters.

How much could Nintendo earn?

Nintendo will earn from its equity-accounted income as it owns 33% of Pokemon Company, said Gibson. The analyst, who has an Outperform rating on Nintendo shares, noted that they have assumed a #10 ranked game in Japan generates ¥12bn annually, suggesting ¥3.6bn NP for Pokemon Co. And, Nintendo would book 33% of that or ¥1.2bn, which is 3.3% of FY3/17 NP guidance.

Initially, Gibson thought that the title would have little monetization as per its beta. However, as users build their Pokémon inventory and spend money to train, battle, hatch and store, it performed more than expectations. Gibson noted that the most popular item in Australia is $0.99 coin, which they think is positive, as it means its #2 gross ranking is driven by a large number of users and not by big spenders.

Assuming a 33% stake in Pokemon and no other stake in the game, the analyst estimate a #10 gross ranking in Japan would represent approx. 3-5% to Nintendo NP annually, whereas a #5 gross ranking in Japan would add around 7-10% to NP. And, a USA ranking of #1 gross would add 9-15% to NP pa.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.

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