Does The Nintendo-DeNA Alliance For Mobile Games Make Sense? Analysts Call It A ‘Good Fit’

Nintendo and mobile game publisher DeNA announced an alliance Tuesday morning to develop a new online service and bring popular characters like Mario, Link, and others to mobile games. Investors and analysts have called for Nintendo to utilize its intellectual property in the mobile space the past few years and have welcomed the news. IHS Technology’s Piers Harding-Rolls calls the move a “good fit” for “two companies that are no longer leaders in their respective segments.”

The booming mobile segment dwarfs the handheld gaming segment with more than $26 million in consumer spending compared to $3.3 billion. The mobile segment is highly competitive though, and one that Nintendo is not wholly familiar with, which is where DeNA fills the gap.

DeNA has provided a mobile gaming platform called Mobage in various forms since 2006. Android and iOS collectible card games such as Rage of Bahamut and Marvel War of Heroes have turned into popular freemium titles for the company. It has also focused on games with popular licenses like Star Wars, Transformers, and the NBA. However, its market share has slipped and it has struggled to compete internationally, according to IHS.

Smartphone games using DeNA’s platform only earned around $35 million in the fourth quarter of 2014. Despite that, IHS Head of Game Research Piers Harding-Rolls says it “remains one of the leading mobile company’s in Japan and…shares cultural similarities with Nintendo.”

“This alliance makes commercial sense on many levels,” Harding-Rolls explained. “The main challenge will be knitting together the cultures of both companies and aligning the speed of development and iteration that is needed in the mobile space with Nintendo’s more patient and systematic approach to games content production. How the new games are monetised may also provide a challenge considering the general differences in models used in retail for Nintendo and through in-app purchases for DeNA.”

How Nintendo mobiles games will be monetized is up for debate at the moment. DeNA almost exclusively utilizes the freemium model for games where players can download a game for free. There’s a “treadmill” of coin purchasing or waiting to keep playing though.

Nintendo has denounced this freemium model in the past though. There was no mention of what mobile model it would prefer during Nintendo’s announcement, but President Saturo Iwata did say that the company would “like to provide even more premium gameplay experiences on Nintendo’s dedicated game platforms.”

“By taking this approach, we firmly believe that doing business on smart devices will not shrink our dedicated video game system business and will instead create new demand as this broader reach will enable us to provide consumers around the world with more opportunities to experience the appeal of Nintendo IP,” Iwata added.

Nintendo and DeNA first began discussions of forming an alliance together. DeNA will also form the backbone of a new Nintendo online membership service that will connect Nintendo consoles, including the upcoming NX console, plus smart devices and PCs.

[Images via Nintendo, DeNA, Marvel War of Heroes]