In this Market Foolery podcast segment, host Mac Greer is joined by David Kretzmann and Aaron Bush of Supernova and Rule Breakers to discuss the ways a deal with Tencent can boost the value of devices like the Nintendo Switch. And it's not just about content sharing -- the Chinese market is practically virgin territory for gaming consoles, and this could be Nintendo's ticket in.
A full transcript follows the video.
This video was recorded on Sept. 20, 2017.
Mac Greer: Well, on a more upbeat, positive note, shares of Nintendo hitting a nine-year high on Tuesday, on the news that Nintendo will be partnering with the Chinese internet giant Tencent. Aaron, for those of us who are not familiar with Tencent, why is this such a big deal?
Aaron Bush: Tencent is the largest gaming company in the world. I think it's larger than Activision and EA combined, if that gives any --
Greer: That's big.
Bush: Yeah. It's very big. And this is extra important to Nintendo, because they've been on a roll. Probably about a year ago is when they launched Pokemon Go -- that was overhyped.
Mac Greer: I've heard that.
Bush: But they've since launched the Switch and launched a new mobile strategy and such. And so far, it's working out fine. But one thing that they're missing still is third-party publishers to put their own games on the Switch. Nintendo really just publishes their own games on it, but if others would add their own content, it would be a bigger deal, reach a larger audience. So that's part of why this is a big deal, because Tencent, largest gaming company in the world, is looking to put at least one of their top games on the Switch. Which is good for Tencent, because it helps them reach a new market, but it's good for Nintendo because it's a new game. But also, this is a great partnership because it can help Nintendo launch in China, and Nintendo has never launched in China, which is so fascinating, because a few years ago, consoles were banned because the Chinese government said it interfered with education. They have since changed.
Greer: And it does. As a father, I would like to say, that's a true fact.
Kretzmann: [laughs] No disputing that.
Bush: [laughs] But,that's changed, so Nintendo is contemplating ways to get in. So this Tencent partnership might be a key cornerstone of that.
Kretzmann: And my understanding from looking at this story is, there isn't actually a guarantee that Nintendo will be selling the Switch or any of their devices in China, but I guess the theory is, this partnership helps get them closer, hopefully, to that point within the next couple of years.
Bush: I guess there's a win either way. Either they win and get into China, or they win and content that's in China helps bolster their presence outside of China.
Kretzmann: Yeah, can't argue with that.
Aaron Bush owns shares of Activision Blizzard. David Kretzmann owns shares of Activision Blizzard and Electronic Arts. Mac Greer owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.