Nintendo (OTC:NTDOY) has had a strong 2019 so far, up 43% on the year. While the overall console gaming industry is currently in a late-cycle downtrend, that's not the case for Nintendo, whose two-year-old Switch console is still garnering strong sales from consumers. Eventually, however, the Switch cycle will also eventually wane. For future growth, Nintendo is currently cultivating its mobile gaming segment, which could be the company's next big growth driver beyond the Switch.
Nintendo has been a bit late to the mobile gaming party relative to peers. However, this quarter the company released its fifth mobile game, Dr. Mario World, in July, and then followed that up just last week with its sixth, Mario Kart Tour, part of the classic Mario Kart franchise.
From all indications, it looks as if Mario Kart Tour is living up to its high expectations.
Breaking the internet
Mario Kart Tour's release on Wednesday, Sept. 25, for iOS and Android, was both ominous and tremendously positive. The initial traffic surge overwhelmed Nintendo's internal servers, and loyal Mario Kart fans were disappointed to receive error messages when trying to play throughout launch day.
That's likely because Mario Kart is perhaps Nintendo's most well-known and beloved software franchise. The first Mario Kart game was released for the Super Nintendo system all the way back in 1992, and the characters Mario, Luigi, Toadstool, and the Princess date all the way back to 1985.
Given the franchise's popularity, fans were likely champing at the bit to check out the new game. On its first day, Mario Kart Tour shot up to the No. 1 free game for the iPhone, and the 19th-ranked iPhone app by revenue, despite the game operating on a "freemium" business model, meaning it's free to play at the basic level, but Nintendo charges for in-game purchases such as new cars and characters, along with a deluxe mode with access to secret courses (and higher speeds) for $4.99 per month.
The initial revenue numbers are well ahead of the Dr. Mario World's release in July, though it's actually a tad behind Nintendo's 2017 release of Fire Emblem Heroes, which came in at No. 17 for the iPhone on its first day.
Mario Kart should only improve
Of course, as with any much-anticipated release, there were some complaints about the mobile version of Mario Kart Tour. The first and biggest was a lack of multiplayer mode, which some analysts were even calling a "big minus" for the release.
However, the good news is that Nintendo has indicated it will be adding multiplayer mode at a later date. It's a bit curious that the initial release of the game didn't have this feature, as it's a defining characteristic of the original game. It could be that either Nintendo engineers are going to tweak Mario Kart Tour over the coming weeks and months to work out the kinks or Nintendo may be looking for multiplayer mode to give the game another kick-start once the hype over the initial release wanes.
It's not dissimilar to Nintendo updating the Switch hardware this year with the lighter, cheaper Switch Lite, which just came out on Sept. 20, along with an upcoming deluxe model that is rumored for release in the near future.
Is $4.99 too expensive?
Another odd characteristic is that Mario Kart Tour's $4.99 monthly Gold Pass seems a tad expensive for a single game. If you compare that with the new Apple Arcade, which offers 50 mobile games, and Alphabet's Google Play Pass, which offers 350 games, that 5 bucks seems downright crazy. And yet, if Mario Kart Tour can drive a meaningful amount of Gold Pass subscriptions, it would be a testament to the power of the franchise and Nintendo's IP. The pricing doesn't seem to have affected interest in the game or overall monetization thus far, though it's unclear how many people are currently monetizing through the Gold Pass versus in-app purchases.
Can mobile boost Nintendo?
Dr. Mario World and Mario Kart Tour are welcome additions to Nintendo's mobile portfolio. Mobile sales made up only $91 million of Nintendo's $1.56 billion in revenue last quarter, or 6%. Yet judging by the server overload generated by Mario Kart Tour, investors should look for Nintendo's mobile contribution to increase in the quarters and years ahead.