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Straying from a company’s core business model can lead to disaster. But for Nintendo, such a bold plot move should deliver a happy ending.
The Japanese gaming group said on Wednesday it is developing a live-action film of the Legend of Zelda franchise. Nintendo plans to release one movie every year. It will finance more than half of the production, with Sony Pictures Entertainment providing funding and global distribution.
Nintendo shares rose more than 6 per cent in Tokyo, the biggest jump in almost three years. Investors have fretted for over a decade that Nintendo needs to find new revenue streams. Consoles and games account for over 90 per cent of group sales.
Not that the gaming group is doing badly. Shares are up about a quarter this year. At 25 times forward earnings, it trades at a premium to global gaming rivals. In the interim to September, which includes the launch of the Super Mario movie, intellectual property related revenues more than doubled.
More movies is smart for Nintendo. This follows this spring’s success of The Super Mario Bros. Movie, the animated-film version of the popular Nintendo video-game franchise. The film has already broken box office records as the world’s biggest video game adaptation. That alone generated $1.4bn in ticket sales. Zelda is one of Nintendo’s biggest franchises.
True, the often-volatile performance of rival Sony’s movie studio business has prompted investors in the past to call for its partial sale. But Nintendo’s movie ambitions are relatively low-risk. Nintendo can dip into its extensive intellectual property rights library for film adaptations, not to mention over $13bn of net cash. Even so-so results from movie releases would still offer a marketing push for Nintendo’s games.
Nintendo’s latest Super Mario Bros movie shows just how effective that can be. Movie goers bought more Mario games after watching the movie. The Super Mario Bros. Wonder platform game for its Switch console broke sales records after its October launch, selling 4.3mn units in the first two weeks. That too gave a lift to sales of the Switch.
Proof of concept now exists for Nintendo. A hit movie can lengthen the lifespan of a console — its Switch console is over six years old. The small portion of group revenues from film royalties suggests there is room for plenty of growth.
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