How Brand Nintendo can win over mobile-crazy Chinese gamers

Nintendo, the developer of marquee gaming titles such as Super Mario and Pokemon and consoles such as Playboy and Wii (which have sold around 400 million units globally), finds itself doubling down on its brand strategy to crack the highly regulated and fiercely competitive Chinese market that it entered officially in early December.

For a company that has prided itself for breakthrough hardware designs for its consoles—from the Game Boy to the Wii—success in this market is instead likely to heavily rest on rapidly finding its sweet spot in locally-relevant games. “The key is really the games,” says Serkan Toto, founder of Kantan Games, a gaming consultancy in Japan. “Without experiences that are exclusive to this platform, Nintendo and Tencent will have no chance in China.”

While mobile games today dominate the gaming market—accounting for a vast majority of the market—Nintendo can position the Switch console and its catalogue differently for China. Switch boasts something that PCs, other consoles or phones don’t have: a growing catalogue of exclusive software Chinese users can’t get anywhere else.

From its fumble with the Wii U console, Nintendo’s brand has recovered smartly with the Switch, with an Interbrand Best Global Brands report naming it the most valuable brand in Asia-Pacific, displacing consumer electronics giant Sony from its perch. Along the way, Nintendo’s brand value has increased by 19% in 2019 to $5.5 billion.

NINTENDO'S HARDWARE HITS & MISSES

CONSOLE	SALES	RESULT
Tetris	120 million units	Runaway hit
Visual Boy	1.26 million	First push into 3D a huge dud
Nintendo DS	154 million	Company’s best seller
Wii	101 million	Massive hit with casual gamers
Wii U	14 million	Follow on flopped
Switch	15 million	Resurrected the brand

In China, according to other branding experts such as Jay Milliken, Senior Partner, Asia Regional Lead for Prophet, a brand consultancy, Nintendo can leverage some strengths that its rivals don’t enjoy. For example, a recent survey by Prophet to identify the most relevant brands in China placed Nintendo at 16^th place, significantly higher than PlayStation and Xbox which don’t figure in the top 50.

Prophet’s study also showed specific niches were Nintendo could promote the Switch console. For instance, Milliken pointed out that the brand is (yet) incredibly relevant in in lower-tier cities (#10 in its list), with non-millennial consumers (#12) who are less likely to be mobile gamers and with emerging middle-class households (#8).  “This is an incredibly strong starting point for Nintendo to launch Switch,” he contends.

Winning in China is key for Brand Nintendo to show that it can be a nimble gaming company, capable of devising break out hits. “Nintendo's brand recognition was heavily tarnished after the previous console, the Wii U, turned out to be a massive flop,” he adds. “Even mega brands like Nintendo cannot live off their legacy forever but need to prove they can still innovate and land hits continuously.”

Nintendo has plenty riding on Switch, after its previous device the Wii U flamed out. The company had positioned Switch differently at the time of the launch, and this tactic seems to have paid off.  

The durability of Brand Nintendo’s fortunes may be tied closely to how quickly it gets original gaming content off the ground. This push in China is typically stymied by tough regulation that makes game approval a slog. “Yes, going forward, a lot more games are absolutely necessary, but I think the regulation is entirely in the hands of the Chinese government,” says Toto. “I expect no easier regulation anytime in the near future.”

Brand Nintendo has been a relatively new entrant in China---until 2014 consoles were banned in the country and it is only in the past five years that these device makers have had a chance to make up for lost ground. Daniel Ahmad, senior analyst, Niko Partners, a gaming consultancy, says the hybrid nature of the device-allowing people to play at home and on the go—will be a strong driver of sales.

“High quality localised software from Nintendo, Chinese developers and overseas developers as well as Tencent powered servers for local and online multiplayer on the go are also selling points,” he adds. Milliken of Prophet agrees about content being core to Nintendo’s unique brand identity in China. “Gaming is a content play,” he argues. ”Nintendo Switch is just a gaming platform …  without some blockbuster content consumers will lose interest in using the platform.”

To make deeper inroads into the Chinese market, Nintendo tied up with homegrown tech giant Tencent to launch the Switch and that will likely help drive adoption. “In order to (provide) a better user experience for mainland China purchase, Nintendo eShop in China will be supporting WeChat Pay and 1-year warranty is included as after-sales services.  Offline sales channel will be set up as well,” a Tencent rep says.

Niko Partners’ Ahmad points out that Tencent has invested in a robust distribution channel for Switch that consists of online sales via JD.com and TMall, as well as offline retail partnerships with Suning and other retail brands. Pre orders for the console began on December 4 and as many as 100,000 have been placed across JD.com and TMall. To drive this console’s sales, Tencent has set up what it calls a Nintendo Co-Operation department in Shanghai and a new subsidiary Shanghai Tengren Technology in September 2019 to handle Nintendo Switch operations in the country.

Nintendo is building out a strong pipeline of games—first party titles, well-known third-party titles and even games from independent Chinese developers—for for 2020 and beyond, experts say, as it takes a serious crack at the Chinese market.

Several popular games such as include Mario Tennis Aces, Yoshi’s Crafted World, Super Mario Party, Kirby Star Allies, The Legend of Zelda: Breath of the Wild and Pokemon Let’s Go Pikachu and Eevee are set for an official China release, even as Splatoon 2 and Pokemon Sword and Shield are missing from the list, frustrating local gamers.

Nintendo declined to comment for this article.  

The Japanese Gaming giant’s console is arriving in a market that is overrun with mobile games and an audience that is used to playing on its handsets. According to some estimates from Niko, China’s gaming market is forecast to grow to $33 billion by end 2019, a near 8% increase over the previous year. The onset of high speed 5G networks is only expected to further drive growth in this space.

For now, experts believe that Brand Nintendo may be on point. According to estimates from Niko Partners, Nintendo Switch will replace PlayStation 4 as the market leader in China by 2022 when accounting for both legal and grey market sales. Nintendo’s Switch has been well timed.