TOKYO: Nintendo Co shares jumped after China’s Tencent Holdings Ltd won approval to distribute one of the company’s games for its Switch console, a sign the Japanese company may benefit from growth in the world’s largest games market.
Tencent received approval for the test version of New Super Mario Bros U Deluxe for the handheld device, according to a notice on the website of China’s Guangdong provincial culture and tourism department. A Nintendo spokesman confirmed that Tencent had applied for the sale of Switch hardware, but could not comment specifically on the Guangdong approval, saying it was just one part of the entire process. Nintendo’s stock surged as much as 17%, the most on an intraday basis since September 2016.
Tencent could prove an invaluable ally for the Kyoto-based company in China where gamers have historically shunned consoles in favor of smartphones and PCs. The alliance could provide a jolt to growth prospects for the Switch. Nintendo in January cut its outlook for the console’s shipments, raising questions about demand for the three-year-old device.
“With its huge gamer population, China is like a dry sponge for Nintendo,” said Hideyuki Ishiguro, a senior strategist at Daiwa Securities Co. “We’re now starting to see a scenario for Switch sales to continue increasing and for earnings growth.”
Shares of other Japanese game publishers like Capcom Co, Square Enix Holdings Co, and Bandai Namco Holdings Inc also rose more than 3% after the news. All three release software for the Switch, raising prospects of sales on the mainland.
China is the world’s largest gaming market, but consoles accounted for less than than 2% of industry revenue in 2018, researcher Newzoo estimated last year. Microsoft Corp. and Sony Corp. have seen limited demand since releasing their newest consoles on the mainland in 2014 and 2015, as gamers have opted to play free titles on their phones instead of spending hundreds of dollars on dedicated gaming devices.
But the Tencent partnership may put Nintendo on different footing from its Western rivals, with the prospect of a strong distribution network and the marketing prowess of a household name with Chinese consumers.
Nintendo’s family-friendly series like Zelda and Pokemon may also receive a warmer reception from Beijing regulators, which have hurt PlayStation and Xbox demand by not approving more-violent blockbusters like Grand Theft Auto and Call of Duty. — Bloomberg