Apple’s Game Changer
We all want Apple to buy Nintendo. Now it makes sense.
At the risk of sounding like a broken cartridge, I think it’s time for Apple to seriously look at buying Nintendo.
Yes, I’ve been going on about this for years.¹ And yes, major hurdles remain: namely that Nintendo remains a profitable company with seemingly little or no desire to sell.² But come on, it’s starting to make too much sense.
I found myself thinking about this once again last week on the news that Apple was promoting their head of M&A, Adrian Perica, to report directly to Tim Cook. Mark Gurman reads this as an indication that Apple is about to get more serious about larger acquisitions. And he could be right — I’ve been thinking about this myself recently, given the current state of Apple.
But just as important here is something that was announced two weeks ago: Apple Arcade. While the details were light — we don’t know the launch date beyond the fall, nor do we know the price Apple will charge — we do now know that it’s one of the key cogs in Apple’s move towards their services-oriented future.
Even at a high level, Apple Arcade was one of the more interesting things the company announced on stage. It seems like a clever way to combat the race-to-the-bottom with regard to app prices, and more specifically, paid game prices in the era of free-to-play.
Oh and by the way, Apple will be commissioning games to be a part of this bundle. Which developer would be the best in the world to work with in this regard? From a pure IP perspective, there are a few names that come to mind — Mario. Zelda. Donkey Kong. — all Linked together by a single company.
Would Nintendo work with Apple on such a service? There was obviously no indication of this on stage. But given the rather lackluster mobile offerings for Nintendo’s games thus far,³ perhaps they’re open to the idea.
But I believe both sides should be open to another idea: Apple acquiring the company outright.
With the unfortunate passing of CEO Satoru Iwata a few years ago, and the recently announced departure of American head Reggie Fils-Aime, Nintendo is back in a state of flux. Sure, the Switch has been a hit, but signs are pointing to a rather quick fade — which is why we’re already hearing about two new devices scheduled for this year. The Switch is a good system, but that’s first and foremost because of the IP.
In the past, Apple has treated the gaming business quite casually, even though it has seemingly been right there for the taking, given the popularity of the format on iOS devices. Now they’re diving in. And yet they still don’t have such expertise in-house. You know who could get them smart, quick? In that way, it wouldn’t be too dissimilar from the acquisition of Beats to get Jimmy Iovine and team in the mix.
Also, you know who makes great gaming hardware? Sure, the specs may not match their rivals, but Nintendo stretches their hardware + software advantage better than anyone outside of Cupertino, California. Of course, an Apple-owned Nintendo probably wouldn’t be making their own stand-alone gaming consoles anymore. But such a team would undoubtedly help make the Apple TV a worthy entrant in the living room wars. Have you tried to play games with the current god-awful remote?
Again, Apple Arcade as-announced is interesting, but it could be a total game changer if it featured Nintendo IP. Who doesn’t sign up for such a service?
Let’s say Apple charges $10/month for that service. If a million people sign up, that’s $120 million a year for Apple. Apple would undoubtedly charge more with Nintendo IP. And more people would undoubtedly sign up with Nintendo IP. At $20/month, with 10 million people signed up, that’s $2.4 billion a year. Have I mentioned that there are 1.4 billion iOS devices out there?⁴ You do the rest of the math yourselves…
Such a combination could make the service waters into which Apple is setting sail downright oceanic in scale.
Also, to stretch the metaphor to the breaking point: Apple pushing Nintendo games via Apple Arcade will undoubtedly help all boats rise. Whereas normally indie developers would be terrified of Nintendo entering their waters, because of the subscription nature of the Arcade, Nintendo would be the best possible shipmate.
I know, I know. It’s a wild idea. Nintendo currently has a market cap of about $40B. A deal would require a pretty healthy premium. Apple has $250B in cash.⁵ More importantly, they finally have the pressure to… think differently, and to do a crazy deal like this.
Game on?
Note: this post was adapted from my newsletter published this week. Those interested can sign up here.² Not to mention the talk, for years, that it’s very hard — culturally, if nothing else — for a foreign buyer to acquire a Japanese company.
³ Nintendo is seemingly doing well enough these days in mobile thanks to two titles — Fire Emblem and Animal Crossing — both of which monetize via in-app purchases. They swung and missed on the bigger idea: Super Mario Run.
⁴ Sure, many are duplicate devices in households — and a selling point of Apple Arcade is the ability to share an account with your family — still, we’re looking at hundreds of millions of potential customers, conservatively.
⁵ And while Apple may have repatriated a lot of this cash with recent tax changes, this remains a great use of overseas cash they’re accumulating…
