Nintendo Deal With Tencent Paves Way for China Push
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> For all its global popularity, Nintendo Co. has had relatively limited business in China. Now a deal with Tencent Holdings Ltd. has investors excited at the prospect that Nintendo’s Switch console and smartphone games could take off in one of the world’s biggest game markets.
> Nintendo shares shot up by more than 7% to a nine-year high Tuesday as investors welcomed its deal to put one of China’s most popular videogames—Tencent’s “Honor of Kings”—on the Nintendo Switch this winter. The game is called “Arena of Valor” in Europe, and a U.S. launch under that name is set for later this year.
> For the moment, the deal, disclosed last week in a Nintendo video posted online, doesn’t directly involve users in China because the Switch isn’t sold there. But it could be a precursor to further arrangements allowing Nintendo to sell the Switch and its mobile games in China, said people familiar with the thinking of Nintendo and Tencent executives.
> “This is very positive in the longer term in getting Chinese publishers supporting the Switch,” said Macquarie Capital Securities analyst David Gibson. He said he expected Nintendo to introduce the Switch in China by March 2019.
> China is the world’s largest smartphone game market, and “Honor of Kings,” first released two years ago, is one of its standout hits. Research firm App Annie said the game was the top-grossing app in China during the second quarter of this year, earning some $87 million a month on average on Apple Inc.’s iOS platform.
> The game, a battle between five-player teams, has been so popular that this summer, Tencent imposed daily playing-time limits on players aged 18 and under and imposed a curfew for children 12 and under. It was introduced in Europe in August.
> For 15 years starting in 2000, China blocked videogame console makers from its market, saying the consoles could hurt young people’s education. After it opened up in 2015, Sony Corp. and Microsoft Corp. released their latest consoles. Nintendo held back, in part because consoles remain a niche product in a country where consumers are used to playing on smartphones and personal computers. Nintendo has sold a version of its 3DS handheld device in China, but it drew less traction than in the U.S. or Japan.
> People familiar with Nintendo’s thinking said it has been looking for ways to expand in China and sees Tencent as a possible partner, although they cautioned that nothing is in place yet. They said Nintendo looked at selling its Wii U console in China but dropped the plan.
> In addition to the Switch, which went on sale in March, Nintendo has moved into smartphone games globally since last year with titles such as “Super Mario Run.” If the company makes a big push in China, it would likely look for ways to make those games available to Chinese smartphone users, analysts said.
> The Tencent-Nintendo deal also has implications beyond China because it suggests that Tencent is getting more aggressive about reaching customers beyond its home market.
> “Tencent’s approach outside China has been to invest in gaming companies that augment its existing games and pipeline in China,” said Daniel Ahmad, an analyst at Niko Partners who follows the Chinese game market. “Now we’re seeing Tencent start to bring its own internal games to the West.”
> Meanwhile, the addition of the Tencent game to Nintendo’s Switch lineup suggests rising third-party support for the console, a key factor for its long-term success, said Macquarie’s Mr. Gibson.
> Sony’s PlayStation 4 has many more units sold because it has been on the market for nearly four years, but Mr. Ahmad of Niko Partners said the Switch’s smartphone-like aspects, such as portability and a built-in touch screen, attracted game makers such as Tencent that are used to smartphones.
> Over Fence Co., a small game developer in Tokyo, said it found it easier to win attention when it introduced its puzzle game “Flip Wars” for the Switch because the field of software competitors isn’t as crowded compared to smartphones. It said it was preparing several more Switch titles.