Nintendo investors have realized they’ll only see a fraction of Pokémon Go’s profits

Pokémon Go giveth, and Pokémon Go taketh away. Nintendo’s shares plummeted nearly 18% in trading today (July 25), hitting the Tokyo Stock Exchange’s daily limit of 5,000 yen, as the euphoria around its hit game began to dissipate. The fall was triggered by a cautionary note (pdf) the game company issued after markets closed last week, where the firm told investors to expect income from Pokémon Go to show “limited” impact on its business results.

Nintendo’s note highlighted the fact that Pokémon Go is developed and distributed by Niantic Labs, which paid a licensing fee to the Pokémon Company. Nintendo, in turn, has a stake in the Pokémon Company amounting to 32% of that firm’s voting power. Nintendo will get a cut of this licensing fee, plus payments for helping to develop and operate the game, it said, but the firm hasn’t disclosed a precise breakdown of revenues from the game. The Pokémon Company’s other shareholders are Creatures and Game Freak, which developed the Pokémon characters and original games.

Pokémon Go charges players for in-app purchases. It also plans to earn advertising revenue from sponsored locations and branded items.

Nintendo has forecast an increase of nearly 37% in operating income for the year ending March 2017, on the back of a slight drop in revenues, of about 1%. The note it issued on Friday said this forecast accounted for all Pokémon Go-related revenues, including sales of a new wearable called Pokémon Go Plus.

Pokémon Go has sent Nintendo’s stock soaring since it was released on July 6. At its peak, on July 19, the stock was trading at more than double its pre-Pokémon Go prices. Even after today’s fall, the stock is up 65% compared to the start of trading on July 6.

Nintendo has plans to better capitalize on Pokémon Go. It’s making a watch-like wearable called Pokémon Go Plus that will alert players to the presence of Pokéstops and monsters without destroying their phones’ batteries. No release date for the wearable has been announced yet, although it was available for pre-order, priced at $34.99. The company also has a hotly anticipated title for its 3DS handheld console, Pokémon Sun and Moon, due in November.

Perhaps the most important thing Pokémon Go has contributed to Nintendo, however is the lesson this global mobile hit offers. The firm has struggled to translate its gaming expertise and cast of characters, like Mario, into relevant products for a world of smartphone users. But as one analyst told Reuters, Pokémon Go’s success means Nintendo’s future in mobile gaming is bright. “Nintendo is well-placed to boost its earnings with its other characters, such as Super Mario and Zelda and their potential is unknown,” said Yasuo Sakuma, of Bayview Asset Management.

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