Nintendo Co., Ltd. announced last week that it will start making video games for the super computer in your pocket (the smartphone). The companys stock shot up on the news, and it put every other player in the mobile game space on notice. And yet, I dont know if everyone understands how big a deal this will turn out to be.

What this move tells me is that Nintendo may be the most consequential video game company on Earth. If you think thats nonsense, bear with me a moment as I unpack what I mean.

If you have played video games in the last 30 years you probably reacted to the news of Mario on your iPhone with some excitement. Even if youre not a fan of Nintendo games, you probably know someone who is. But unless you also follow the business of video games you might not know the company is in third place in the current phase of the console war, and has struggled for years to sell its hardware at the same rate as its rivals at Xbox and Playstation.

The console video game business is at its core a race to become the hardware standard. The last major success Nintendo had was the Wii (launched in 2006), which swam against the tide of more power, more pixels and more shooters that were reshaping the gaming world. It attracted millions of new customers, but over time the low-powered Wii and its strange gesture control system couldnt attract enough software to capitalize on their early sales momentum.

But while the Wii disappointed down the stretch (it still sold 100 million units), its successor, the Wii U, has been a disaster. In this chart from games site Polygon, you can see that Nintendo has had some poor-selling hardware in the past, but never as poor as the Wii U.

The reasons Nintendo is having trouble selling the Wii U have been dissected ad nauseum by many industry analysts, but the end result is the same: Nintendo still cant attract third-party software developers to make games for its consoles. It creates a vicious cycle: No one buys the console, so no one makes games, so theres less reason to buy the console. Rinse, repeat.

As a full disclosure let me say I have been a fan of Nintendo since I got my first NES in the late eighties (the console known as the Famicom in Japan). Lately though, we have drifted apart. I dont own a Wii U and these days I spend a lot of time on rival devices.

I also spend a lot of time playing games on my phone. The most lucrative source of revenue in the mobile app software universe is gaming. Because people tend to play games on their phones in stolen moments between whatever else they are doing in their lives in the shopping lines, on the bus or subway or maybe on the toilet the games industry calls these casual games. The 10 most-downloaded apps in any app store on any week of the year typically include several games.

Some of these games have been enormously successful, earning millions of dollars a day in micro-transactions or in small upfront payments. Unlike the typical console game, which can sell for $50-$70, mobile games start off at a lower price point, and many have trouble earning their way to a sustainable revenue-per-user number. There are many, many more failed smartphone games than there are successful ones. So, you might ask yourself: What does a console maker like Nintendo know about making games for this market?

Nintendo has been making hand-held portable games for decades. The Gameboy and its many descendants have been a profit centre for Nintendo since they arrived in 1989, sometimes the only bright spot for the company. It has had touch-screen games on its portable DS machine since 2004. It knows how to make mobile games.

Originally posted here:

Nintendos save game: Why Mario on your phone is a huge deal