Content is King
All work and no play makes Jack a dull boy, or so the saying goes. The proverb, made famous by the infamous 1980s horror movie The Shining, suggests that a life without time devoted to enjoying activities outside of work can quickly become rather boring. This is a concept that I am sure most of you would agree with! Whilst there are a whole host of industries people turn to for their leisure requirements, one of the most lucrative is the video game market.
In 2016, global gaming revenues came in just shy of the $100 billion mark with 2.2 billion active gamers (according to data provider Newzoo). Avid gamers will know there is significant rivalry between the main console producers – each keen to maintain their position as the most technologically advanced system. However, from an investment perspective, it may surprise you to learn that we are somewhat indifferent when it comes to debating the merits of the hardware specifications adopted by competing platforms.
There are generally two reasons for this. The first is that the console platform market now accounts for a significantly smaller percentage of global gaming revenues that it has done historically. The advent of smartphones combined with innovation such as augmented reality (Pokémon Go anyone?) means that this is now the most popular medium for gamers; at least in terms of the contribution to total revenues. This is a trend that looks highly likely to continue, with the latest predictions indicating that 50% of global revenues will come from the sale of smartphone or tablet games by 2020.
The second reason, which is very much linked to the first, is that you can have the most technologically advanced console in the world but without the plethora of games to accompany the hardware, at best, all you have is an overpriced DVD player (and let’s be honest, it’s unlikely to be long before they also go the way of the dodo and then you really are left with nothing). If superior graphics processing capability was the defining criteria for successful consoles then the widespread adoption of smartphones as a platform for gaming is unlikely to have taken off.
This is a concept that Japanese video game maker Nintendo appear to have grasped. Despite generally being perceived as the underdog among the big 3, none of the other players come close to matching Nintendo’s vast array of intellectual property.When it comes to content, Nintendo, alongside its arsenal of loveable misfits,is undoubtedly king. Ignoring the sense of nostalgia I feel, when reminiscing on the time spent playing Nintendo N64 classics (Mario 64, Banjo-Kazooie, Snowboard Kids and the Ocarina of Time), the popularity of this console, even today, serves as a testament to the overarching importance of producing quality content – which in Nintendo’s case is its library of unique games and world famous characters.
In essence, Nintendo essentially becomes platform agnostic and this is a prime example of how the Company is able to remain relevant long after the hardware (that its rivals continually obsess over) becomes redundant. As the shift towards mobile based platforms continues, this should position Nintendo favourably against its less content-affluent competitors.
As investors, this ability to adapt to the changing environment and ultimately, survive the test of time, is one of the main reasons we like Nintendo as a prospective investment. Owners of both our Huntress Global Balanced and Huntress Global Growth funds have exposure to the Company through their underling holdings in Lindsell Train’s Global Equity Fund and, in a smaller quantity, through Polar Capital’s Global Technology Fund.
For anybody who is keen to witness Nintendo’s brilliant content in action, we welcome everyone to join us in the Market Square on the 8th and 9th September, where we will be co-hosting an event, alongside our friends at Just Games, in support of the Priaulx Premature Baby Foundation. Not only will you be contributing to an excellent cause, but there will also be a highly sought after Nintendo Switch up for grabs! Many of you will know that the latest console from Nintendo is almost as elusive as the golden bunny which periodically frequents the basement in Mario 64! More details will be announced in the coming weeks and we look forward to seeing everybody there.
Article taken from the August 2017 issue of GSYLIFE.