What Does Fire Emblem Heroes’ Performance Tell Us About The Success Of Nintendo’s Mobile Strategy?

By on Mar 3, 2017 in Mobility Strategy |

Friday, March 3, marks the global launch of Nintendo’s (OTCPK:NTDOY) $300 hybrid home console/portable Switch hardware.

It’s a vital date in the veteran Japanese company’s battle to remain relevant in the $100 billion games market it once owned, but in which it now trails Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT).

Few people will think about Thursday, March 27.

In a wider context, though, it marks one month since Nintendo launched Fire Emblem Heroes, its first proper free-to-play mobile game.

Given mobile games are the largest single segment of the market, with annual sales of between $37 billion-$41 billion (depending on your source), Fire Emblem Heroes’ launch performance also has significance for Nintendo’s future vitality.

Big in Japan

The good news for Nintendo, its operations partner DeNA (OTCPK:DNACF) and the game’s developer Intelligent Systems is Fire Emblem Heroes got off to a good start in Japan.

As the home market for these companies, this is perhaps to be expected. Similarly, Fire Emblem games have always been highly oriented toward Japanese culture and have generally performed well domestically on Nintendo hardware such as the DS and 3DS portable consoles.

More importantly, in the case of Fire Emblem Heroes, the $7 billion Japanese mobile game market is both highly insular in terms of the origin of games that rise to the top of the top grossing charts, and heavily skewed toward a winner-takes-all dynamic.

This is best demonstrated by the performance of GungHo Online’s (OTC:GUNGF) Puzzle Dragons and Mixi’s Monster Strike games. Released in 2012 and 2013 respectively, both Japanese-developed titles have been the #1 and #2 top grossing mobile game in Japan for many months, generating billions of dollars in the process.

Puzzle Dragons has generated over $5 billion in five years, while Monster Strike (the current #1) has generated around $4 billion from less than four.

For this reason, Nintendo will be pleased to see that globally, Fire Emblem Heroes’ has performed best in Japan, typically being a top 10 grossing game on the Google Play Store and similarly in the Apple App Store for its first two weeks.

(Source: App Annie – free but registration required)

However, it will also be concerned to see the game slipped into the top 10-top 20 range on the App Store during its third week.

(The Japanese market is split 50:50 in terms of iOS and Android devices, and App Store rankings are more volatile than Google Play because Apple uses a shorter time frame to calculate positions.)

Fire Emblem Heroes regained its top 10 position on the App Store at the end of February thanks to a content refresh. Called Sibling Bonds, it makes new characters from previous Fire Emblem games available in the game and adds new missions.

Summoning random characters using Orbs is the game’s key monetization technique as the random nature of the summoning process relates to the actual character and its star rating. The higher the rating, the more powerful the character, and although players can level up low star characters, it’s a time-consuming and dull process.

Spending money to buy more Orbs appeals more to certain gamers, especially in Japan, hence the very high level of revenue per user that mobile games can generate.

(Source: author, screens showing the flow from Summons to in-app purchase)

Over the coming months, Nintendo, DeNA and Intelligent Systems will be working hard to ensure players have plenty of new content to enjoy. Fire Emblem Heroes will have to maintain a top 20 top grossing position on the App Store and Google Play to fulfill Nintendo’s promise of launching mobile games that can generate more than $100 million ( ¥11 billion).

Limited time events, characters and rewards drive the monetization of top-grossing Japanese mobile games and a focus on such cadence is now widely understood across the industry as recent comments by Zynga (NASDAQ:ZNGA) CEO Frank Gibeau and Glu Mobile (NASDAQ:GLUU) CEO Nick Earl demonstrate.

The global view

Outside of Japan, the picture for Fire Emblem Heroes is mixed.

In North America, the game is grossing better in Canada than the much larger US market, but – again – both markets showed a strong decline of chart position in week 3.

Until Sibling Bonds content drop, it was heading out of the top 50 top grossing on the App Store and looks certain to do so over the coming days.

(Source: App Annie – free but registration required)

On Google Play, the game’s position is top 10 in Canada and top 20 in the US, but markedly down from its respective peaks of #1 and #3.

In the key European countries – France, Germany, Spain and the UK – Fire Emblem Heroes is already outside the top 50 top grossing position on the App Store apart from in Spain.

Indeed, in Germany, it’s already outside the top 100, with France and UK likely to follow suit.

(Source: App Annie – free but registration required)

Google Play shows a similar trend, with Germany being the weakest territory, although the game’s is holding up in Spain and France around the #20 mark.

Fire Emblem Heroes hasn’t yet been released in the key APAC markets of China, South Korea, Taiwan and Hong Kong, although it’s unclear how important these markets will be for this game due to Nintendo’s lack of history in the regions as well as a more general apathy to Japanese gaming culture.

Looking ahead

Of course, we’re just one month into the launch of a game that has a planned life of years so it’s too soon to make forthright conclusions.

Broadly speaking, Nintendo has taken the right approach with Fire Emblem Heroes and focused its design, gameplay and monetization for the world’s most lucrative mobile game market, Japan.

By necessity, this has alienated the mass market of western gamers who appear to have tried the experience and then stopped playing and pay after a couple of weeks. Certainly this is what I’ve found anecdotally.

Still, this being the case, the deep-seated love of all things Nintendo has ensured the game has a decent niche following, especially in North America where it looks likely to generate several million dollars during its launch month.

But it’s only in Japan where it has the potential to generate tens or hundreds of millions of dollars (or billions of yen).

Mark of success

Certainly it will be fascinating to get hard figures when Nintendo announces its Q4 financials. As revealed during its Q3 report, its first mobile game, Super Mario Run, generated ¥6 billion (around $50 million) globally on iOS devices during its launch period. It’s yet to launch on Google Play.

However, due to its $10 one-time-only level unlock business model, Super Mario Run can’t generate more revenue from a player once they’ve paid $10. In contrast, the most fanatic Fire Emblem Heroes players already will have spent thousands of dollars in their pursuit to maximize their characters’ stats and build the perfect teams.

(Source: App Annie – free but registration required)

Despite their very different business models, it will be a clear symbolic mark of Fire Emblem Heroes’ success if it has beaten Super Mario Run’s total, and a mark of its failure if not, something that may dent investors’ confidence given the boost they gave Nintendo’s shares following the announcement of its mobile strategy.