With Pokemon Go, Nintendo's comeback begins

Brothers Jon and Ryan Edmonds play the augmented-reality smartphone game Pokémon Go in downtown Texarkana, Arkansas on Saturday, July 9, 2016. Released July 5, the game allows players to "catch" characters that appear to be in the real world using GPS and the smartphone camera.
Joshua Boucher | Texarkana Gazette | AP

Five years ago, there was no more vocal opponent of mobile games than Nintendo. Today, the company is positioning itself as a leader in the field.

"Pokemon Go" has become a phenomenon in the mobile world — the likes of which haven't been seen since the early days of "Angry Birds." The app, which features the Nintendo franchise, soared to the top of Apple's app store and gross revenues charts in just two days. And it's showing no signs of slowing down.

Police stations have had to ask players to stop coming to the station to "capture" the mythical creatures. Churches are using the game to fill the pews. The game has even inadvertently led police to a dead body.

Analytics firm SimilarWeb said the number of daily active users is already nearly on par with Twitter.

The Pokemon franchise exploded in the late 1990s. It has since fallen off the mainstream world's radar, but has been a consistent strong seller for Nintendo — helping drive sales of the company's DS and 3DS handheld platforms.

"Pokemon Go" is an extension of that. It's a scavenger hunt game at heart. Using the phone's GPS, the game makes various Pokemon characters "appear" around you, using augmented reality on your phone's screen. While you'll find one or two around your home, the game rewards people who actively search outside of their home.

It is, in some ways, publicly accepted live action role playing. Instead of hunting the characters in a mythical town, people can live out their Ash Ketchum (the hero of the Pokemon TV series) fantasies and hunt them in the real world now.

That hooks the hardcore fans. But by tapping into the general public's obsessive collecting mentality and by using augmented reality in a fashion most people have never seen before, the game has quickly taken off.

One thing you won't find in "Pokemon Go" are the battles that were a part of previous games. Instead, to strengthen the Pokemon in your collection, you'll need to use "special items," which can be found randomly, as Pokemon are, or bought via in-app purchase — which is where Nintendo will capitalize on the game.

One analyst estimates the free game boasted day one revenues of between $3.9 million and $4.9 million.

And that could just be the tip of the iceberg. Pokemon Go has only launched in the U.S., Australia and New Zealand. Launches in other markets, including the company's home country of Japan, are still looming.

Nintendo's shares soared almost 25 percent in trading Monday, after gains of just under 9 percent Friday.

Not long ago, Nintendo was the industry's biggest critic of mobile games.

Satoru Iwata, the normally genial president of Nintendo in 2011, wasted no time attacking the mobile industry's game offerings, calling them substandard and a threat to traditional electronic entertainment companies, including his own.

"Smartphones and social network platforms are not at all like our [industry]," he told developers. "These verticals have no motivation to maintain the high value of video games. For them, content is something that is created by someone else. Quantity is what makes the money for them. Quantity is how they profit. The quality of video game software does not matter to them. … The fact is: What we produce has value and we should protect that value."

Nintendo shares soar 25% on Pokemon GO hopes
Nintendo shares soar 25% on Pokemon GO hopes

Iwata, who died of cancer in 2015, changed his thinking a few years later, as the Wii U floundered and investors began to strongly urge the company to alter its stance. And he spent the last two years of his life working with The Pokemon Company and game developer Niantic on "Pokemon Go."

Nintendo owns one-third of The Pokemon Company and holds an undisclosed stake in Niantic. It also took a 10 percent ownership position in Japanese mobile developer DeNA last year.

Analysts say the excitement surrounding "Pokemon Go" could benefit the company as it prepares to launch its new console system — code named "NX" — next March.

"I think it creates a lot of potential excitement for NX," said Mick Hickey of Benchmark. "It's crazy the amount of attention this game has gotten. And attention creates awareness. It gets people thinking about Nintendo and there are ancillary benefits for people thinking about the company's IP. It's a positive because it creates curiosity. And Nintendo has had success in leveraging handheld consoles — like the DS — and creating interest in its consoles historically."

As if that weren't enough, Pokemon Go may another ace up its sleeve. In addition to the app, there's an optional hardware component for dedicated players called "Pokemon Go Plus." The small Bluetooth device, which could be clipped onto clothes, lets fans play the game even when they're not looking at their phones, notifying them of nearby Pokemon, which can be "captured" by pressing a button.

The Nintendo Store is sold out of the accessory. And they're already being offered on eBay for $280.