Nintendo Ready for China Jump -- WSJ
The deal with Tencent may be a precursor to bringing the Switch to huge game market
By Takashi Mochizuki and Alyssa Abkowitz
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 20, 2017).
For all its global popularity, Nintendo Co. has had relatively limited business in China. Now, a deal with Tencent Holdings Ltd. has investors excited at the prospect of the Japanese company's Switch console and smartphone games taking off in one of the world's biggest game markets.
Nintendo shares shot up 7.1% to a nine-year high Tuesday on word that one of China's most popular videogames -- Tencent's "Honor of Kings" -- will be available on the Switch this winter. The game is called "Arena of Valor" in Europe, where it was introduced in August; a U.S. launch under that name is set for later this year.
For the moment, the deal, disclosed last week in a Nintendo video posted online, doesn't directly involve users in China because the Switch isn't sold there. But it could be a precursor to arrangements allowing Nintendo to sell the Switch and its mobile games in China, said people familiar with the thinking of Nintendo and Tencent executives.
"This is very positive in the longer term in getting Chinese publishers supporting the Switch," said Macquarie Capital Securities analyst David Gibson. He expects Nintendo to introduce the Switch in China by March 2019.
China is the world's largest smartphone game market, and "Honor of Kings, " first released two years ago, is one of its standout hits. Research firm App Annie said the game was the top-grossing app in China during the second quarter of this year, raking in some $87 million a month on average on Apple Inc.'s iOS platform.
The game, a battle between five-player teams, has been so popular that this summer Tencent imposed daily playing-time limits on players ages 18 and under and imposed a curfew for children 12 and under.