The 1.3 billion people in China represent a potential oasis in Nintendo’s profit desert.
China is a huge market that has prohibited the sale of gaming-specific consoles for nearly 14 years. Yesterday, China suggested that policy could come to an end, and that possibility caused Nintendo’s stock to swell.
Nintendo’s share price opened the trading day up more than 7.5 percent to a two-year high of $18.90. This follows China’s renewed announcement that it is officially doing away with its anti-console policies.
“[We will] temporarily stop carrying out the [old] regulation and wait until the Cultural Management Department of State Council makes the new, related regulation,” reads the Chinese announcement.
The market latched on to this news as a good sign for Nintendo, but that conclusion overlooks some of the key unknowns about the new regulations.
“The new policy avoided any details,” Chinese market analyst Lisa Hanson told GamesBeat yesterday. “Therefore, we are still at ‘wait and see’ with regard to what the console market will entail in China. My guess is that it could be a good opportunity, but it will not look anything like the Western observers are anticipating.”
It’s unlikely that China will let Nintendo or any other company sell their products without major modifications. The Chinese government implements strict controls on just about every product that enters its market — especially with online access — and the console manufacturers would have to retrofit their current devices to meet these still unspecified demands.
We’ve reached out to Nintendo to ask if the Chinese market is something it is prepared to take on. The company has a history of releasing Chinese-specific products, including the iQue Player, which is a controller capable of playing Nintendo 64 games off a specialized flash card. That device debuted in the country in 2003, which is around seven years after the Nintendo 64 first released in Japan.
Nintendo is especially in need of some way of rejuvenating its revenues. The gaming publisher’s Wii U hardware is falling far behind Microsoft’s Xbox One and Sony’s PlayStation 4 in North America and Europe. The house of Mario’s profits are continuing to slip, and a fresh Chinese market could present the cure it needs.
Unfortunately, for Nintendo, Hanson and other analysts agree that China is probably still a few years away from a having a real console market.
China originally prohibited gaming-specific devices in 2000 in an effort to protect the nation’s youth from video game violence. Despite those regulations, the country has a $13 billion gaming industry that generates most of that money on PC.
Nintendo shares closed at $18.66 today.