Why is Nintendo focusing on its IP strategy? What are successful IPs? Strategies for game IP hits

IP strategies have been emphasized in the video game industry in recent years, as Nintendo has been focusing on “expanding the population exposed to Nintendo IP”. What is IP in the first place? Why is it so important?

Following the previous issue of Metaverse, we asked two game writers, Mr. A and Mr. B, both game developers, to talk about “game IP.

IP titles are easy to attract customers and have good sales prospects.That is why game companies are aiming to establish IP.

Mr. A: The game industry in 2023 appears to be very active, with so-called major IP titles such as “The Legend of Zelda: Tears of the Kingdom” and “Final Fantasy 16 (FF16)” becoming hits. More recently, Nintendo has been enjoying great success with “The Super Mario Brothers Movie,” a film adaptation of its popular IP.

In recent years, Nintendo has stated in its financial statements that it will “focus on expanding its IP strategy,” and it seems that more and more attention is being paid to IP titles. So today I would like to ask you about IP strategies of game companies.

Mr. B: The term “IP” means intellectual property. Generally speaking, it refers to copyrighted works such as games, animation, and manga that are known and popular among many people. In the case of the video game industry, IP refers to titles and characters that have become big hits. Zelda”, ‘Super Mario’, and ‘FF’ fall into this category, so you could say they are IP.

Mr. A: Then why is the term “IP strategy” so important?

Mr. B: Simply put, it is because it is easier to attract customers and sales are more likely to come from a series. If you compare a title with the title “Super Mario” and a completely new title, the former has a better chance of selling.

That is why game companies are making efforts to establish their works as IP. IP also has the advantage of earning revenue by expanding into other genres, such as animated cartoons, comic book adaptations, and merchandise sales.

Mr. A: However, looking at Nintendo's most recent financial results, game hardware and software accounted for 1.54 trillion yen of the 1.6 trillion yen in annual sales, and “mobile and IP-related income, etc.” was 51 billion yen. These figures are for the period from April 2022 to March 2023, so they do not include revenues from movies, but even so, it seems that IP revenues are only a small portion of the business results.

Mr. B: That's right. When game companies develop their IP in non-game content, they often rent the IP to other companies and receive a portion of the sales as royalties, so the revenue is not that much. So, they would not be placing high expectations on the sales themselves. What is more important is that we can expect a simple contact effect by developing IP in many directions.

Mr. A: You are referring to the psychological phenomenon in which people become interested in things or people they were not originally interested in after repeated contact with them multiple times, right?

Mr. B: That's right. For example, even people who have never played the game “Pokemon” think “Pikachu” is cute and have a somewhat favorable impression of it. This is because of the success of the media mix, including the animated series.

People who are interested in the characters and the title in this way are more likely to buy the sequel to the game someday. In other words, creating content other than games as IP is based on the expectation that it will eventually return to game sales.

IPs are used in multiple ways to “attract new users” and “connect existing fans.

Mr. A：It is easier to feel familiar with a work that one has heard of than one that one has never heard of.

Mr. B: Recently, more and more real events are being developed. For example, Square Enix has announced a stage adaptation of “FF16” in Takarazuka. In the past, there have been stage adaptations of the “Saga” series and the smartphone game “Twatsugai.

In addition, idol and band productions such as “Love Live,” “Bandolier,” and “iM@S” frequently hold live events featuring the voice actors who voice the characters.

The events themselves are intended to generate revenue, but they are also intended to arouse fans' love for the IP and encourage them to pay for the content over the long term. In modern parlance, it means to keep supplying content so that people will keep pushing for it.

Mr. A: I see, so IP development is also a form of fan service for existing fans. It is true that people want to buy goods of content they have grown to like, and the continuous supply of content in the form of anime and manga adaptations helps to maintain their love or loyalty to the IP.

Mr. B: If we can keep the fans' enthusiasm alive in this way, the probability that they will buy the new IP game when it comes out will increase. In this way, a title that continues to provide content over many years and builds a strong fan base can be called an IP.

However, the term “IP” has only been in vogue for about 10 years at most. When “Super Mario” and “FF” began, the term “IP strategy” did not exist. As a result, it can be said that the games that became hits and were able to release many sequels have only now become what we can call “IP.

In recent years, it has become the norm to strategically aim to create IP, including media mixes, from the planning stage.

Mr. A: I guess you could call it a survivor's bias. Then, is it impossible to create IP now?

Mr. B: Of course, there are IPs that have been created in recent years. However, the level of difficulty is much higher than in the past, and successful IPs are almost always based on the premise of a media mix at the planning stage. For example, “Love Live” must have been planned from the beginning to expand into novels, manga, live events, anime, and games.

Also, “Uma Musume,” which has now grown into a major IP, was also a project based on the premise of a media mix. The project was announced in 2016, from which an anime and manga were announced, and the game was released in 2021 after a three-year pre-registration period.

The development and IP development costs alone must have been enormous before the main game was released, so this is an example of how difficult it is to establish an IP unless you have the financial resources at the time of planning to endure it.

A recent example is “World Dice Star,” an anime that aired during the spring 2023 school year, which is scheduled to be released as a smartphone sound game in July.

In this way, the recent IP strategy is not one of developing a hit game in many directions, but rather of establishing IP through multi-faceted development that includes games. However, this approach requires a larger initial investment than developing only games. It is also a high-risk challenge because the damage in the event of failure is significant.

Mr. A: So there is a difference in strategy between a well-established game company that already has IP and a game company that is trying to create new IP. When you look at it this way, it seems that companies that already have IP are in a very strong position.

But to be honest, there are many examples of IP works that fail. Many people on the Internet say that even when Square Enix adapts an IP into a smartphone game, the service is soon terminated.

The prolific Square Enix and the overprotective Nintendo protect their IPs.

Mr. B: The smartphone game market was born in recent years, so there is an assumption that each company has a different strategy. In the case of Square Enix, until the early 2010s, they did not use “Dracula” or “FF” and released a large number of completely new titles.

After that, we adopted a strategy of releasing operational IP titles after we had gained a certain degree of insight into the smartphone game market. As a result, we have produced some blockbuster titles such as “Dracula Walk,” but some of them have ended after only a year or so.

Mr. A: As a fan of ancient games, I am not comfortable with IPs being used in smartphone games.

Mr. B: The smartphone game market is now saturated, and it is very difficult for completely new titles to attract customers. In such a situation, using IP has the advantage of reducing marketing costs by hundreds of millions of dollars.

Furthermore, the development cost of a console consumer game can run into the billions of yen, but compared to that, smartphone games can be made on a lower budget, so the idea is to make a lot of games. Even so, the development cost of an operation-type smartphone game is now at least 200 to 300 million yen.

Mr. A: If you put it that way, it makes a little more sense, but it still seems to me that you are eating up IP and lowering the company's reputation.

Mr. B: To begin with, in game development, it is impossible to have a hit with every single shot. Square Enix's strategy is to make a few hits out of a large number of games. In other words, it is a strategy of “many products, many deaths. Even so, Square Enix must be doing this with the calculation that if a hit title is produced, it will be a positive enough result for the company.

Square Enix is one of the most well-established game companies in Japan, but they are probably getting a bad impression because of the large number of IPs they have put into smartphone games. Just as Sega's “Sakura Revolution” ended after only six months, it is the same for all companies that just because it is an IP does not mean it will never be successful.

In spite of this, the smartphone game “Romasaga RS” has been a hit, and Saga is being revived as an IP, and remakes of past titles are being made. In some cases, this is a positive thing for so-called game fans.

Mr. A: You are taking a high-risk, high-return strategy for both the company and the fans. On the other hand, Nintendo rarely releases smartphone games, and even if they do, they are structured in such a way that they don't require much in the way of payment.

Mr. B: Nintendo also showed signs of focusing on the smartphone game market by announcing a partnership with social game giant DeNA in 2015, but they are still cautious about releasing smartphone games. Since they are making enough money in the console market, there is probably no need for them to venture into a high-risk market.

Square Enix is the type of company that drops its own children into the valley of a thousand questions and raises those that survive, while Nintendo is the type of company that carefully nurtures its own children and does not allow them to go into dangerous places. Sega and Namco Bandai are somewhere in between, and they are introducing their IPs to the smartphone game market in moderation.

However, I believe that game companies as a whole are more careful in creating IP games than completely new games. Whether they are making their own IP or borrowing the IP of a popular manga from a publishing company, the pain of failure is still too great.

After all, if the game is not interesting, it will never be a hit.

Mr. A: It is not easy to establish a new IP. Recently, a smartphone game called “Kamigami Shijima” was released with the mention that famous YouTuber Hajime Chacho was involved in its production. This title has already been adapted into a manga and other media mixes.

However, the game was extremely unpopular and fell below the top 500 in sales ranking within a month or so of its release. Why do you think this kind of failure occurs?

Mr. B: In a word, making games is not easy. I heard that Hajime Shacho was involved in the project for almost three years, but in effect, his involvement must have been limited to roughly thinking about the game world and making requests such as, “This game is interesting, so let's make something like this.

The game companies must have aimed to use the influencers' names to attract an initial audience, and that must have had some success. However, in the end, if the game is not interesting, it will not be a hit, no matter what celebrity is used.

This game is in a genre called asymmetrical competitive games, as typified by “Dead by Daylight,” but there is simply nothing that makes it better than existing works, so it is an unavoidable result. It is heavy in operation no matter what you do, and the UI is not praiseworthy either.

There are very few examples of smartphone games that were not well-received immediately after their release but later became big hits, so it is already difficult to establish an IP.

Mr. A: It's tough to make games, and it's even tougher to make IP. From now on, I will be a little kinder when I encounter a boring game.

Profile

◉Mr. A.

A single game writer in his 40s. He devotes all his time outside of work to games. His favorite games are “Cities Skyline” and “Monster Hunter Rise: Sun Break. The game he recently played was “FF16. He says, “I like the action, the graphics, and the story, and I feel like I haven't played an RPG in a long time.

◉Mr. B.

After working as a director and planner for a major game company, he is now working for a game company that mainly does contracted development. His favorite genres are FPS and idol-breeding games, and he has spent the past two years working his way up the ranks in “APEX” to Diamond, but recently he feels that his reflexes have deteriorated. Recently, he is into “Uma Musume” and his favorite character is Rice Shower.

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