Saturday, February 1, 2014

Should Nintendo buy Capcom (Opinion)



"We built up cash reserves when earnings were strong. Because the entertainment industry ebbs and flows in wild swings, Mr. Yamauchi insisted it is vital to have deep pockets. Without savings, we could not have recovered from a single failure in game systems. Even now, we can afford many options because of our robust financial standing."

"We should abandon old assumptions about our businesses. We are considering M&As as an option." said Satoru Iwata, President of Nintendo, in an interview with publication Nikkei on the last days.

M&A refers to Mergers and Acquisitions, which mean Nintendo is considering acquire (buy) more studios/ Publishers to expand their work force (and IP portfolio) and/or create partnerships with other Companies that share their interests.
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Now what studio could buy Nintendo that could create a mutual benefit for both parties? I say Capcom is the perfect option.

Capcom is an old Publisher with many great IPs under his wing, Street fighter, Resident Evil, Okami, Devil May Cry, Megaman, to name a few, and the list can go on.

So, why Capcom:

IPs
Nintendo Games are among the best games in the industry, that is out of discussion, but at the same time, present a problem, they are barely system sellers alone and most of them only cater to old fans, while newer player entering  the industry seem driven to more action-violent oriented games (Shooters, Hack n Slash) and this is one of the main reason why Nintendo latest console, The WiiU, is having such a hard timeto find itself a place in the market.
Acquiring Capcom will means acquire those games, and become exclusives for Nintendo console, which will boost the appeal of the console by several folds.
On its side Capcom games will get something they badly need, Good Management. Outsourcing the games, crippling em with DLC, over expenses, all this has contributed in the last years to deteriorate Capcom Games overall quality and had a negative impact on their image, Disk Locked DLC fiasco on Street Fighter x Tekken, The Devil May Cry Spin off, DmC,  is the worst received in the franchise, and despite selling a over 7 Million Copies, Resident Evil 6 was a financial failure as it could not make back the amount that was invested on it, cancelling several Megaman Games and instead releasing the awful ports to smartphones.
Under Nintendo management game will be able to be good without unnecessary expenses, which will easy to reach profitability levels even with lower sales.
Also as 1st party games for Nintendo, games wont longer need to pay licensing and Royalty fees, which will also increase the amount of money every game can make.

Its cheap
Despise their age and amount of franchise at its disposal, as mentioned before, the last year have not been kind for Capcom ,reason why has a Market Cap of  ¥ 135.79 Billion (+ / - 1.35 Billion Dollars)
On the other hand, Nintendo's cash 100% at disposal for any kind of expenses is  ¥ 561.60 Billions (+ / - 5.61 Billion Dollars)

For less than one fourth of its savings, Nintendo will get a lot of IPs that will increase the appeal of any current and future console.

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