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Analysts set expectations for Super Mario Run

Industry watchers say Nintendo has a hit on its hands despite concerns about the business model and always-online requirement

Super Mario Run launches on the iOS App Store today, and all eyes are on Nintendo's flagship IP as it makes its first jump to mobile platforms.

Part of the anticipation surrounding the game also revolves around its business model. A sampling of the game's levels will be free-to-download, with Nintendo charging $10 to unlock the full game. There are no in-app purchases or further revenue streams, so Nintendo is counting heavily on its clout to make a success out of a game using a premium business model on a platform dominated by free-to-play. Nintendo set a high bar for itself with the premium model, but it's one the company can almost certainly clear, according to a number of analysts polled.

When asked if the game would be a hit, IHS Technology director of games analysis Piers Harding-Rolls winkingly responded, "Do I need to answer that?" As for the business model, Harding-Rolls felt it struck a good balance between generating revenue and protecting the perceived value of Nintendo's key brands.

"I expect the conversion rate to be very high compared to average titles using this approach," he said.

Wedbush's Micharl Pachter agreed the game would be a hit, but also had some concern about the monetization scheme.

"The premium model may alienate people who expect a free to play game," Pachter said. "I expect a lot of downloads (100 million quickly and 500 million eventually), but only 2-5% conversion, so unlikely that it is huge the way Pokémon Go was. The persistent online connection will be a problem, and most mobile players aren't used to a typical Nintendo platformer, so it may not resonate the way Pokémon Go did."

Pachter projected that the game would ultimately sell 20 million units in the first year, with modest continued sales after that.

Research firm Superdata said Super Mario Run would be downloaded 30 million times in its first month, generating $60 million from people who unlock the full game. Company CEO Joost van Dreunen said that would have to be considered a successful launch since the game is only releasing on iOS for the time being.

"Were they to also release on Android and persuade as many people to spend the $10, which is more challenging since spending on Android skews lower, that would multiple it by 2-3x," van Dreunen said. "So $60 million in revenue the first month should be considered a moderate success. Anything over $100 million would be exceeding expectations."

Harding-Rolls said he doesn't see any major downside to the limited exclusivity on iOS.

"The exposure that the game has had since being announced on stage and on the iOS store has been beneficial," he noted. "It's likely that the exclusivity will have involved some financial arrangement. It's worth noting that average iOS device spend on apps continues to be significantly higher than Android, so addressing the Apple audience as a priority with a premium product is well planned."

The rollout hasn't been flawless, however, as Harding-Rolls said, "I think Nintendo's only misstep so far is the requirement to be always online when playing the game. I think this reflects a fundamental misunderstanding of the use cases of mobile games and may harm the experience for a share of gamers."

UPDATE: We heard from a couple more analysts after the original publication of this story, so we're adding their thoughts here.

Patrick Walker, EEDAR VP of Insights

"The strength of the Mario brand and the accessibility of mobile means that Super Mario Run is almost guaranteed to be a month one hit. Expect record month one download numbers and a high conversion rate for mobile. However, I think the premium business model and a genre, endless runner, that is difficult to monetize over time will lead to rapid declines in revenue and overall revenues that are lower than other market leaders. Building a game designed to make ongoing revenue for many months is challenging and has a much higher chance of complete failure. Therefore, launching the first mobile title with a brand as strong as Mario as a premium game minimizes risk and guarantees the game will achieve positive headlines and at least moderate financial success.

"I believe that a lot of moves Nintendo is making right now, such as bringing Mario to mobile and releasing the NES classic, are focused on increasing overall Nintendo brand equity and buzz before the launch of the Switch than revenue generation. The real prize for Nintendo is a successful Switch launch and what better way to increase Nintendo brand awareness than get Mario on as many smartphones as possible."

Peter Warman, CEO at Newzoo

"The IP and anticipation, combined with Apple's promotion, will ensure tens of millions of downloads for Super Mario Run in its first days. We can even imagine that 10 million people across the globe will buy the game in the next few weeks, generating a neat $100 million in gross revenues. The press release to share this success with the world is most likely already written and may give Nintendo's stock a boost. But then what? Will it generate a billion dollars a year for Nintendo? No, most probably not. Still, we anticipate that in a couple of years from now, smartphone and tablet games will account for at least half of Nintendo's software revenues. Today, Nintendo takes the first step. A small step for the industry, but a giant leap for Nintendo."

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