Janus Henderson: Nintendo: paving the way for positive play

Hamish Chamberlayne and Ama Seery, members of the Global Sustainable Equity Team, discuss how Nintendo is putting its stamp on the video gaming industry.

Key takeaways:

• The US$160 billion video gaming industry has provided solace for many individuals in a time when physical social contact is limited. However, negative allegations surrounding gaming have long been a cause for concern.
• Japanese consumer electronics and video game company Nintendo is a prime example of how gaming companies can ‘do it right’, by creating unique, family-friendly games for all ages.
• Tackling obesity, enhancing mental wellbeing and making learning fun are all ways in which Nintendo’s products can contribute positively to society.

Since the invention of the first ever ‘video game’ in the 1950s, the global video game market has grown to a billion-dollar industry, reaching a value of nearly US$160 billion in 2020.1  In fact, some sources suggest that the worldwide gaming industry generates more money than the North American sports industry and global film industry combined.2 And as technology has improved, gaming has levelled up too. The first commercially successful video game ‘Pong’ – where two players engage in a game of virtual table tennis – is a far cry from the graphics and complexity found in today’s gaming market.

A key objective of Nintendo’s products is to create fun for everyone, placing a strong emphasis on unique family-friendly games that can be enjoyed by all ages and genders.

Throughout the COVID-19 pandemic, video gaming has proven to be a convenient distraction for those who have been forced to reduce social contact by creating virtual worlds in which people can interact. In fact, gaming accessory firm HyperX found that more than half of 13–18 year olds use gaming as a primary source to stay in contact with friends. But while video games can be a source of entertainment, they have often been met with contention. Numerous studies have been undertaken to assess the negative social implications associated with gaming. The impact of violence and depictions of gender and race stereotypes that appear some video games are top of the list. Additionally, concerns have been raised about the amount of time spent playing video games, especially in children and young adults.

Agendas that align with environmental and social impact

We seek to invest in businesses that have a clear positive impact on society and the environment by virtue of the products or services sold, and by the way in which the operations of the business are managed.  Our idea generation is guided by ten sustainable development investment themes which are aligned with the United Nations Sustainable Development Goals (UN SDGs).

Japanese consumer electronics and video game company Nintendo is a prime example of how we believe gaming companies can ‘do it right’, by contributing positively to society. Our analysis suggests that Nintendo contributes most highly to the Quality of Life theme within our portfolio (please read our Investment Principles for more information on our ten sustainable development themes). A key objective of Nintendo’s products is to create fun for everyone, placing a strong emphasis on unique family-friendly games that can be enjoyed by all ages and genders. As a result, Nintendo has seen greater adoption among women, children and older gamers, a much-overlooked demographic.

Getting 1UP on obesity

The sedentary lifestyle associated with video games can be a health concern for children, who often opt for gaming and watching television instead of spending time outdoors and keeping active. With over 340 million children and teens classed as obese3, encouraging an active lifestyle from a young age is imperative. Nintendo was an early adopter of parental controls on its systems, allowing parents to set maximum playing times and enforcing breaks to prevent prolonged activity.

The company’s games are unique in design, focusing on movement and action as a core element of play. The Wii Fit uses motion sensing capabilities via the Wii remote to enable players to participate in virtual games of tennis, boxing, baseball, and more. The continued development and promotion of Nintendo’s active games such as Ring Fit Adventure and Pokémon GO also encourages users to get off the sofa and engage in new ways. Ring Fit is an exercise-based action role-playing game that utilises a Pilates ring and leg strap. Pokémon GO is now one of the most successful mobile games of all time, becoming the most downloaded mobile game ever in its first month of release.4 The augmented reality game uses GPS to locate and battle virtual Pokémon creatures in real-world locations, encouraging players to go outdoors. As well as being loved by children, these games are enjoyed by adults too meaning that all ages can reap the benefit of exercise.

Next mission: mental health

In recent years mental health awareness has increased dramatically. We consider it to be an integral part of overall health and wellbeing and were pleased to find that Nintendo’s games can contribute positively to mental wellbeing.

Transparency is a core attribute of sustainable investing, both in terms of how sustainable development is incorporated and in the subsequent reporting of the results. In a breakthrough study with the Oxford University, gaming firms Nintendo and EA allowed researchers to use real anonymised play-time data, rather than self-reported and estimated figures, to analyse the impact on participants mental health. The study found that participants playing Nintendo’s Animal Crossing: New Horizons and EA’s Plants vs Zombies: Battle for Neighborville reported feeling happier than those who had not played.5 This is contrary to other reports on gaming which have suggested that the more people play video games, the unhappier they feel. One possible reason for this discrepancy could be the social nature of the games in the study whereby players could interact with other users in order to build a positive environment around them. This is especially important in recent times where COVID-19 induced lockdown measures have led to reduced social interaction and loneliness.

Attention and emotional processes are closely linked in the brain and a recent study analysed the link between memory games and emotional functioning. The results suggested that simple memory and cognitive exercises, such as Nintendo’s Dr Kawashima’s Brain Training, may reduce symptoms of depression and anxiety among teenagers.6

Gaming for education

The global economy is changing. While some jobs are disappearing due to automation, brand new jobs are emerging as a result of technological advances. In the US, Science, Technology, Engineering and Mathematics (STEM) jobs are predicted to grow by 13% between 2017 and 2027.7 Technology is also changing the way students learn, connect and interact every day. Today, STEM learning includes educating through digital games. In a study by the Joan Ganz Cooney Centre at Sesame Workshop, 71% of teachers using digital games reported that games had been effective in improving their students’ mathematics learning.8

In 2018, Nintendo launched the Labo project to enhance its educational capabilities. Nintendo Labo is a toys-to-life game that combines cardboard sheets with Labo software to allow the user to design, build and use attachments to the Nintendo Switch console. The software has been successfully developed into a classroom tool which combines hands-on creation with technology, helping to teach children communication, critical thinking, creativity, and problem-solving skills in a fun setting. Additionally, the software has been leveraged to promote STEM subjects in schools.

Improving lockdown lives

During COVID times, Nintendo’s products have been more in demand than ever before. With lockdown measures restricting physical social interaction, including in school and work, banning most team sports and even causing facilities such as gyms to close, the benefits of Nintendo’s products have been amplified. The company sold more than 24 million Switch consoles in the nine months to December 2020 and reported a surge in profits to US$3.6 billion in the same period, 91.8% higher than the year before.9 The desire to keep fit, be entertained and stay engaged are all made possible through Nintendo.

Footnotes

¹Statista, Video game market value worldwide from 2012 to 2023, 2021.

² Marketwatch.com, Videogames are a bigger industry than movies and North American sports combined, thanks to the pandemic, 2 January 2021.

³World Health Organisation, April 2020.

⁴Guiness World Records, News, August 2016.

⁵N. Johannes, M. Vuorre, A. Przybylski, Video game play is positively correlated with well-being, November 2020

⁶ L. Ackermann, Brain Training Games May Reduce Teenagers’ Vulnerability to Depression and Anxiety, Psychiatric Times, Volume 36, Issue 6, 5 June 2019.

⁷Education Commission of The States, Economic Modeling Specialists International, 2017.

⁸L.Takeuchi & S. Vaala, Level up learning: A national survey on teaching with digital games. New York: The Joan Ganz Cooney Center at Sesame Workshop, 2014

⁹Nintendo, February 2021