Saudi PIF’s Nintendo stake to further kingdom’s economic diversification

Announced last Thursday, the $500 billion PIF said the Nintendo purchase was made for investment purposes. It follows two such investments in Japanese gaming companies.

“The PIF’s acquisition announcement of a 5 percent stake worth of Nintendo (equating to 6.5mn shares of the business) is interesting on several fronts. It follows the PIF’s recent disclosure of stakes in two other Japanese gaming companies – Nexon and Capcom.

Within this context, it’s worth noting that Nintendo is one of Japan’s leading IP companies and Japan is the world’s third-largest content market, behind USA and China,” said Matthew Pickering, CEO of Power League Gaming.

“It also follows recent consolidation activity in the segment by Microsoft and Sony, specifically the acquisition of Activision Blizzard on Microsoft’s part and Sony’s absorption of Bungie (with both publishers focusing on US and Euro player bases).

“Whilst the Sovereign wealth fund’s investment into the gaming segment sees continued and sustained activity, particularly over the past twenty-four months, the focus on Japanese equities is possibly driven by the yen being pushed to multi-year lows, presenting timely opportunities to secure stakes in the Japanese gaming giant,” he continued.

Such a move could eventually lead to the localisation of content, in a region where the number of gamers in the three largest markets – Saudi Arabia, the UAE, and Egypt – is expected to reach 86 million by 2025.

“From a content perspective, the MENA region historically struggles with global game publishers’ provision of localised content. This acquisition is perhaps a nod toward a downstream opportunity to drive the localisation of some of Nintendo’s content for Arabic-speaking audiences, something which PLG would welcome,” said Pickering.

“Naturally, localisation of games and game-related content drives up-weighted engagement and enhances customer (gamer) experience. From our perspective as an integrated gaming content and eSports development company – should localisation of Nintendo’s content be boosted for Arabic audiences, this would assist the gaming content strategists at PLG to further enhance the customer experience they provide to our brand partners and their audiences,” he continued.

Kyoto-based Nintendo reported lacklustre financial results last week as the creator of Super Mario struggles to revitalise its five-year-old Switch console and manage a global chip shortage, Bloomberg reported.

Meanwhile, some stakeholders saw this move as one more step in Saudi Arabia’s path to diversifying its economy away from oil revenues.

Nazih Fares, head of Communications and Localisation at The 4 Winds Entertainment, said: “My personal take is that similar to other investment in this industry sector, PIF is probably focusing on either an international investment exposure, or to keep a hold on stock and sell when the ROI is beneficial at a certain time and reduce their reliance on crude oil revenues.

“We’ve seen this happen in late 2020, when PIF’s cut its US holdings, and reduced its stake in Uber for example from $3.5bn to $2.7bn within the same year.”

He concluded: “This is a good indication, however, on how the gaming sector is now being taken seriously by the government. I would rather prefer seeing these sort of investments go towards the national and regional industry: financing game development or publishing projects with local flavours catered to the audience that require usually much smaller capital, and larger return on investment.”