Why Pokemon Unite MUST Succeed

Ever since the announcement of Pokemon Unite last year, there has been a general excitement about the potential opportunity to re-imagine MOBAs for a broader audience.

Tencent’s Honor of Kings mobile MOBA game is regularly the #1 grossing game in the world; it also continues to grow since 2016.

So how well can Pokemon Unite do, and what are the prospects for this game?

The big questions around this title have been the typical concerns:

• IP Adaptation: Will Tencent make a MOBA that adapts the gameplay well to Pokemon IP?
• Product/Market Fit: Will a younger demographic enjoy playing a MOBA-style game? Will the broader audience like the changes made?
• Western Revenue: How well will the game do in Western markets where most of the revenue for MOBAs has been in Asian (really mainly China) countries?

However, when I think about my own outlook for Pokemon Unite, I think in terms of 2 lines of thinking:

1. Comps based potential
2. Strategic implications

Let’s start with the first line of thinking. However, it’s really the context of Tencent and the future of gaming in China around the second line of thinking that makes me believe: Pokemon Unite will absolutely win.

Why? Because it has to.

#1. Mobile MOBA Comps

Mobile MOBAs have been doing very well globally. This is especially significant for China, which has the biggest market for MOBAs. Look at the revenue from China compared to other countries for Honor of Kings below:

Honor of Kings: Global, Net DL and Rev 8/19/20–8/18/21

Notice, however, the massive contribution of revenue from China:

Note that China accounted for $2,101,022,213 of a total $2,190,220,332 (~96%) in net revenue and 26,339,355 out of 47,933,949 (~55%) downloads over the past year.

To get a better comparative basis for evaluation, we look at the top 3 MOBA games excluding China as well below:

Top 3 MOBAs: Global Ex-China, Net DL and Rev 8/19/20–8/18/21

Past Year: 8/19/20–8/18/21

Revenue per Download 10 Months from Launch

Potential Scenarios Based on Comps

Based on the above data points, a reasonable scenario analysis for Pokemon Unite for global, net revenue 1-year post-launch may look like the following:

However, there are a few reasons to be a bit more optimistic about Pokemon Unite:

1. Pokemon IP is amongst the best game IP in the world period
2. From what we saw with Fortnite, going cross-platform had a halo effect on mobile downloads
3. Pokemon Go, while a cultural phenomenon that isn’t super likely to be replicated, had over 405M downloads and $830M in net revenue in its first year of launch

Pokemon Go Downloads 1 Year from Launch

Given these points, I would likely err on the side of optimism and lean more towards a bull case.

Relative to other MOBAs, Pokemon Unite is also trending positively and more in line with Mobile Legends: Bang Bang than Wild Rift. Remember, Mobile Legends did over 150M installs over the past year.

The above trends graph should be an indicator of stronger relative download volume, at least compared to Wild Rift.

#2. Tencent Strategic Implications

Ok, now let’s talk about strategic implications. We know that Tencent has the ability to push whatever it wants in China based upon its WeChat platform and can pretty much make any game successful that they want.

We further know that the Chinese government has specific societal objectives that all Chinese tech companies, including Tencent, will likely support.

We note some evidence of Tencent falling in line to support the Chinese government societal objectives:

Quick Takes:

• The Chinese government has already forced PUBG to eliminate violence from the original game version and rebranded itself as “Game for Peace.”
• The Chinese government emphasis on the increased protection of kids including the amount of screen time should indicate a shift to more family-friendly and kid-friendly types of games for China
• Assuming the above is true, having access to Nintendo’s IP — the most popular and kids friendly IP in the world — becomes critically important
• Tencent has a history of betting big on key IP titles as a major key to success for their global titles.

Conclusion:

• There is absolutely no way Tencent will allow Pokemon Unite to fail. We should view the title as the first in a larger arrangement to bring more Nintendo IP titles to the Chinese and global markets

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