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Forums - Nintendo Discussion - Why the SRD Acquisition Is Bigger Than You Think

I haven't seen a lot of talk about Nintendo buying up SRD. I know it's no where near the headline grabber of Activision or Bungie, but it hasn't gotten a lot of reporting, even within the Nintendo sphere. Even here, I'd expect it to be a bigger topic. The thing is, I actually think, at least from Nintendo's perspective, this is pretty big news.

Nintendo's philosophy on buying companies has always been "why buy the cow when you get the milk for free?" Before Nintendo bought Next Level Games in 2021, the last major acquisition they made was Monolith Soft in 2007. SDR has been a support studio for four decades. There is little reason for Nintendo to even acquire them. But they did, and I think this may be indicative of a bigger change. More than any other time in the industry's history, there is an absolute ton of money floating around the industry. Companies of any size are prime for acquisition. If Microsoft can buy Activision (assuming the FTC doesn't step in), then anyone is fair game. 

The same could be considered for NLG, especially when compared to Rare. Like Rare, NLG's owners wanted to sell off. In the case of Rare, Nintendo refused despite owning 49% of the company. Rare was responsible for numerous hits, had made several IPs, and was a big reason the N64 did as well as it did in North America. But Nintendo didn't want to take that plunge for the other 51%. About two decade latter, and when presented with a similar scenario, Nintendo buys up NLG. Now, NLG is a great developer, but they are no Rare. They're biggest hit has been Luigi's Mansion, but outside of that, they've been pretty typical (and even made a flop with Metroid Federation Force). I think back in 00s, Nintendo wasn't as worried about losing developers as they are now. 

I think what we are seeing for Nintendo is a defensive position to protect their interest. With so much money going around, there is no guarantee that these developers will be available to work with Nintendo. More studios are putting up for sale signs in hope of a big payout. With Microsoft and Sony looking to buy up studios, Nintendo may not be able to keep these no strings attached relationships they like. SDR is evidence enough of that. Regardless of who made the first move (I expect the owner wanted to sell), it was clear Nintendo wasn't going to give it up

I expect over the next few years, we are going to see more Nintendo acquisitions than most people expect. However, most of these will be smaller studios that Nintendo can't afford to lose. The prime candidates would be Grezzo, Good Feel, Camelot, HAL and Intelligent Systems. However, I think there are two others big ones that will happen

Platinum - Platinum has been very coy. Initially, the company wanted to be independent, but in recent months have said they are open to a buyout. I expect part of this is due to self publishing being harder than they thought and likely a response to all the money in the market. Either way, I think Nintendo will likely buy them up. One thing Nintendo does target is developers who make games Nintendo can't. Nintendo invested in a lot of RPG companies, including former SquareSoft employees. Brownie Brown (now 1Up Studios) was one such developer. Platinum can make difficult and mature titles which is something Nintendo struggles with. Its a reason they stepped in to fund Bayonetta 2 and 3. I think that if Bayonetta 3 does well, then Nintendo will do through with a deal. 

Creature/Game Freak - This one is a little different. The ownership of Pokemon is all kinds of fucked, with Nintendo, Creature and Game Freak each having a third. As a result, the Pokemon Company kind of does its own thing, for better or worse. While the console releases are always on Nintendo hardware, Pokemon has released numerous titles on mobile platforms, long before Nintendo did. The reason I think this will happen is that I don't think the relationship is as rosy as it seems. As time has gone on, Pokemon has almost become more distant, and with Sony putting their titles on Steam, I'm sure the Pokemon Company is thinking of how to do the same with Pokemon titles. Moreover, because these companies own Pokemon, there is nothing stopping Microsoft or Sony from buying up Creature and/or Game Freak to try and get the Pokemon games on their system. I expect Nintendo will try and consolidate the brand under their roof.  

While there is always the possibility of something crazy, I think, in the near term at least, Nintendo will make some of these smaller acquisitions to ensure they don't lose them. 



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This definitely makes a lot of sense, but I don’t see it happening until the consolidation in Japan starts. The second Sony buys a company like Square Enix, Nintendo will definitely try to gather up these companies.

Platinum is begging for Microsoft to buy them but they do make their best games with Nintendo, so ideally that would benefit both parties. The Pokémon Company can really run amok when it comes to the quality of their products, and Game Freak has previously released games on different platforms. It would be in Nintendos best interests to ensure they work with all these companies going forward, but like I said, I don’t think they’re going to pull anything until one of the other big 2 make the first move. Nintendo better hope Game Freak or Creatures aren’t the first to be purchased.



gtotheunit91 said:

This definitely makes a lot of sense, but I don’t see it happening until the consolidation in Japan starts. The second Sony buys a company like Square Enix, Nintendo will definitely try to gather up these companies.

Platinum is begging for Microsoft to buy them but they do make their best games with Nintendo, so ideally that would benefit both parties. The Pokémon Company can really run amok when it comes to the quality of their products, and Game Freak has previously released games on different platforms. It would be in Nintendos best interests to ensure they work with all these companies going forward, but like I said, I don’t think they’re going to pull anything until one of the other big 2 make the first move. Nintendo better hope Game Freak or Creatures aren’t the first to be purchased.

I don't think I need to spell you how little sense your speech has but let me point to you that Nintendo owns one of the biggest majority in shares for both GameFreak and Creatures(which also owns shares in Gamefreak). 

Pokémon and it's studios are litteraly untouchable unless the Pokémon Company, Gamefreak and Nintendo agrees to otherwise.



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gtotheunit91 said:

This definitely makes a lot of sense, but I don’t see it happening until the consolidation in Japan starts. The second Sony buys a company like Square Enix, Nintendo will definitely try to gather up these companies.

Platinum is begging for Microsoft to buy them but they do make their best games with Nintendo, so ideally that would benefit both parties. The Pokémon Company can really run amok when it comes to the quality of their products, and Game Freak has previously released games on different platforms. It would be in Nintendos best interests to ensure they work with all these companies going forward, but like I said, I don’t think they’re going to pull anything until one of the other big 2 make the first move. Nintendo better hope Game Freak or Creatures aren’t the first to be purchased.

Wrong. They're saying the exact opposite of that. Just because Kamiya (who's not in charge) says he wants to work on Scalebound again and Okami again with MS and Capcom doesn't mean he wants them to buy them. What you sais is a false narrative created by fans who don't know how to read what they actually said.  They mentioned only be open to talks if they could still remain independent like Atlus with SEGA or Bungie with Sony but they do not have the clout to demand that. They know this, which means they said in a polite and elaborate way. We're not looking to be bought.



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VideoGameAccountant said:

I haven't seen a lot of talk about Nintendo buying up SRD. I know it's no where near the headline grabber of Activision or Bungie, but it hasn't gotten a lot of reporting, even within the Nintendo sphere. Even here, I'd expect it to be a bigger topic. The thing is, I actually think, at least from Nintendo's perspective, this is pretty big news.

Nintendo's philosophy on buying companies has always been "why buy the cow when you get the milk for free?" Before Nintendo bought Next Level Games in 2021, the last major acquisition they made was Monolith Soft in 2007. SDR has been a support studio for four decades. There is little reason for Nintendo to even acquire them. But they did, and I think this may be indicative of a bigger change. More than any other time in the industry's history, there is an absolute ton of money floating around the industry. Companies of any size are prime for acquisition. If Microsoft can buy Activision (assuming the FTC doesn't step in), then anyone is fair game. 

The same could be considered for NLG, especially when compared to Rare. Like Rare, NLG's owners wanted to sell off. In the case of Rare, Nintendo refused despite owning 49% of the company. Rare was responsible for numerous hits, had made several IPs, and was a big reason the N64 did as well as it did in North America. But Nintendo didn't want to take that plunge for the other 51%. About two decade latter, and when presented with a similar scenario, Nintendo buys up NLG. Now, NLG is a great developer, but they are no Rare. They're biggest hit has been Luigi's Mansion, but outside of that, they've been pretty typical (and even made a flop with Metroid Federation Force). I think back in 00s, Nintendo wasn't as worried about losing developers as they are now. 

I think what we are seeing for Nintendo is a defensive position to protect their interest. With so much money going around, there is no guarantee that these developers will be available to work with Nintendo. More studios are putting up for sale signs in hope of a big payout. With Microsoft and Sony looking to buy up studios, Nintendo may not be able to keep these no strings attached relationships they like. SDR is evidence enough of that. Regardless of who made the first move (I expect the owner wanted to sell), it was clear Nintendo wasn't going to give it up

I expect over the next few years, we are going to see more Nintendo acquisitions than most people expect. However, most of these will be smaller studios that Nintendo can't afford to lose. The prime candidates would be Grezzo, Good Feel, Camelot, HAL and Intelligent Systems. However, I think there are two others big ones that will happen

Platinum - Platinum has been very coy. Initially, the company wanted to be independent, but in recent months have said they are open to a buyout. I expect part of this is due to self publishing being harder than they thought and likely a response to all the money in the market. Either way, I think Nintendo will likely buy them up. One thing Nintendo does target is developers who make games Nintendo can't. Nintendo invested in a lot of RPG companies, including former SquareSoft employees. Brownie Brown (now 1Up Studios) was one such developer. Platinum can make difficult and mature titles which is something Nintendo struggles with. Its a reason they stepped in to fund Bayonetta 2 and 3. I think that if Bayonetta 3 does well, then Nintendo will do through with a deal. 

Creature/Game Freak - This one is a little different. The ownership of Pokemon is all kinds of fucked, with Nintendo, Creature and Game Freak each having a third. As a result, the Pokemon Company kind of does its own thing, for better or worse. While the console releases are always on Nintendo hardware, Pokemon has released numerous titles on mobile platforms, long before Nintendo did. The reason I think this will happen is that I don't think the relationship is as rosy as it seems. As time has gone on, Pokemon has almost become more distant, and with Sony putting their titles on Steam, I'm sure the Pokemon Company is thinking of how to do the same with Pokemon titles. Moreover, because these companies own Pokemon, there is nothing stopping Microsoft or Sony from buying up Creature and/or Game Freak to try and get the Pokemon games on their system. I expect Nintendo will try and consolidate the brand under their roof.  

While there is always the possibility of something crazy, I think, in the near term at least, Nintendo will make some of these smaller acquisitions to ensure they don't lose them. 

Nin own Pokemon trademark, even if MS/Sony buy Game Freak now, Pokemon will never come to Xbox/PS unless Nin allow it.



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I see you bring rare into the discussion.

How things would have been different if they bought them lol. Even if the talent left the IP alone was worth the money. Could have hired new talent to take them to a new level.



 

 

The reasons for Nintendo's purchases are plain out in the open, so...

Next Level Games: With this purchase, the platform holder said it wanted to "secure" NLG's development expertise and the availability of its resources, "as well as facilitate an anticipated improvement in development speed and quality by enabling closer communication and exchange of staff with the Nintendo development team."

SRD: The acquisition serves to strengthen the management base of SRD and secure the availability of development resources for Nintendo, in addition to facilitating an anticipated improvement in software development efficiency.

It's the same reason for both acquisitions, so if the same circumstances occur for another so-called second party studio of Nintendo, then Nintendo is very likely to acquire them too. Neither NLG nor SRD were demanding an outrageous price, unlike Rare in the early 2000s, which can be derived from Nintendo's notices on their corporate website where neither acquisition wasn't declared to have more than a minor effect on their financial results. This can be described as a defensive strategy for acquisitions, because the main point is to keep current development resources available for Nintendo.

Knowing all this, it constitutes a leap of logic to land at Platinum Games and GameFreak. The former wants to maintain independence upon a possible acquisition, the latter wouldn't be more than an empty shell in a potential takeover, because Nintendo owns all the Pokémon trademarks. And as a game developer without the Pokémon IP, GameFreak has already proven often enough that they are average at best, so I don't consider them to be on anyone's list for potential acquisitions.



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I’ll just add it’s a good time to buy because of inflation.



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gtotheunit91 said:

This definitely makes a lot of sense, but I don’t see it happening until the consolidation in Japan starts. The second Sony buys a company like Square Enix, Nintendo will definitely try to gather up these companies.

Platinum is begging for Microsoft to buy them but they do make their best games with Nintendo, so ideally that would benefit both parties. The Pokémon Company can really run amok when it comes to the quality of their products, and Game Freak has previously released games on different platforms. It would be in Nintendos best interests to ensure they work with all these companies going forward, but like I said, I don’t think they’re going to pull anything until one of the other big 2 make the first move. Nintendo better hope Game Freak or Creatures aren’t the first to be purchased.

I agree with your first point. Nintendo seems to respond to Sony more than Microsoft. I don't think Platinum wants to be bought by Microsoft seeing as they've worked with them once and it resulted in a canceled game. They've had far better working relations with other publishers, Tencent included. As far as Pokemon goes, I think it's that the Pokemon Company cares more about short term profits than anything else. With how the ownership is arranged, I could see corperate sabotage being possible in this hot market. 

RolStoppable said:

The reasons for Nintendo's purchases are plain out in the open, so...

Next Level Games: With this purchase, the platform holder said it wanted to "secure" NLG's development expertise and the availability of its resources, "as well as facilitate an anticipated improvement in development speed and quality by enabling closer communication and exchange of staff with the Nintendo development team."

SRD: The acquisition serves to strengthen the management base of SRD and secure the availability of development resources for Nintendo, in addition to facilitating an anticipated improvement in software development efficiency.

It's the same reason for both acquisitions, so if the same circumstances occur for another so-called second party studio of Nintendo, then Nintendo is very likely to acquire them too. Neither NLG nor SRD were demanding an outrageous price, unlike Rare in the early 2000s, which can be derived from Nintendo's notices on their corporate website where neither acquisition wasn't declared to have more than a minor effect on their financial results. This can be described as a defensive strategy for acquisitions, because the main point is to keep current development resources available for Nintendo.

Knowing all this, it constitutes a leap of logic to land at Platinum Games and GameFreak. The former wants to maintain independence upon a possible acquisition, the latter wouldn't be more than an empty shell in a potential takeover, because Nintendo owns all the Pokémon trademarks. And as a game developer without the Pokémon IP, GameFreak has already proven often enough that they are average at best, so I don't consider them to be on anyone's list for potential acquisitions.

First, I don't think you can gleam much from either statement since they are both riff with PR speak (especially SDR's). That said, in the SDR statement, they say it was to "secure the availability of development resources for Nintendo". Nintendo didn't see a reason to secure development resources before, even as they moved into HD development and away from low power handhelds. I think that statement is more admission of the time.

On Rare, you mentioned they were expense. Were they really? From IGN

In an announcement at Microsoft's X02 Europe event today, the company confirmed rumors that it had purchased Rare Ltd, the company behind several of the N64's biggest hits, for $375 million....Rare was responsible for over $1 billion in revenue over the last five years beginning with the N64's groundbreaking eight-times platinum Goldeneye 007 and continuing with megahits like Donkey Kong 64 and Perfect Dark.

Keep in mind Microsoft bought 100% of the company, but Nintendo owned 49% already. Assuming Microsoft didn't pay a significant premium, Nintendo would have bought them for $184 million. Seeing as the company generated $1 billion in revenue, it wouldn't take Nintendo long to recoup there loses. If anything, the price Nintendo would have had to pay would have been reasonable. Keep in mind they also created IPs, something NLG hasn't done yet.

On Platinum, you're right, they did want to maintain their independence, but their tune has changed

"Speaking to VGC following his recent promotion to president and CEO, Atsushi Inaba was asked about recent consolidation in the games industry, most significantly marked by Microsoft’s $70bn buyout of Activision Blizzard, and if Platinum would be open to offers. Inaba responded by saying he’d be open to any possibility, as long as Platinum was afforded the kind of independence he expects Microsoft to offer Activision once its deal is completed."

One thing to add which I alluded to, but didn't elaborate on. What we're seeing in the game market is a lot of hot money floating around and people are trying to catch it. They'll put the company up for sale to get a good payout and move on. This was pretty much the game in banking before the crash in 2008. Platinum's owners probably see an opportunity that wasn't there in 2020. Also, as far as maintaining development resources, Platinum has already made 3 exclusive games on the Wii U and will have 2 on the Switch. I'd say they fit the bill. On Pokemon, you are mixing up Trademark and Copyright. Nintendo also owned the trade mark for Rare's IPs until they were sold to Microsoft. The Pokemon Company owns the IP. The trademark is irrelevant. 



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