The Pokémon company has become a multi-billion dollar franchise. How did the colorful creatures become such a sensation since their launch?
The Pokémon franchise is a revenue machine. In 2021 Sensor Tower reported that since its launch, Pokémon Go, the augmented reality smartphone game, had generated $5 billion in revenue. Handheld versions of the Pokémon games generated tens of millions in sales over the years, with games such as Gold and Silver selling 23 million units, followed by Sword and Shield with 20 million and Diamond and Pearl with 17.6 million units sold. Pokémon is one of the biggest media franchises in history. How did the franchise become such a hit all over the world?
A passion for insects sparked the idea for Pokémon
Pokemon was developed by Game Freak and launched by Nintendo in 1996 with its first installments Pokémon Green and Red for the Game Boy handheld console. The two games reached American stores in 1998. Over a little over two decades, the Red, Green and Blue versions have sold a combined 31.3 million units as of December 2020 according to Statista. These are impressive sales figures, especially as the formula has been repeated across three games with minor alterations. What was the magic that kept children flocking to the series?
Satoshi Tajiri came up with the idea for Pokémon in 1990. Over a course of six years he would tinker at the game. Tajiri is a rather mysterious persona as he rarely steps into the spotlight, but TIME Magazine Asia was able to get a rare interview with the creator of the colorful critters in 1999. Tajiri in his early years was infatuated with anime and manga, stating that if games had not been a viable career, he would have probably ended up creating anime. Tajiri first started out writing about games, which he called Game Freak magazine, where gamers could read up on how to play and win at popular games of the times. When asked how he transitioned from writing about games to actually making them he replied, ‘Pretty soon I had some contributors, and we’d all get together and talk about games. The more I learned about games, the more frustrated I became because the games weren’t very good. I could tell a good game from a bad game. My conclusion was: let’s make our own games.’
Tajiri said that he loved catching insects during his childhood. He would find mysterious creatures everywhere and when he searched more, he would find even more varieties. In rivers he would find crayfish. It became an obsession where he learned about their behavior and how to catch them such as the iconic beetles, which is a hobby that a lot of children in Japan share. When asked whether his fascination for insects inspired the idea for Pokémon, he replied, ‘Yes. Places to catch insects are rare because of urbanization. Kids play inside their homes now, and a lot had forgotten about catching insects. So had I. When I was making games, something clicked and I decided to make a game with that concept.’ Further saying, ‘Everything I did as a kid is kind of rolled into one–that’s what Pokémon is. Playing video games, watching TV, Ultraman with his capsule monsters–they all became ingredients for the game.’ Tajiri wanted to bring back nature to the children living in the cities, who had lost connection with the great outdoors. When the Gameboy came out, he found the medium which was best suited for his concept, which through a cable enabled digital communication between other devices, which caught his interest.
One of the most iconic characters of the Pokémon franchise was Pikachu, who played a minor role in the game. Tajiri revealed that the anime staff wanted a prominent character to focus on. Pikachu was the best option as it appealed to both boys and girls. The success of Pokémon was still relatively small compared to the heights it would reach in years to come, but already its popularity was a topic of interest. When asked how the franchise was able to grow so popular, Tajiri responded, ‘When you’re a kid and get your first bike, you want to go somewhere you’ve never been before. That’s like Pokemon. Everybody shares the same experience, but everybody wants to take it someplace else. And you can do that.’ Obviously this is a simplistic answer which we’ll need to dive into later on.
It’s easy to view the sales of the Pokémon games as a standalone development, but just like with the ability of Apple Music to grow rapidly through its platform adoption.
In 2019, a CGI version of the traditionally 2D drawn Pokémon franchise, Pokémon Detective Pikachu, was released, with Pikachu being voiced by Ryan Reynolds. This was 10 years after the first Pokémon movie hit the box office. Forbes reported that the CGI adaptation was unable to, what Scott Mendelson called, ‘The video game movie curse’. Melson explained, ‘However, in its own skewed way, it continues at least one odd variable of the so-called “curse of the video game movie.” Like several other high-profile adaptations before it, it has earned large amounts of money without being exceptionally profitable. It has broken records while barely breaking even.’ He predicted that the movie would surpass the $400 million global box office performance. His predictions were not far off with the movie generating a worldwide revenue of $433 million, from which $288 million earned internationally and $144 million domestically which put it on par with the Warcraft movie that generated $433 million as well.
In 2021, Nintendo celebrated the 25th anniversary of Pokémon by announcing three games, namely, Pokémon Legends Arceus and Pokémon Brilliant Diamond and Shining Pearl. All games announced for Nintendo’s handheld game console hybrid, Switch. The Guardian noted that the Pokémon games had sold over 368 million times as of March 2016.
The Gameboy platform was growing at breakneck speeds
It’s easy to view the sales of the Pokémon games as a standalone development, but just like with the ability of Apple Music to grow rapidly through its platform adoption. A lot of Apple’s success can be attributed to its hardware sales. This rings just as true for Nintendo and GameFreak who, through pushing the hardware are growing their target audience exponentially, as there would be no market had the Gameboy handheld not been such a success. When we zoom in on the sales of the different Nintendo handhelds, we can see how much the reach of Nintendo was able to grow over the years.
The first Game Boy sold 1 million units in the United States in its first weeks. In the fiscal year of 2005, the Nintendo DS sold 5.27 million units globally, the year after that unit sales grew to 11.36 million, in the fiscal year 2007, sales soared to 23.56 million. Unit sales peaked in 2009 when they reached 31.18 million, and then following to 27.11 million in the fiscal year of 2010. But the falling sales of the DS were picked up by its successor, the 3DS, which sold 3.61 million units in the year 2011, catapulting to 13.53 million in 2012 and peaking in 2013 to 13.95 million units sold globally. Over the 16 years that the Gameboy was sold, about 120 million units were sold worldwide. A stellar performance for the toy manufacturer.
The global Pokemon Go Hype
When Pokémon Go was announced by Nintendo in 2016, shares soared by 24%, adding $7.5 billion to the valuation of the company. The highest amount since 1983. The game would be produced by former Google subsidiary Niantic Labs. In March of the same year, screenshots were released which showed the gameplay mechanics of the new Augmented Reality game. The game was gradually released in selected countries, in this case Australia and New Zealand.
In July 2016, Pokémon Go was launched in Germany. The game was released in the United Kingdom, a week after Australia, New Zealand and the United States. In the same month, Nintendo’s valuation doubled. Pokémon Go was going across the globe like a wave, welcoming each country quickly one after the other. The game was so popular around the world that its servers were struggling to keep up with the demand. The hype also had less fortunate side effects, such as users stumbling upon dead bodies along the game requesting full access to one’s Google account. As users had to scour around the world to capture Pokémon, they wandered into memorials in Washington and New York City.
In 2016, analytics estimated that Apple made $3 billion from in-game purchases made in Pokémon Go. Laura Martin from Needham & Co calculated that users pay 10 times more than the average Candy Crush user, which generated a revenue of $1 billion in 2013 and 2014. The Verge noted that a whole new industry sprung up that revolved around the world of Pokémon Go, such as battery chargers, in-game chat and dating. While the latter two might seem a little far fetched, the battery charges were a welcome addition for the battery heavy game. In August of the same year, the inevitable sales boost for the Pokémon franchise as a whole took place. Venture Beat noted, ‘During the first six months of Nintendo’s fiscal year, the company sold 2.71 million 3DS systems. That’s up 19 percent compared to the same period in 2015.’ Further saying, ‘This suggests that fans got a taste of the pocket monster on mobile, and that led them to seek out a more robust and traditional gaming experience on an official Nintendo platform.’
The hype started to lose some of its potency in August of 2016 with daily active users dropping from 45 million to 30 million. While this might seem alarming from a business perspective, users will always explore the product and what the fuss is all about. Nonetheless , 30 million daily active users is still a remarkable feat. A month later, the Pokémon Go wearable was launched. A wristband, called Pokémon Go Plus, which would alert players when Pokémon were nearby or when they were near a Pokéstop.
In the same year, in 2016, Slice Intelligence reported that the paying customer base had dropped by 79%, peaking during the launch period on July 15th of the same year. The drop is more significant compared to other mobile game buyers. Nonetheless its revenue performance was impressive, taking 28% of in-game purchases generated in the following month. Ranking supreme compared to the next two in line namely Candy Crush Saga, attracting 4.5% of all in-game purchase revenue and then again Candy Crush Soda Saga with 3.5%. Whilst its paying customer base shrunk, revenue from Pokémon merchandise peaked. Rakuten Intelligence noted, ‘The revenue amassed from branded Pokémon toys and games was 233 percent larger this August compared to the same month last year. Branded apparel sales in August even outpaced last year’s Halloween season, which is when branded Pokémon apparel purchases are historically highest.’
The collection mechanic that keeps buyers coming back
An important mechanic within the Pokémon games, and its media productions, is the collection of the creatures to become the ultimate Pokémon master. The franchise is built on collecting, which brings us to the question why we have such an urge to collect in the first place.
When zooming in to collecting items overall, research found that 33 to 40 percent of Americans collect things. Shirley M. Mueller M.D. researched the underlying factors that drive the urge to collect. She said that the collectors experience pride in the object they collect, especially when acquiring a rare and exclusive item. Others feel connected with history, either with a world long lost or ancestors. Collectors may look for what Mueller labels as intellectual satisfaction, which gives a sense of discipline, skill and motivation. Those familiar with Pokémon games know that catching a legendary creature is far more difficult than the more common ones which are scattered around the game world. But, with the very innocent versions of collecting, Mueller reveals a more hidden, gloomier version of collecting, saying, ‘Last, and certainly not least, is that all reinforces to collect involve anticipation. In its nascent stage, yet fulfilled, the collector’s craving allows her to imagine anything she wants about the desired returns the object will bring.’ Further saying, ‘Once the prize is obtained, the pleasure center quiets. In other words, the anticipation of the reward is more exciting to our pleasure center than possessing it.’ This is the mechanic that drives the success of the Pokémon games. The constant repetition of obtaining an even harder to get Pokémon and through each new game a new generation is added can potentially be added to one’s collection. The thing one has to do, is to buy the new game and grind hours after hours to capture them all.
Collectible trading cards and product tie-ins
Earlier in the article I briefly touched on the fact that the reasons for Pokémon popularity were more than just Tajiri’s take. We’ve seen that Pokémon became a hit series across the world during the late 90s and early 2000s, with the Pokémon Go hype fly-wheeling the series into the mainstream again during the 2010s. I’ve also mentioned that collecting objects is rooted in human nature. Now that we’ve laid down those foundations we can break down how Nintendo and GameFreak, who have bundled their efforts in the Pokémon Company subsidiary, through its clever marketing and products, were able to hook children for so long, even into adulthood.
A major driver of revenue for the Pokémon Company is the trading card game. In 2020, with the pandemic, the demand for Pokémon Trading cards exploded resulting in production shortages. The Pokémon Company had to introduce a lottery system to manage sales. In 2021, statistics revealed by the company showed that the record demand for trading card games resulted in the sales of 3.7 billion cards in 2020. An estimated 34.1 billion trading cards have been sold since the introduction of the cards. We can trace back the popularity not only to the pandemic which resulted in increased demand for board games, but once again to the collection mechanic. The internet is riddled with articles revealing the most valuable, and rarest, cards, fueling our brains to purchase more, as they are wired for collecting rare items. With each find, releasing sweet chemicals that fill us with a sense of pride. In some sense the purchasing of trading cards is a gamble. Not knowing what’s in the packs, but which may result in a grand price. But this mechanic is nothing new. Trading card games have been around for decades and the debate on how they spark addictive behaviors have been increasing over recent years with EA being a notable suspect.
Addiction Professional on the HMP Learning network spoke to Arnie Wexler who helps those addicted to the buying of trading cards, saying, ‘I just got off the phone with a guy who started with baseball and football cards and then went into all kinds of other stuff that came on the market, like Beanie Babies…He quit his job and was just buying things, collectables, until he went broke, and is now in recovery.’ Michael Smith, co-founder and CEO of Chapter House Sober Living and Counseling Center explained to HMP that the trading card industry has changed its modus operandi when the market became saturated during the late 1980s and early 1990s. As more and more companies ventured out into the selling of trading cards, prices dropped, resulting in the creation of limited edition autographed cards. Pricing for card packs increased to $50 and resellers put them on the market decades later for $2,000. Smith compared the buying of trading cards as playing at a casino, where the industry used the gambling aspect to lure in and maintain customers. Those particularly susceptible to gambling addiction, would spend vast amounts of money to acquire the most limited editions. The temptation of being able to purchase a card worth thousands of dollars for just a fraction, is what keeps buyers coming back.
Since the inception of Pokémon, television commercials have been an integral part of the marketing strategy. Television ads for games such as Gold and Silver in Japan, the United States and the Netherlands. Crystal in the United States and Japan. Pokémon Yellow in the United States and Japan. Platinum in the United Kingdom. Pokémon games were prominently featured on television. Nintendo and GameFreak were also well aware of the power of product tie-ins with sweets for children, its primary target audience. In 2021 Krispy Kreme launched its Pokémon tie-in along with Oreo, who released 16 collectible cookies with unique packaging. Note the collectible cookie part. The company once again had ensured that its customers would want to collect them all, through limited availability. Through all the product exposure, Pokémon would also be on top of mind with its audience.
A franchise made to sell
Pokémon is still popular to this day, with companies such as Krispy Kreme and Oreo happily affiliating themselves with the colorful creatures. The original creator, Tajiri may have sold the Pokémon franchise as an insect collection simulator as a way for children to re-experience nature. That humble thought has been long lost to the greed of mega-corporation Nintendo who milked the franchise till every last drop.
I may sound overly cynical in this breakdown of the Pokémon franchise and while the beginnings of Pokémon might have started out with honest intentions, it quickly morphed into a corporation who wanted to maximize profits through the integration of addictive elements such as limited edition cards and even fast moving consumer goods were turned into collectibles. The cute characters have a friendly demeanor which makes them approachable. The whole Pokémon business model preyed on the most basic of human instincts and those most susceptible to it, poured all the money they could spare into it. From a marketing perspective, this is the pinnacle of product marketing. Generating billions of dollars through cross selling. Games, trading cards, foods, merchandise. All of it was generating revenue and building the franchise. A brand worship rarely seen.