Nintendo Should Become A Broader Entertainment Company, New Investor Says

Nintendo should expand its reach beyond games and become a broader entertainment company. That's the thinking of the investment firm ValueAct Capital Partners, which recently acquired 2.6 million additional shares in the company to own a 2 percent stake in the gaming giant.

ValueAct is known as an "activist investor," which means the firm is picking up a huge number of shares in Nintendo in an attempt to influence its future direction. However, unlike other activist investors, ValueAct is not attempting to get a seat at Nintendo's board of directors, according to a report from Reuters. Instead, the company is looking to work "behind the scenes" with Nintendo.

ValueAct began investing in Nintendo back in April 2019, and it currently has a stake of $1.1 billion in Nintendo. ValueAct said in a note, which was seen by Reuters, that it sees room for growth in Nintendo's business in the areas of new games, as well as a transformation to become a "broader entertainment company."

A spokesperson for Nintendo confirmed that it has been "engaged in dialogue" with ValueAct, though it declined to share specifics, citing a company policy to not do so.

ValueAct said in its note that it has already had "several meetings" with Nintendo management, adding that it has faith that Nintendo president Shuntaro Furukawa is leading the company in the right direction.

At the same time, ValueAct pointed out that Nintendo has not enjoyed the kind of success--and profits--that companies like Activision and EA have over the past 10 years. But thanks to some of Nintendo's recent moves in the digital space, ValueAct sees Nintendo on a strong path forward.

"We believe Nintendo will be one of the largest digital media services in the world, in a category with the likes of Netflix, Disney+, Tencent Interactive Entertainment and Apple Music," the company said in its letter.

ValueAct brings unique insight and perspective to Nintendo, the note said, because some of its members have served on the boards of other tech companies, including Microsoft.

In 2014, then-Nintendo president Satoru Iwata--who has since passed away--said he doesn't see Nintendo as a company that sticks strictly to games.

"A lot of people around the world think Nintendo is solely a company that makes video games, and I believe more and more of our own employees have started thinking in this way," Iwata said at the time. "Some employees in charge of development find themselves in positions where all they are thinking about is how they can make the game in front of them more fun, so I don't think it can be helped if others outside of our company see us the same way."

"So even though we won't change the fact that our focus is on video games, I felt the need to take that occasion to state that Nintendo is a company that can do whatever it wants," he added.

Nintendo has indeed branched out to new markets to position itself as more of an entertainment company in recent years. The company is currently producing a Mario movie with Minions studio Illumination, while it is working with Universal on a Super Mario theme park.