A family friendly frenzy was set off at the box office last week when the The Super Mario Bros. Movie was released in theaters worldwide. Produced by Nintendo(OTC: NTDOY) in a partnership with Illumination and Universal Studios, the mustachioed plumber and his cast of friends hit the big screen for the first time in decades and immediately started breaking box office records. Investors took notice, sending shares of Nintendo up close to 10% over the last month.
Nintendo has made a great leap outside of just producing video games with this hit new Mario film. But what does that mean for the stock?
Breaking box office records
Dropped on Easter weekend, TheSuper Mario Bros. Movie entered the market at a perfect time for its family focused audience. The movie opened with $377 million worldwide, which is now the best opening weekend for an animated movie ever, beating out Frozen 2's $358 million haul. And this is without showings in Nintendo's home market in Japan, where the movie releases at the end of April. Add the Japanese box office into the mix, and opening weekend box office sales will likely reach well north of $400 million.
In its second week on the market, the movie is showing durable demand, with Tuesday sales coming in at $15.5 million in the U.S. If Nintendo super fans make multiple trips to the theater to see their favorite Mario characters, I think it's likely TheSuper Mario Bros Movie grosses far more than $1 billion at the global box office over the next few months.
What it could mean financially for Nintendo
Box office records are great, but investors in Nintendo really care about how much it will generate in profits. With all the different stakeholders at play it is very difficult to measure how profitable a movie will be for its producers. But let's do some quick estimates to get a ballpark figure for Nintendo if the movie does a global box office run of $1.5 billion.
First, we need to divide the gross figure by two to account for the cut that goes to the movie theaters. That leaves $750 million roughly for the producers. Then, we subtract around $200 million to account for marketing and production costs and get to $550 million in profits split between Illumination and Nintendo. Say the two partners have a 50/50 profit agreement and approximately $275 million in earnings will flow through to Nintendo just from TheSuper Mario Bros. Movie box office run.
Nintendo will also make some money from the movie's run on streaming services and direct digital downloads later this year, which can sometimes account for more than 50% of a movie's overall revenue generation.
Outside of the direct sales, it looks like the movie has helped boost sales for its Mario video games. The data is sparse right now, but in the U.K., sales for multiple Mario games were up by more than 10% week over week when the movie dropped. With how profitable incremental sales of games are for Nintendo's first-party titles, this should bring a huge earnings boost next quarter if this sales jump is sustained.
All in all, I think the Mario movie can drive $500 million or more in profits to Nintendo this year. For a company that generates $4 billion or so in earnings, that is a very meaningful boost.
Are more movies in the cards?
Over the long term, the key thing for investors is whether Nintendo starts producing movies with a regular cadence. The company is notoriously coy about its plans, but investor presentations and interviews with executives do seem to indicate more movies are on the way. How many and at what pace is the big question, though. If Nintendo starts releasing one movie per year, the profits from box office, digital downloads, streaming, and incremental game sales could drive earnings growth for years to come.
NTDOY Operating Income (TTM) data by YCharts
Along with new theme parks opening up around the world, it looks like Nintendo has successfully diversified away from video games and started up some new revenue streams that could generate $1 billion or more in profits for the company every year. If this ends up materializing over the next few years, I think it is all upside for Nintendo shareholders.
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Brett Schafer has positions in Nintendo. The Motley Fool recommends Nintendo. The Motley Fool has a disclosure policy.
