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#G5 Entertainment: Mobile gaming a challenging market

“If you’re not in the top 100, you’ll barely be able to make a living in the iOS ecosystem.” – That’s one of the conclusion of a recent Newzoo-study featured on www.gamesindustry.biz.  That the mobile gaming industry is not the dream industry it has been only 2-3 years ago, has been very obvious in the development of one of our previous top-picks G5 Entertainment. The company flourished with the rise of Apple’s app store only to see its sales fall once the market shifted more and more towards Free-to-play games (G5 was heavily focused on unlockable games at that time). Once that was overcome and the company managed to generate most of its revenues from F2P-games, margins deteriorated mainly to the need of high user acquisition costs. 

The researchers at Newzoo have provided fascinating new data to GamesIndustry.biz that offers some insight into just how hard it can be to survive in the world of mobile games development. One look at the weekly App Annie charts typically shows just a reshuffling on the top grossing games, but a deeper look into the revenues generated by the top 1000 games on iOS in June allows us to extrapolate what an annual average haul might look like for the top performing titles on Apple’s platform.

As you can see from the table below, if your game falls outside the top 20, you’re not going to be making very much, and if you’re outside the top 100, it’s going to be nigh impossible to even survive beyond a one or two-man team. Considering the absolute glut of titles that flood the App Store, the data paints a fairly bleak picture for developers aiming to make a living on iOS.

Appstats

Zooming in on iOS revenues of June in the US, Europe and China, we see that 170 different companies grossed $83,000 or more that month which, on an annual basis, would lead to a >$1M business. This is gross, so including the 30 percent that Apple then takes. $1M is an important threshold because you would need this to run a small game studio of 5 to 10 people. Of these 170 companies, 64 grossed more than $830,000 in June, or >$10M gross annual revenues (studio of 50-100 people),” Newzoo CEO Peter Warman explained to GamesIndustry.biz.

On a game level, the top 20 iOS games grossed on average $3.7M for both EU and China and $5.9M in US this June alone. In the US you can say that there are at least a hundred games that will gross around $7M or more this year from iOS revenues alone. For Europe and China both have a hundred games that will gross $2.5M or more this year,” he continued. “This of course is iOS only which represents just over half of the market in the US, half of the European market and a third of the Chinese market. On a global scale, iOS game revenues in the US, Europe and China represent close to 45 percent of the $30Bn worldwide market.

While seeing data like this may be discouraging for mobile developers, Warman still believes that iOS and mobile in general can be wonderful opportunities for gamemakers – but he acknowledges that the PC is better for building a groundswell of support around certain titles.

There is a lot of talk that the mobile gaming space is dominated by a limited number of publishers and there hardly is any money to be earnt if you do not have a top game. I do not agree. There is no market segment or screen that has such a long tail of games and companies making their living from it. Especially compared to consoles of course which is still very much a closed space, but even compared to PC the list of companies making good money is longer,” Warman noted.

At the same time, there are so many developers making games for mobile devices that it still is a challenge and is making more and more mobile first companies look at the PC as an alternative platform. An advantage of PC is discovery. The PC allows niche communities to form around the smallest franchise in a unique way while discovery and community forming on mobile is limited.”

The key in the mobile space is to carefully evaluate your product release strategy. Perhaps one region is a better bet or better market to test out a beta than another.

The mobile market is the most globally aligned market segment in terms of distribution and business models. This means that traditional rules for an international roll-out do not apply. A Western developer can choose to launch their game first in Southeast Asia for instance if that specific genre monetizes well in those markets and the market is less competitive or cheaper to market towards than for instance the US. By analyzing appstore data, you can size and profile the opportunity for your game across all territories and, depending on your marketing budget, select countries where it is realistic to reach a certain rank position required for your game to fly,” Warman explained.

Beyond that, understanding how to target people who will actually spend money on a title is vital to success. Warman added, “Demographic data shows you what sets the (big) spender apart from the free riders to optimize your marketing effort. More and more companies are moving away from a CPI driven approach and take a more traditional marketing approach aimed at specific target groups. Data is required to outsmart competitors. For instance, the majority of big spenders in Southeast Asia are teenagers while in China hardly any teenager is a big spender and the biggest group of spenders aged around 30.”

Nordic Investor

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  1. Filip August 10, 2015 Reply

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