tmt-predictions-2016

Predictions

Mobile games: leading but less lucrative

TMT Predictions 2016

Executive summary

Deloitte Global predicts that in 2016 mobile (smartphone and tablet) will become the leading games platform by software revenue, generating $35 billion in revenue up 20 percent from 2015. This compares to $32 billion for PC games and $28 billion for console games, up only five and six percent respectively from the previous year.

However we expect average revenue per game by platform to vary significantly. We forecast $4.8 million per console game available, $2.9 million per PC game, but only $40,000 per mobile game. While many tens of thousands of companies create mobile games, we would expect only about 200 mobile games companies will gross over $1 million in 2016.

One key characteristic of the mobile games market is low barriers to entry. A typical latest-generation console or PC-based game costs tens of millions of dollars to produce, a similar sum to market, and can take several years to develop. Mobile games can be created in mere hours. This has contributed to a profusion of mobile games titles. As of the start of 2016, we estimate app stores will offer more than 800,000 mobile games; this compares to 17,000 titles available for games consoles and PCs. Every day a further 500 mobile games titles are launched on a single platform.

The immense number of mobile game titles renders many new titles invisible without substantial marketing spend. If mobile games publishers cannot afford a TV campaign, they could use outcome-based advertising, such as app-install ads. However this can be expensive. A mobile games publisher might pay several dollars per download with no resulting revenue. And since the predominant business model for mobile games is freemium -- whereby games are downloaded for free and additional content is charged for -- the vast majority of mobile players can (and do) spend tens of hours playing without having to pay a cent.

The large investment required for a mobile game to stand out from the crowd is likely to keep the market stratified in 2016. We expect about 80 per cent of mobile games revenue in the top 1,000 titles to be earned by the top 20 publishers in each region: that leaves the remaining 20 percent of mobile games revenue to be shared among many tens of thousands of developers. One survey of 8,000 developers found that 17 percent generated no revenue; 18 percent made less than $100 a month, and half made less than $1,000 per month.

Given these market characteristics, we predict that the rise of mobile games, in terms of revenues, will not ‘eat’ console and PC games revenues in the medium term: the three platforms will co-exist, with each serving largely distinct needs, underpinned by different business dynamics.

We expect games play to remain a principal usage of mobile devices and predict that in subsequent years mobile games revenues will continue to grow, propelled by both a rising base of mobile devices, and a marked increase in device specification, particularly for smartphones. However, life may become increasingly arduous for some mobile games publishers, potentially leading to some major players exiting the market in 2016 or 2017.

Aside from keeping a day job, small mobile games developers may have only three options: (1) hope for a serendipitous hit, (2) align with a major publisher which has the resources to market a new game heavily, or (3) focus on the console or PC market, where the addressable base may be far smaller but gamers are long accustomed to paying for content.

Mobile games: leading but less lucrative

Watch the video

Did you find this useful?