Mobile gaming: Free to play, enhanced with pay

Mobile gaming is huge: There were 80 billion new mobile game downloads in 2020, up 18% year over year.¹ Deloitte’s recent Connectivity and Mobile Trends survey for 2021 found that 64% of US respondents (referred to as “regular mobile gamers” here) play games on their mobiles at least once a month, although most of them play at least once a week.²

However, in spite of all these downloads, our survey found that 67% of regular mobile gamers spend less than US$10 per month to buy new mobile games. But that doesn’t mean they’re not spending. To unlock new levels, capabilities, and personalization, mobile gamers make in-app purchases. Among our regular mobile gamers, 48% are making in-app purchases to enhance the functionality and experience of their games. Of that, 60% are spending more than US$10 per month; the average is closer to US$20 a month.³

The freemium model is a notable business strategy. Mobile games offer their titles to smartphone users for very cheap or free. This lowers the barrier to entry considerably, expanding the audience and letting games show value without requiring an up-front cost from the user. When people start using the game, they soon realize the “need” to spend to enhance the game experience. What are they buying? Virtual currency, enhancements to the game, personalization, and capabilities such as gear and tools—in that order.⁴ Mobile games—and more games in general—are becoming services that keep adding new experiences, often with social interactions and personalization, monetizing it all along the way.

Then there is the streaming video business. With competition heating up, providers are chasing audiences and seeking profitability against a dizzying array of entertainment options. Mobile gaming may offer ways—and inspiration—for streamers to grab more attention and money from broader audiences.

Implications for media executives

• Transform traditional models. Streaming video providers can explore the freemium model. Mobile games often attract users with cheap or free access, but the enhanced experience requires additional fees. Streaming video services are experimenting with a similar approach: offering free subscription tiers supported by ads so that more people can enjoy the service. Could they consider easy-to-purchase “experience upgrades” for access to select premium content? Is there a micropayments future for streaming video services?
• Build games into streamers’ portfolios. As streaming content providers expand their offerings to attract wider—and younger—audiences, delivering their own mobile games may offer a way to enhance engagement and revenues. In our Digital Media Trends survey, the majority of Gen Z ranks video gaming as their favorite form of entertainment, more so than video.⁵ But mobile gaming also attracts older generations and is strong across genders.⁶ As streamers seek to grab more time that users spend on mobile devices, having games in their portfolio makes sense. However, developing engaging gameplay is not easy, and streaming video providers may be wise to work with experienced game studios. For many streaming services, developing a successful line of business for mobile gaming will likely take years. Some are already starting on this path.⁷
• Explore new sources of revenue. If they can successfully add mobile gaming to their portfolios, streamers could then explore in-app purchasing as an additional revenue stream beyond subscribers and advertising.

The maturing streaming video market is demanding differentiation and putting pressure on pathways to retention and profitability. Generating strong revenues per user is tricky, especially when luring and keeping subscribers may require lower prices or using more ad-supported models. By exploring freemium pricing, microtransactions, and lightweight mobile games, streaming video services could expand audiences and increase engagement through more diverse experiences.