Games industry to ‘generate $35b from mobile devices’

Games industry to ‘generate $35b from mobile devices’

Games industry to ‘generate $35b from mobile devices’

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Mobile devices such as smartphones and tablets will become the leading global games platform by software revenue by the end of 2016, generating $35 billion up 20 percent increase from 2015, according to Deloitte.

[quote font=”georgia” font_size=”22″ font_style=”italic” align=”left” arrow=”yes”]Deloitte Global explains three main reasons for the acute differences in revenue per game from the three platforms: The first is due to the size of the installed base. About 1.75 billion smartphones and tablets will be used to play games frequently as of end-2016, out of a total base of 2.7 billion smartphones and 750 million tablets. This compares to the just over 600 million that play games regularly on PCs, and approximately 200 million on consoles.[/quote]This is part of a prediction by Deloitte Global, a network of business management consultants, headquartered in New York, which expects that taking from smartphones will grow significantly.

Participant playing an online game at Lagos Social week
Participant playing an online game at Lagos Social Week 2016 in Lagos

This is expected to surpass the revenue that the games industry will generate from PCs and consoles as PC games are expected to generate $32 billion, only five percent increase from 2015, while console games are expected to generate $28 billion, only six percent increase from 2015.

Deloitte Global further predicts 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. Better processors and sharper screens will likely enable more sophisticated game play and more complex graphics over time.

Average revenue per game by platform is however expected to vary significantly from the total industry revenue by the end of 2016. Per console game is expected to generate $4.8 million, Per PC game is expected to generate $2.9 million, but per mobile game is expected to generate only $40,000.

Average annual spending on content per mobile games player is estimated to be about $20 compared to $50 per PC games player, and $145 per console player. While many tens of thousands of companies create mobile games, only about 200 mobile games companies are expected to gross over $1 million by the end of 2016.

Deloitte Global explains three main reasons for the acute differences in revenue per game from the three platforms: The first is due to the size of the installed base. About 1.75 billion smartphones and tablets will be used to play games frequently as of end-2016, out of a total base of 2.7 billion smartphones and 750 million tablets. This compares to the just over 600 million that play games regularly on PCs, and approximately 200 million on consoles.

Connected generation: Cross section of participants at the #TechPlus2016 gaming event held at the Eko Hotel and Suites in Lagos
Cross section of participants at the #TechPlus2016 gaming event held in Lagos

The second fundamental difference is barriers to entry. A typical latest-generation of console or PC-based game, also known as AAA, costs tens of millions of dollars to produce, a similar sum to market, and can take several years to develop. Mobile games have relatively low barriers to entry, and can be created in mere hours.

This has contributed to a profusion of mobile games titles. As of the start of 2016, it was estimated that app stores will offer more than 800,000 mobile games; this compares to 17,000 titles available for all 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 spending.

The largest mobile games publishers are spending hundreds of millions of dollars on marketing annually, with a large amount spent on broadcast TV. A mobile games publisher might pay several dollars per download with no resulting revenue, even if the user benefits from hundreds of hours of free usage.

Mobile phone users seen at Social Media Week Lagos 2016
Mobile phone users seen at Social Media Week Lagos 2016

The third fundamental difference is the business model. The predominant sales model for mobile games is freemium, whereby games are downloaded for free and additional content, in the form of extra lives, additional characters or special powers, is charged for, but players can however, spend tens of hours playing without having to pay a cent.

About one in 650 mobile games players known in the game industry as ‘whales’, generate about half of all in-app spend in free-to-play games. By contrast, almost all players of console or PC-based games have paid for the game. One reason why console and PC game players may be more willing to pay is because of the utility derived, with prolong hours of play.

About 80 percent of mobile games revenue in the top 1,000 titles are expected to be earned by the top 20 publishers in each region leaving a fifth of the remaining revenue to be shared among many tens of thousands of developers. Size-able reward is expected to be maintained for the number one game; the best grossing game could generate five times that of the number five game, and 10 times that of the number 10 game.

The mobile games industry as a whole is expected to thrive in 2016, but the outlook for individual mobile games developers is likely to be far more varied. However, while consumers are likely to continue to enjoy playing mobile games, life may become increasingly arduous for mobile games publishers, potentially leading to some major players exiting the market in 2016 or 2017.

This may leave three options for small mobile games developers aside from keeping their day job. A first option would be to hope for a serendipitous hit. A second option would be to align with a major publisher which has the resources to market a new game heavily while a third option may simply be to focus on the console or PC market, Deloitte Global states.

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Elizabeth Edozie Technology Journalist @Technology Times 08077671659 elizabeth.edozie@technologytimes.ng

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