Digital content distribution has disrupted several notable industries. In that context, no industry has been more impacted by digital distribution than the video games. Leading the disruption are iOS and Android devices, whose free and inexpensive games, distributed across a massive installed base of powerful and networked tablet and mobile phone form factors, have already disrupted billions of dollars of game revenue.
Portable gaming, has been dominated by Nintendo and Sony for over two decades. In this model, at retail, consumers pay around $200 for the gaming device and up to $40 for popular game cartridges. Because of the similar form factor, overlap in consumer base (especially younger players on iPod touch) and the casual nature of game content, iOS and Android devices have redefined the category. With the inclusion of smartphone revenue into the category, shifts taking place in market share become clearer.
The most striking trend is that iOS and Android games have tripled their market share from roughly 20% in 2009 to nearly 60% in just two years. Simultaneously, Nintendo, the once dominant player, has been crushed down to owning about one-third of market in 2011, from having controlled more than two-thirds in 2009. Combined, iOS and Android game revenue delivered $500 million, $800 million and $1.9 billion over 2009, 2010 and 2011, respectively.
Within the portable category, an abundance of digitally distributed free and $0.99 games, available on hardware that is both comparably priced and more powerful than traditional portable game devices, better appeals to many consumers. As a result, the days of paying $25, or more, for a cartridge at a retail store may soon end. Further, the installed base of iOS and Android devices has not only reached critical mass, but also continues to grow at unprecedented rates. In their latest public statements regarding installed base, Apple and Google reported a total of 250 million iOS devices and 190 million Android devices activated, respectively.
Due in part to its demise in the portable game category, Nintendo is facing its first fiscal year loss since the company began reporting profits in 1981. Combined with slumping Wii sales, Nintendo is indeed struggling. Equally concerning for Nintendo is that the battle for video game dominance is entering the living room, with entries by both Apple and Google into the TV category. Ostensibly, this new class of hardware will create a new platform upon which the digital distribution model of apps will be overlaid. Now, in addition to tablet form-factor competition, the console game industry, which currently pits Microsoft, Sony and Nintendo against each other, will additionally face competition from Apple and Google TV initiatives. Beyond 2011, if Nintendo continues to face financial hardship, it may be forced to consider difficult choices such as divesting its hardware business and distributing its content, for the first time, across non-proprietary platforms.
In February this year, Nokia’s CEO Stephen Elop mentioned about the burning platform in a internal memo to Nokia employees. Nintendo has a very similar problem at hand. A burning platform and hard decisions for its future – Innovate or Die!
One of my oft reservations about G+ and after its initial success has been the lack of games. Games have been have been huge sticking pads for Social networking sites such as Facebook. It increases the user time spent on the site and gives that much bigger a window for more ads to be served to the consumers.
With respect to that, Google+’s move into gaming should be a scare to both Facebook and Apple, the two leading next generation gaming platforms. Not with-standing the early success of Google+ and the fact that Google+ could use Google’s portfolio of internet based applications and services over the Gaming domain for more relevant and pertinent targeting, there are other factors that make Google+’s venture into gaming a point of discontinuity
1.Google is attempting to break today’s 30 percent cut that has become standard across both Facebook and Apple. Google will share 95 percent of the revenue from virtual goods sold with the developers and keep only five percent for itself.
2.Google is also interested in allowing games to be played cross-platform, meaning a person could pause their game on the Web and then pick back up in the same place on their phone. If Google+ games could run through the browser on the iPhone or iPad, it could undercut Apple on its own device.In that scenario, consumers would have to find a compelling reason to switch from playing games that are downloaded through the App Store to playing games through a Google+ experience.
3. Google’s partnership with Adobe will be a critical experience factor for users on Google versus Apple. Add to that a HTML5 integration in the horizon, Apple also has a reason to be wary of Google’s moves in online gaming.
Regardless, it should be comforting to developers who are uneasy with the control that either Apple or Facebook has from time to time. Developers will be looking to see if the Google+ game network can be as powerful as Facebook. One thing for certain is that they all can start off with a fresh slate. Not one is massively bigger than the others, like Zynga, which is larger than the next 15 developers combined.
The full list of games now on Google+ includes Angry Birds, Bejeweled Blitz, Bubble Island, City of Wonder, Collapse! Blast, Crime City, Diamond Dash, Dragon Age Legends, Dragons of Atlantis, Edgeworld, Flood-It!, Monster World, Sudoku, Wild Ones, Zombie Lane and Zynga Poker.
Gaming takes the cake in terms of Apps and its stickiness with users.Average mobile gamer plays approx 7.8 hours per month where-as an iPhone user plays the most at 14.7 hours per month & Android users play 9.3 hours p.m. This data was released by Nielsen for Q2,2011.
An interesting survey of top 100 grossing games on the Apple Apps store in January and June of 2011 by Flurry yields an interesting trend in terms of gaming. Games occupy more than 75% of all top 100 grossing apps in the app store, it’s the single most dominating business model in the mobile apps industry today. The interesting result of this survey is the growth of revenue from Freemium games at the cost of share decline of Premium-paid up games.
Stickiness is the key to success of all gaming because this then provides compelling spending opportunities and branding spaces for consumers as well as sponsors. The best example is that of Zynga which with its Farmville and Cityville franchises has worked its way to a $1bn IPO.
A freemium model with in-app purchases, is perceived to be advantageous as it can induce higher trial and usage rates. Also, when a network of friends opts in to play together, their group profiles and consumption can be an interesting hunting ground for brand ads and sponsors. Those who consider buying or paying money on the gaming app will anyways be doing it if the game appeals to them. Thus in terms of appealing to larger initial masses, a freemium app definitely beats out a premium app. The other problem with a premium app is that without any trials on the game, it is a difficult choice to invest on the game upfront to the users.
Freemium and Free-to-play is here for good.
A very basic game of catapulting birds across a distance to break eggs which are heavily fortified. That’s Angry birds for you. However this description misses out on the slick gaming interface and the stickiness that has catapulted Angry Birds as one of the highest downloads in history of mobile gaming.
The potential that is offered by Mobile Gaming as an industry is immense. Thanks to games such as Angry Birds, spending on mobile game advertising increase by more than 900 percent according to a new report by Juniper Research. Even then, ad spending will still pale in comparison to direct player spending. Juniper envisions aggregate mobile game ad spending of $894 million in 2015, up from an estimated $87 million in 2010, as more brands show interest in targeting mobile game players.
Despite this increase, Juniper thinks direct revenues from paid downloads and in-game purchases will continue to represent the vast majority of mobile game revenues in five years’ time. The value of these revenues will be 10 times larger than those for advertising in 2015. Juniper forecasted that the total end-user revenues for mobile games will hit $11 billion annually worldwide by 2015, nearly double the $6 billion recorded in 2009, driven by in-game purchases. In-game purchases currently representing roughly 80 percent of all revenue on games for iOS devices. Titles such as Rovio’s Angry Birds that offer full, ad-supported versions are making a significant impact on the mobile game ad market. The beauty of engaging gaming titles is that while users get great games for free, advertisers get significant product/brand exposure.
Citing the profusion of titles and developers, Discoverability — or users’ ability to sift through the tens of thousands of games on the App Store to find the true gems — will remain a hurdle for developers.Discoverability can be a ‘chicken and egg’ problem: high downloads lead to prominence, but achieving a high number of downloads is largely dependent on already being prominent. Consequently, a small minority of games achieve very high downloads, whilst the vast majority achieve very small download figures