The gaming shot heard around the world. The wall came down. Blizzard’s next big game, the biggest announcement at last year’s Blizzcon, was Diablo Immortal. A mobile game. Not just that, a reskin of a game by chinese developers, presumably for the chinese market.
And people flipped the hell out. But my question is simple. Why should they? Why should they flip out? Blizzard, EA, Bioware, Bethesda, all shit the bed in the past year, and people seem to have a tough time understanding it.
Its because they are having to pivot to the new reality.
I hate to break it to everyone, the war is over. The people lost. And they lost a long time ago. Lets talk about why all of these AAA developers are going to mobile, china, and what this means for us, who enjoy more traditional gaming.
1. Mobile is where the people are.
Look at this graphic
So, this is real simple. PCs, effectively, have had flat line sales since around 2008. While iOS and Android devices have fare outpaced sales. This also means that there are far more people now that have Apple/Android smart phones that have either PCs or Consoles.
More people, means you have a pool of money to tap into. Larger market. Larger amount of people than you have ever had in human history who have access to the tools by which to game, in this case, a phone.
2. Mobile is where the growth is
As a result, mobile is where the growth is. Check this one out from newzoo.
I feel like this graph is self-explanatory, but I want to focus on the concept of CAGR for one second. CAGR is a concept used in business that more or less calculates what any typical year worth of growth would experience based on the results (or in this case results and projections) of a time period. Another way to think of it is time value of money. Where does it make sense to put your resources in to have the best chance to get the most revenue.
Generally speaking, you put your money where the growth is. In this case, increasing population of people with phones AND an increasing revenue, demonstrated by companies in the field over time, means it just makes more business sense to put your money where the growth is. You have a better chance to hit if companies are out there growing their revenue 26% over a 10 year period.
3. China also is where the growth is
Not only is the Chinese middle class exploading but China’s High Net Worth Individuals (HNWI) are off the charts. A larger pool of HNWIs gives you a better chance to find more whales. If you are not familiar with the concept of gaming whales, these are people who have enough money to spend $1-2M annually on mobile gaming. While they are less powerful than they used to be, they are still the best way to grow money for your fledgling game.
Again, its all about the growth. Again, from newzoo.
If the Asia-Pacific corredor is half of revenue earned on gaming, and is growing 17% compared to North America’s 10%, why wouldnt you target for the largest market with the largest growth.
This is just business sense.
4. You can be lazy and still make piss loads of revenue AND profit
If you are like me, most mobile gaming experiences feel like a lab rat hitting a feeder bar to get a food pellet. Its designed to fuck with your mind. Shit like Clash of Clans and Candy Crush. There is no story or real progression. Its about getting you to spend money to have your next turn.
And mobile games can absolutely have this. But the real money makers dont.
There is a reason alot of legacy gamers feel like this. You see, when you are in the startup culture, you learn about this thing called the minimally viable product (MVP). You launch something with enough features to satisfy intial customers while you continue to work on the product. This is very common in start ups, especially in app development.
The issue here with mobile games, alot of times the MVP IS the final product. They launch the thing, and sure they make some technical updates, but they dont actually improve the system. Cause it works. And you stay much cheaper.
I hate to pick on Blizzard about this, but I will. This is from Blizzard’s 10-K last year.
There is a few things to note here. Blizzard purchased King in early 2016. King makes Candy Crush, an app that seems to consistently make money.
Ok, look at activision’s profitability vs King. They both have the same profitability margin of around 35%. King has a similar revenue growth as core activision on a YOY basis.
Here is the difference. Activision’s growth was powered by the Destiny 2 launch. King’s growth was powered by THE SAME FUCKING GAME THEY HAVE HAD FOR FOUR FUCKING YEARS. People are STILL pumping new money in it for events and what not.
So here is the question. Do you want to take the time developing all of these games and have a chance at a failure like what EA is currently experiencing with Anthem. OR Do you want to just print easy cash and get AT LEAST the same growth rate.
And its even more so if you catch the culture wave. A company like Net Ease (which is developing Diablo Immortal) for example, has it even better.
These are in RMB, so the USD number is about 1/6 of that, but it still makes the point. Look at Gross profit for online gaming services. Look at that. Thats just gross.
Its not a surprise to me that you go this route. There are clearly enough customers out there to feed this growth that arent upset with microtransaction hell.
So where does this leave people who like full stories and developed characters.
All hope is not lost young one. The difference is, your gods are dying, find new ones.
Sure Bethesda, Bioware, and Blizzard shit the bed. The answer is. Ignore them. They are out there chasing that NetEase money.
Follow your creators. People you like. See what they are up to. For example, I find alot of hope in what fancy people call the Democratization of Capital. Aka, you got your fans for money.
Instead of giving money for the next Madden or Fifa, people can put their money and go independent. And its working.
You have people like Larian Studios doing a kickstarter to make one of the greatest video games in the past 10 years. After Konami went full gambling, Koji Igarashi is out here making is own spiritual successor to Castlevania.
They aren’t all going to be winners, but there is plenty of money and faith out there to go around.
Overall, I would leave you with this, let the old gods die. Great games will still be made. You just cant look to anyone who has to meet that public expectation of revenue growth every quarter to do things that are artistically substantial anymore. They will chase the money forever.
Let them go. We will DIY our way to a better future.