The Big Money Is In E-Sports, Not Mobile Gaming
Activision’s USD5.9bn acquisition today of King Digital Entertainment, maker of the hugely popular Candy Crush Saga series of games highlights just how much the atmosphere has changed in the industry. Coming the same day that Juniper released a report claiming revenues for e-sports will grow by 250% between 2015 and 2020, here’s a look at how stakes are changing in the online gaming space.
Casual Gaming Houses Unsustainable
Despite a number of very high-profile successes, casual gaming studios tend not to be able to easily replicate these successes – a main reason of this is that casual games tend to be viral hits, whose successes are nearly impossible to predict. Zynga, once one of the biggest players in the space actively discouraged innovation, with employees anecdotally being told to stick with previously successful models. While that’s an extreme example, it does highlight how rare viral success is.
The other problem is sustaining growth, once a game becomes a hit. It is arguably their very simplicity that means they fail to generate the same level of deep engagement and brand and studio loyalty enjoyed by makers of high-budget, high-profile ‘AAA’ games. Investors are increasingly wise to this since Farmville developers Zynga failed to live up to the huge valuations it was being given. A similar pattern can be seen with Angry Birds developer Rovio, which has produced a film based on its franchise in what can be seen as a late bid to maintain visibility in the face of failure to achieve similar successes with other titles.
Rise Of E-Sports
The other side of the equation is that with the general stagnation (or at least plateauing growth) of casual games, is the rise of eSports as an increasingly lucrative space within the sector. New data from Juniper Research suggests that by eSports sites like Twitch, which this year saw 133m views, will be surpassing 310m by 2020. These figures are comparable to traditional spectator sporting figures – the study cites the NFL and Formula 1, which respectively saw 220m and 400m in 2014. With huge viewing figures come huge revenues.
Of course,e-sports provide massive opportunities for advertisers – Juniper predicts that advertising revenues for E-Sports will grow by 250% between 2015 and 2020. E-Sports revolves around a relatively small number of key titles. Necessarily so – the more fragmented the field, the smaller the respective audiences and the less valuable advertising space becomes. It’s rapidly developing an ecosystem of its own, with firms offering analytics, platforms, and even training and coaching services all picking up funding over the past year.
Casual Games Aren’t Dead
Of course, casual gaming is far from a neglected market, but it’s one that, given its unique, viral-driven success thresholds, is uniquely challenging for developers to enter, both new and incumbent. But it continues to serve as a platform for AAA developers. Nintendo has a storied history in the casual gaming space, with its Wii console, one of the most commercially successful of all time, essentially pioneering the market. But for years, it has been reluctant to pitch in to the smartphone market, operating as it does its own highly successful range of handheld consoles.
However, this is changing with the release of it’s Miitomo title, which brings its Mii avatars, well known from its console offerings, to a smartphone audience. While it is unclear whether this will be the viral success in the league of Angry Birds or Candy Crush, (probably not, as it’s billing itself a social experience rather than a goal-oriented game), Nintendo are the kind of company that can afford to put money behind potentially risky ventures. That a firm previously so smartphone-averse is pitching in to the space is also a reminder of the continuing, central importance of the smartphone in driving the sector.