KEY TRENDS AND GROWTH KPI S FUELING MARKET GROWTH INTRODUCTION Only five years ago consumers played games primarily using the PC and TV screen. The uptake of smartphones and tablets has since doubled the number of screens used by consumers to engage with entertaining content. Consumers are spreading their time and money accordingly, resulting in rising pressure on single-screen revenues. At the same time, the use of jargon and hyped terminology within the industry has confused external investors who sliced their investment volume in half in 2012. Misleading headlines by traditional press and research organizations about a games market in decline have exacerbated this problem that we, as an industry, need to resolve. This has motivated Newzoo to consolidate our efforts further in providing the total and global picture in 2013 and beyond. ABOUT NEWZOO Newzoo is an international full service market research and consulting firm, 100% focused on the games industry. We aim to provide the best and most actionable independent market data across all segments, business models and continents. Our clients benefit from our unique mix of primary consumer research, transactional data and financial analysis. Using our extensive network and deep involvement in the industry, we aim to stay ahead of the curve and at least two steps ahead of traditional research companies. Our clients include Wizards of the Coast, Plantronics, Incomm, SEGA, ProSieben, Konami, Blizzard, GlobalCollect, NamcoBandai, GameHouse, Microsoft, Valve, Coca-Cola and VISA. WWW.NEWZOO.COM Part of this effort is already reflected in this Mobile Games Trend Report. This includes our Screen Segmentation ModelTM that we use in parallel with the traditional segmentation, which will fade out over time. ture d spot fu ata in a n a e g n and cha ingle-screen d underst ly u r lace s e. t o T eed to p een perspectiv n e w s r ie c it s y n ib u t lt oppor driven nd mu global a ly, changes are rics e t t met Ultima s and no r e m u s OO con O NEWZ AN, CE WARM PETER 1. More Screens Only five years ago, gamers played mainly on two screens: The TV and the PC. That number has since doubled giving room for more time and ultimately money spent on gaming. For now, gamers spread their budget across all screens. 2. Free Games Consumers have gotten used to the idea of trying a game to the full before they decide to spend money. The days of low quality free games have passed as ingame spending business models have proven successful. Next stop: The TV screen... 3. Games are Services As monetization now takes place within the game at a moment the consumer chooses, publishers and developers are even more incentivized to keep their gamer engaged as long as possible. Beta periods are crucial involving the gamers in the final settings of the game. 4. Business Model Balancing Act Now that games are services, the business model requires continuous balancing between value for the consumer and profit for the publisher. Monetization of the game should keep free gamers happy and provide room for spending by the whales. The launch of a game is just the start... 5. Global Market Place The games market is now, per definition, a global playground. Online connectivity allows companies to localize and launch games anywhere on the planet. To secure growth, emerging markets are a necessary part of any game companies strategy. THE 5 KEY TRENDS LEADING CHANGE IN THE GLOBAL GAMES MARKET 2
SMARTPHONE AND TABLET GAMING THE GLOBAL PICTURE KEY GLOBAL FACTS ON SMARTPHONE AND TABLET GAMING Fueled by simultaneous uptake in Western, Emerging and Asian markets, mobile games show a substantial growth compared to other games market segments. Most impressive are the figures shown here on app downloads and spending. One in three app downloads are games and two thirds of all mobile app spending is on gaming. Examining the global figures we can see there are more than 500 million mobile gamers, with 35% of these (175 million) spending money. / Distimo MOBILE (PAYING) GAMERS PER COUNTRY SHARE OF ALL (PAYING) GAMERS, AGE 10 TO 50 (2012) In all countries the majority of gamers plays on their smartphone or tablet, ranging from 53% in Belgium to 79% in the UK. Spain has the second largest share of mobile gamers (77%), followed by Brazil (71%) and Russia (70%). As the share of paying gamers continues to grow, the UK leads the field with 38% of mobile gamers actually spending money. Brazil, Australia and Italy follow closely behind, with at least 35% of their mobile gamers paying to play. 3
A NEW LOOK AT THE GAMES MARKET CONSUMERS AND THEIR FOUR SCREENS NEWZOO SCREEN SEGMENTATION MODEL The Newzoo Screen Segmentation Model distinguishes between four types of screens: the Computer, Entertainment, Personal and Floating Screen. According to this new model, each of the four screens plays a different role, yet all of them are firmly present in consumers lives and therefore continuously used. To examine mobile games, we focus on the floating screen which accounts for the use of tablets as well as handheld consoles and the personal screen which covers smartphones. THREE REASONS WHY THIS NEW SEGMENTATION IS NEEDED 1 Investors are lost Our jargon and over-hyped terminology in combination with misinterpreted headlines (about the decline of traditional sales) is damaging our industry. We are confusing investors without giving them the total picture. Result: Investments from outside our industry have dropped by 50% compared to 2011. 2 3 Spread of budget Consumers are spreading their time and budget across double the number of screens than five years ago. Result: Game companies are forced to follow their consumers and take a multi-screen approach. Single-screen marketing unaffordable Single-screen cost of acquisition has risen too high to secure lasting success through a pure (single-screen) metrics approach. Result: mobile game companies need to attract (paying) players across the other screens. YEAR-ON-YEAR-GROWTH US AND EU MOBILE GAMES MARKET (2012 vs 2011) FOUR GROWTH KPI S Reports on the games market predominantly focus on the number of players and/or money generated. To monitor and fully understand changes in the games market, these figures alone are not enough. This is especially true now that free-to-play is becoming the dominant business model. The growth in time spent gaming and number of paying gamers are key indicators of future growth. 4
FREE TO PLAY THE KING OF MOBILE GAMING REVENUE AND DOWNLOAD DEVELOPMENT OVER TIME DOWNLOADS REVENUES MOBILE GAMES AS A SERVICE Examining F2P games, such as Kingdoms of Camelot by Kabam, we can see the revenues rise alongside the downloads and continue to rise even as the download figures drop. Thus, F2P games generate steady and continuous revenues long after their downloads have slowed. This is not true for P2P games such as Infinity Blade, which see a direct linear relationship between revenues and downloads. /Distimo ios REVENUES SPLIT BY BUSINESS MODEL THE STEADY RISE OF F2P Free-to-play has continued to prove the most profitable business model in the mobile sector and has further increased its domination in 2012. Comparing ios revenue splits from December 2011 with December 2012, we see F2P games taking 70% of the revenue pie across the EU and the US. This is an average increase of 20% from the same period in 2011. Paid games with an in-app business model are performing slightly better in Europe than in the US. /Distimo 5
APPLE VS GOOGLE PLAY CLOSING THE GAP SHARE OF REVENUES BY STORE TOP 200 GROSSING GAMES, DECEMBER 2012 Even as Google Play begins to take a larger slice of mobile revenues, the ios store continues to dominate in Europe and the U.S., taking 81% and 87% of revenues respectively. Interestingly, Japan sees a more even picture, with the Google Play Store taking 35% of mobile revenues. This figure is due, in part, to the under performance of the ipad in Japan. / Distimo PROFILING THE MOBILE GAMER WORK SITUATION AND INCOME Examining the demographics of ios and Play Store gamers, we can better understand the above split in revenues. Almost half of IOS gamers are in fulltime employment compared to 38% of Google Play gamers. ios gamers also boast higher incomes, with 28% in the High Income category, compared to 17% of gamers who use Google Play. WOMAN PLAY, MEN PAY GENDER SPLIT FOR PAYING MOBILE GAMERS In recent years, we have seen an increase in the number of female gamers, to the extent that most Western countries now have a 50/50 split, with some boasting more female than male gamers. This split however, doesn t hold when we examine paying gamers. Men are much more willing to pay for their gaming experience, making up 61% of all payers in the US. This trend is even more salient in emerging markets such as Turkey and Poland, where 70% of all paying gamers are male. 6
CROSS-SCREEN GAMING FOLLOWING THE CONSUMER SCREEN MONETIZATION SPLIT OF MONEY AND SHARE OF PAYING GAMERS THAT PAY ON A SCREEN Consumers now play across four screens and spread their budget spread across the entertainment (29%), computer (50%), personal (7%) and floating (14%) screens. As we can see, of all the paying gamers in the US, 32% of them spend money on the personal screen (mobile) and 37% spends money on the floating screen (tablet & handheld consoles). Although only 7% of money goes to mobile, we expect this figure to rise as the number of mobile payers increases. A remarkable 21% (EU) / 22% (US) already plays games on all four screens. OVERLAP AND GROWTH SMARTPHONES VS TABLETS VS HANDHELDS CONSOLES Of all smartphone, tablet or handheld gamers in the US, 50% play only on their smartphone, 12% use both a tablet and a smartphone and 11% use a smartphone and a handheld console. The greatest insights can be gleamed by looking at the changes in these figures between March and September 2012. The number of people using both a tablet and a smartphone is up by an impressive 52%. Thus, personal and floating screens are complementary and developing games for both platforms is essential. 7
TOP MOBILE GAMES PUBLISHERS ios VS PLAYSTORE (GROSSING) ios PUBLISHERS - DECEMBER 2012 PLAYSTORE PUBLISHERS - DECEMBER 2012 / Distimo / Distimo 8
TOP MOBILE GAMES ios VS PLAYSTORE (GROSSING) ios GAMES - DECEMBER 2012 / Distimo PLAYSTORE GAMES - DECEMBER 2012 / Distimo 9
KNOW YOUR GAMER CONSUMER INSIGHTS AND APP METRICS PROFILING THE PAYER Newzoo s Data Explorer helps our clients to develop marketing strategies and effectively target paying gamers. The tool includes 200 topics for 15 countries and allows for the sizing and comparison of markets in terms of players, payers and money. It makes it easy to profile paying vs. non-paying gamers and understand cross-platform or screen potential. Subscription to the data explorer allows access to the market intelligence needed to support growth across all screens and segments. MONITORING APPS Together with our App Analytics partner Distimo, we offer an online dashboard that allows you to analyze daily download and revenue estimates for a selection of ios and PlayStore games. It provides insight into daily, weekly and monthly leaderboards of the top 44 countries worldwide and enables the analysis of any app in the market whether it is a competitor, potential partner or an investment opportunity. / Distimo BEST OF BOTH WORLDS Newzoo provides a unique subscription service combining both consumer and transactional data. Both are accessed and analyzed online. By providing the best app analytics in the world with the best games market research expertise, we can give you continuous insight that your competitors do not have. Newzoo has been working with Distimo data for almost two years and knows this industry inside-out. We believe the strength of this partnership lies in the combination of Newzoo s global games market expertise and our data, which delivers the best actionable insights for leading game companies. -Vincent Hoogsteder - CEO DISTIMO More information on this subscription, a monthly summary report service and custom analysis possibilities can be found on Newzoo.com. 10
NEWZOO PARTNERS SUPPORTING YOUR GLOBAL BUSINESS DEVELOPMENT Amsterdam, the perfect city for your game company Four reasons why game companies such as PerfectWorld, Gamania and DeNA have chosen the Amsterdam Metropolitan Area for their European office. Central location in Europe The Netherlands sits nicely and independently in between Europe s largest markets: the UK, Germany and France and is known to be a perfect test market for new digital media products. Excellent Infrastructure Amsterdam is home to the Amsterdam Internet Exchange, the world s largest internet hub in terms of both traffic and members. Multilingual Workforce Amsterdam has always been very international in terms of people, languages and business. It is also easy to attract talent from other parts of Europe to spend some years in Amsterdam. Financial Framework Many international companies, such as IKEA have set up their financial HQ in the Netherlands. Please contact me to see what advantages apply to your specific situation. Annelies in t Veld Senior Manager Foreign Investments City of Amsterdam Economic Affairs veld@ez.amsterdam.nl +31 (0)20 552 3204 Payments Intelligence, the fastest way to increase revenues GlobalCollect is the worlds premier provider of payment services. It processes payments across the globe for the majorityof leading game publishers and distributors. > 115 million gaming payments in 2012 In 2012 GlobalCollect processed over 148M video gaming transactions globally. Gaming payments data and benchmarks are available to clients based on gaming platform, game type, monetization model and genre. Payment specific data includes global payment method popularity, average transaction values, fraud benchmarks, country specific volumes, transaction volume figures etc. GlobalCollect has deep gaming knowledge and provides advice to clients on paymentization practices including checkout flows, multi-acquirer management, alternative payment method optimization, localization best practices and benchmarking for credit card processing. Nathan Salisbury Global Market Director - Gaming GlobalCollect nathan.salisbury@globalcollect.com +31 (0)23 567 1500 11
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