Altabel Group's Blog

Will cheap mobile games kill the gaming industry?

Posted on: September 22, 2011

Smart phones are already changing many markets in the IT industry. Mobile gaming represents one of the fastest growing segments of the digital games market, and potential for future growth remains strong as more consumers are using smartphones for games of all types, including the increasingly popular mobile game apps. Is the mobile gaming industry a threat to the console industry?

Traditional PC, PlayStation 3 and Xbox 360 games can take two to three years and $20 million to $30 million to build. By contrast, apps for Apple and Android handsets can be assembled in weeks for less than $20,000, which explains why they’ve captured an entire generation of bedroom entrepreneurs’ imaginations. Given sales of 100 million-plus iOS devices (iPhone, iPad, iPod touch, etc.) though, producing high-quality titles capable of selling in the millions isn’t the issue.

Despite the best efforts of Nintendo and Sony, mobile games are taking a bigger chunk out of the portable gaming market, with one in every three dollars of portable gaming revenue going to smartphone and tablet games, according to new analysis from mobile analytics firm Flurry. Games for mobile devices now account for almost half of all the game downloads.

Even most of the gamers who use a dedicated console to play online are spending the largest chunk of their change on games for mobile devices. The rest of their game funds are going toward titles downloaded for PCs, full consoles, portable consoles, and other systems.

A recent report revealed some startling facts about mobile gaming and the rise of smart phone gamers. iPhone user spends around 15 hours on average every month playing games. Android users weren’t far behind by cloaking 9.3 hours monthly average while other smart phone users were at 7.8 hours. Overall around 64% of people who download applications have installed a game in the past 30 day period making gaming apps the most popular genre of apps.

Although the message is clear many publishers are not very worried considering that the market is still dominated by console games. Since the cost of production for many mobile and social games is extremely low in comparison with console games, when the time comes for jumping ships or expanding over to mobile and social platforms it will not be difficult, especially for a video game development company that already has the assets, technology and manpower necessary to develop games for consoles and the PC market.

While portable gaming market is changing rapidly, Nintendo and Sony aren’t sitting still. Nintendo recently launched the 3DS, which sold almost 400,000 units in its first week, a respectable number that still fell short of some analyst expectations. Sony is working on new portable hardware and moving closer to the mobile market with plans to make its PlayStation software available on Android devices. We’ll have to see how the two gaming giants fare in their efforts to kick-start their businesses, but it’s clear mobile games are posing a huge challenge with their cheap (or free) pricing and easy digital distribution.

The rise of cheap mobile games, even as low as 99 cent apps are compared to that of the iTunes music revolution and that of the takeover of the traditional books market by self-publishers via eBooks. Does this mean that internet is about to change the gaming industry once again? Many companies have already started integrating their games into social and mobile platforms. EA and other major studios and platforms such as Sony, Microsoft, etc., have also started experimenting with social media platforms, as well as the development of games for mobile devices. However, for the near future, gaming companies are quite unlikely to have any serious issues due to the rising popularity of mobile games. There will always be a demand for console and PC games, in addition to mobile games.

And what do you personally think about expanding of mobile games popularity? Do you think mobile games are going to beat console games? And are they more advantageous to invest in?

Kind regards,
Aliona Kavalevich
Altabel Group – professional software development

9 Responses to "Will cheap mobile games kill the gaming industry?"

They won’t kill the industry, but they will most likely reshape it, and some developers may die in the process if they are too slow to adapt. I blogged on this back in March, if anyone is interested:

I’m not sure they even lie in the same genre? It’s like saying that DVD’s and movies on TV will kill the cinema.

A person goes to the cinema because it’s an event. It’s ‘getting out’…experiencing an over-the-top audi-visual environment. A person watches a movie on a DVD or TV simply because it’s there.

Similarly with video games. Social Media games and apps are nothing more than time-wasters. Whereas a video game – turning on your console or PC and settling back for “a session” is a totally different mentality.

I have run an MMO online for just over 4 years now, and the players in that online Community regularly talk about their favourite console games. They fulfill a different need…with my MMO being “something to check in on while online”.

Just my 2c anyway.

I think your estimate of weeks and $20k to develop a mobile app is a little on the low side. While you may be able to put out something small in that time. To make a game that’s truly competitive enough to compete with the traditional markets, you would need to invest 5-10 times that many resources, this includes the effort in marketing, distribution, play-testing & revisions that is needed to ensure a mobile app’s success.

While I agree with the overall message that smart phone (and tablet?) gaming is having a major impact on the traditional channels, I think the success stories of games like angry birds is giving people the wrong idea of the level of effort needed to make a successful title, especially as the market matures.

I think you are both overestimating the effect of low cost development of mobile games that will flood the market at $0.99 and underestimating the overall effect mobile will have on the market over the next 5 years.

Let us not forget that we are at the point where mobile is clearly becoming more important for accessing the internet than PCs and large PC manufacturers like HP are having a hard time making money. If you combine that with a flattening console market and the fact that smartphones and tablets are outselling any other game devices, it is clear that mobile gaming is poised to go from 5-10% of the market to over 50% of the market in the next 5 years.

Initially the large publishers saw mobile as a market for smaller copies of their console and PC games, but today they are starting to realize that mobile gaming is not just miniature PC/console games, the games have to be designed for people on the go. Mobile gaming allows a much more relevant and personal interaction for the players, the phone is always with the user, people play in small or large snippets of time from early morning to late night. Multiplayer is changing into the more flexible asynchronous social gaming where you play with your friends, but you don’t have to do it at the same time as them. Finally we are seeing location becoming a key element where the world around the user can be drawn into the game. This also enables the developers to use location to increase their monetization with Location Based Advertising and sponsored checkins where the game helps drive customers to retail locations.

I talk to a handful of mobile game publishers and developers every week and have meet with over a third of the top players over the last 7 months. It is very clear that we are seeing a shift where everyone expecting the majority of the growth to come from mobile and tablet games, but the most innovative players are planning to create a cross device game experience where you can play on your PC or console, then continue to play in a game on your smartphone or tablet in a game mode adopted to the being on the go. We are also seeing cloud initiatives like EA’s Origin that will eventually take the crucial step from games as software to games as a service across all devices.

If you look at what has happened with mobile gaming business models since Apple’s launch of the App Store there has been big changes. Initially most developers where focusing on paid games downloads with free versions to get some attention. Then some developers started supplementing their revenue with advertising and today there are three models that can all be used at the same time because they monetize each their share of the players; paid game downloads, free games with Location Based Advertising and in-app purchase allowing players to improve their performance in a game by buying game items. Together these models are a lot more interesting than selling games at $0.99 per download and will over the next 5 years begin to rival revenues from PC and console games because mobile gaming reaches a lot larger target group than we have ever seen before.

Thank you for sharing your ideas and thoughts. I really appreciate it!

Thanks for a marvelous posting! I genuinely enjoyed reading it, you will be a great author.I will make certain to bookmark your blog and will often come back at some point. I want to encourage you to continue your great writing, have a nice holiday weekend!

if we talk about portability and freedom , then mobile gaming will surely get an advantage, people would love to kill their time, when they are sparing time. but no doubt it all depends on the age groups. for example age group between 12-18 would still like to stick with the pc and console gaming,while 20-35 age group crowd would like to play on mobile.

wonderful article. thanx

This is awesome. And exactly what I needed to hear at this moment in my little mommy life.

Good page… Just killing some time at work surfing the interweb and found your site. Good looking blog. I will have to add the blog to come back. Cheers! Lethalia Blogs

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: