Mobile games: leading, but less lucrative Deloitte Global predicts that in 2016 mobile devices If mobile games publishers cannot afford a TV campaign, The immense (smartphone and tablet) will become the leading games they could use outcome-based advertising, such as number of platform by software revenue, generating $35 billion app-install ads. They would only need to pay for actual mobile game in revenue, up 20 percent from 2015. This compares downloads of a game or could even choose to pay for to $32 billion for PC games and $28 billion for console apps that are both downloaded and opened several titles renders games, up only five and six percent respectively from the times. However this can be expensive. In the US market, many new previous year. cost per install is $1-2, and can spike far higher on a seasonal basis, such as just after December when However we expect average revenue per game by 165 titles invisible there is a surge of new device activations . An install without platform to vary significantly. We forecast $4.8 million accompanied by usage (known as ‘Cost per Loyal User’) per console game available, $2.9 million per PC game, 166 can incur a charge of over $4 in the US . 158 substantial but only $40,000 per mobile game . We estimate marketing average annual spending on content per mobile games A mobile games publisher might pay several dollars per player to be about $20. This compares to $50 per PC download with no resulting revenue, even if the user spending. games player, and $145 per console player. While many benefits from hundreds of hours of free usage. tens of thousands of companies create mobile games, we would expect only about 200 mobile games This potential outcome highlights a third fundamental companies will gross over $1 million in 2016. difference: the business model. The predominant sales There are three main reasons explaining the acute model for mobile games is freemium, whereby games differences in revenue per game. are downloaded for free and additional content, be this in the form of extra lives, additional characters or special The first is the size of the installed base. We estimate powers, is charged for. Players can (and do) spend about 1.75 billion smartphones and tablets will be tens of hours playing without having to pay a cent. used to play games frequently as of end-2016, out of Market data suggests that this is typically less than three 167 a total base of 2.7 billion smartphones and 750 million percent of all players . 159 tablets . This compares to the just over 600 million who play games regularly on PCs, and approximately Indeed in 2016, it is highly probable that the vast 160 majority of freemium games downloaded to mobile 200 million for games consoles . devices will generate no revenue. According to A second fundamental difference is barriers to entry. Deloitte member firm research, only about a tenth of A typical latest-generation (also known as AAA) console smartphone owners make in-app purchases (including 168 or PC-based game costs tens of millions of dollars to games) in a given month . Those that spend on mobile 161 162 produce , a similar sum to market , and can take games are lucrative, but they are elusive. About one in several years to develop. Mobile games have relatively 650 mobile games players (known in the industry as low barriers to entry, and can be created in mere “whales”) generate about half of all in-app spend in 169 hours. This has contributed to a profusion of mobile free-to-play games . By contrast, almost all players of games titles. As of the start of 2016, we estimate app console or PC-based games have paid for the game. stores will offer more than 800,000 mobile games; this compares to 17,000 titles available for all games One reason why console and PC game players may be consoles and PCs. Every day a further 500 mobile games more willing to pay is because of the utility derived, with 163 many hours of play frequently taking place. By contrast titles are launched on a single platform . mobile games are often played to occupy pauses during The immense number of mobile game titles renders the day when the user might otherwise be doing little or many new titles invisible without substantial marketing nothing, such as while commuting on public transport, spending. The largest mobile games publishers are or waiting for a friend to arrive, or during an advertising spending hundreds of millions of dollars on marketing break. A mobile game can fill a few minutes and is annually, with a large amount of this spent on broadcast often a fall-back, whereas someone playing a console or 164 TV . PC-based game may block out hours to do so. 26