The console wars have been going on for decades. Atari vs. the Colecovision. Nintendo vs Sega. For the last three console generations, that battle has been between Sony, Nintendo, and Microsoft, the Big 3. They were competing over the television. Recently, that battle has matured, and now, there is a new, legitimate screen that all these companies want to dominate. The console wars are ending, and now the war is moving to different platform: mobile.
The size of the mobile market
Mobile gaming has been around since 2007, but the console makers mostly stayed out of it. So, what has changed? First, the size of the market. Mobile game spending is more than 3x console game spending. There are 3x the number of mobile gamers as console gamers. Second, the mobile games market has different demographics than the console market.
Portable gaming has always been bigger than console and PC gaming in Japan. However, mobile gaming created a new market in the rest of Asia. South-East Asian countries like (Malaysia, Thailand, and the Philippines) have had lower player counts in the past because the cost of owning a dedicated gaming PC or console was too high. Now, the mobile games market there has exploded. The casual mobile market is growing, as it is in the rest of the world. The core and hardcore gaming markets have been growing, too — on mobile.
The Big 3 have little market penetration in these markets with their consoles. Mobile gaming gives them a way to reach new customers. So, these three are making different moves to exploit the rise of mobile games.
Mobile gaming options:
Mobile gaming is broad. Here are the different ways the Big 3 could monetize mobile games.
Traditional mobile games
The early days of mobile gaming resembled other parts of gaming. Companies produced a game, and players could buy the game for a one-time fee. Games like Angry Birds and Fruit Ninja made millions while charging $1. Now, one dollar for a game is too low. Companies are moving away from Pay2Play games, but there are still traditional games sales on mobile, like Minecraft and Five Nights at Freddy’s. These are PC/Console-first franchises that port their games to mobile and charge a premium price. They can charge a premium price because of their perceived value. People think of Minecraft as a $15 game, and so they will spend $15 on it.
Low perceived value is a hurdle in selling mobile games. Average perceived value varies per platform. On PlayStation, players are willing to pay $70 USD for a AAA game. On Xbox and the Switch, they pay $60 USD. On PC, prices tend to be lower than $60 USD, although some premium games start at that price point. On mobile, the expectation is $0. The perceived value of a top-selling game like BloonsTD6, which is polished and has tons of content, is still only $6.99 USD. This is not irrational. Play sessions on mobile are shorter than console, and the places people play are different. Control schemes and device power hold back mobile games from a console-level experience. So, it is difficult sell mobile games for even $5 USD. On other platforms, even small games tend to charge more than that.
Overall, this pricing model is antiquated, and none of the big 3 seem interested in pursuing it further. This keeps them from releasing direct ports of successful games on mobile.
F2P revolution and game design
Mobile games have moved beyond P2P and have embraced F2P. All of the top 10 grossing mobile games of 2021 were F2P. If the Big 3 hope to do well in mobile gaming, they will need to approach F2P. However, F2P does influence game design.
Unity’s CEO recently got into some hot water for saying that you’re a “f***ing idiot” if you don’t think about monetization during the creative process. He certainly could have phrased it better, but for mobile games, he wasn’t far off . Developers of free-to-play mobile games must consider monetization. Mistakes in monetization leads to unfun gameplay, unprofitable games, or lack of player retention. There are a lot of ways to monetize a mobile game, and most are different than in console games.
DLC or expansion content: This is shared with console games. The core offering of the game is free, but you can spend money to access additional content in the game.
Ad-Supported Games: This has been tried in traditional games, and it failed miserably there. But it’s one of the biggest forms of monetization for mobile games. Games can combo ads with other forms of monetization or be entirely ad supported by making users watch an ad to play. They can lock purchasable content behind an ad as well, and many more options. To get the most out of ads in games, you need to either design things to be gained by watching ads, or put places in the game where an ad can slot in (similar to network television).
Limited Free Plays: F2P games can give you a limited number of free plays. After they are used, players have to wait or spend money to play. Candy Crush is one game that uses this.
Gacha/Card Packs/Lootboxes: These are the games where you have a random chance to receive an-ingame reward. These are similar to real-world baseball card packs. Gacha games tend to work well with established properties, so large IP owners like the Big 3 should be able to take advantage.
Subscriptions: Some games offer individual subscriptions (I would include battle passes as subscriptions). Companies are also experimenting with multi-game subscriptions, kind of like to Netflix. This might be a better solution for premium games on mobile than purchasing them individually, but the medium is still young. Apple has Apple Arcade, Netflix added games to their subscription, and Google has the Google Play Pass, to give some examples.
In recent years, there has emerged another option for mobile games: game streaming. Xbox has a service where you can play AAA console games streamed to your phone for a monthly fee. There are a few problems, though:
The Controller Problem: Most streaming services require you to use a controller. Controllers are not widespread across the world, and they also reduce the portability of the mobile game experience.
Connection issues: Game streaming struggles to stay smooth over fast internet connections. This is made worse over cellular connections.
Nintendo has been a historically isolated company in terms of their ecosystems, so it is surprising that they have made the biggest splash in terms of the Big 3 when it comes to of mobile gaming.
Nintendo really knocked it out of the park with Pokemon Go. Pokemon Go was the marriage of IP and concept. It was one of the first AR games, and Pokemon fit well with the regional nature. Pokemon Go swept the world. The game was a commercial success as well. It made almost 300 million dollars in its first year, and it’s grown year over year. It hit $5 billion in revenue in 2021. It was the sixth-highest grossing mobile game of 2021.
Nintendo then tried Mario Run, an endless-runner version of Mario. It seemed like a perfect fit: huge brand in Mario, an established mobile genre, and gameplay like regular Mario games. They even got to save money by reusing assets. The game did great at first, and they charged a one-time fee of $9.99 to unlock all of the levels. It did well, but not as well as some of Nintendo’s other mobile games.
Fire Emblem: Heroes
The other really huge success they had on mobile was Fire Emblem: Heroes. They found a lot of success by taking their IP and using it to make a gacha game. Heroes is a casual RPG, where you form your team from different characters from the Fire Emblem franchise. Nintendo locks these characters behind a gacha mechanic, in which players spend money have a chance of getting the character they want. This system works very well for games based on existing IP: Marvel has a few gacha games, as do Star Wars and other similar brands. In the case of Heroes, Nintendo has been able to make more money from the mobile game than from any of their traditional Fire Emblem titles. It is one the highest earners in mobile games.
Overall, Nintendo, despite adopting mobile late, has capitalized well on the medium.
Microsoft hasn’t succeeded on mobile. Windows phone peaked at around 3% market share. They haven’t used their IP like Halo or Gears of War on mobile. They have been taking a different approach than their competitors.
Microsoft has put in an offer to buy Activision-Blizzard. Activision-Blizzard owns many strong brands like Call of Duty and World of Warcraft. They also control strong mobile properties. Call of Duty Mobile generated nearly a billion dollars from October 2019 to July 2022. Diablo Immortal, a recent release from Blizzard, was panned for its microtransactions. Still, the game was the second fastest mobile game ever to reach $100 million in player spending.
Both games are dwarfed by another publisher under the Activision-Blizzard banner: King. Of the three game publishers owned by Activision-Blizzard, King has the highest net revenue. They are a mobile games developer and publisher, and they are the creators of Candy Crush. Candy Crush originally launched 10 years ago and has been a hit since then. The game was the fifth-highest revenue mobile game of 2021. By acquiring Activision-Blizzard, Microsoft would catapult themselves into being one of the top mobile games publishers.
Xbox Cloud Streaming
Microsoft is embracing cloud streaming, and they have the best tech of the big three so far. They own Azure, one of the top public cloud platforms. This means they can save significantly on cloud costs. Sony and Nintendo might be using Azure to power their own cloud services as well. Microsoft is also using Xbox Gamepass to offer a lot of games streamed for a low cost. Their streaming service is starting to roll out mobile-native control schemes. Not requiring users to carry around a controller is a huge boon to cloud gaming. Of the Big 3, Microsoft is the only one in place to push cloud gaming. It’s working right now: Xbox Cloud Streaming playtime is up 1800% this year.
Microsoft recently partnered with Unity to integrate Azure . Unity is a popular engine, but it is especially dominant in mobile gaming. This is a good way for Microsoft to use their strength as a B2B company in gaming. If mobile game developers use Azure, then Microsoft wins. They can profit without having to own every mobile game developer. This is something the other two members of the Big 3 can’t replicate.
Sony has a phone line known as Xperia. They have tried to use this line to push the PlayStation brand in mobile. Most notable is the Xperia Play, a hybrid smartphone and PSP. The Xperia Play flopped. The Xperia Play is an example of why porting console or handheld games to mobile doesn’t work. They had to entice publishers to port their games to Android, just so that only Xperia Play owners could play them. These days, a phone with a built-in controller might be an easier sell because of game streaming. Either way, Sony has abandoned the idea of gaming smartphones and canned an Xperia Play 2 years ago.
PlayStation Mobile Games
Sony made mobile games using their PlayStation brands. One successful attempt is Run Sackboy! Run! They decided to use their premier platformer brand to make an endless runner before Nintendo made Mario Run. Sackboy didn’t do quite as well as Mario Run, but it still has accrued over 10 million downloads on Google Play since it came out in 2015. Earnings numbers have not been announced, but it looks like a mild success.
This doesn’t come close to their biggest success. Sony owns Aniplex, a company that makes anime and some games. They have one major mobile success: Fate/Grand Order. This gacha game surpassed $4 billion in revenue back in 2020. It had the 10th highest revenue of any mobile game last year. Sony doesn’t necessarily have to leverage PlayStation to succeed in mobile games.
Savage Games Acquisition
In August of 2022, Sony opened a mobile games division and brought Savage Games, a mobile game studio. Savage Games has not released a game yet, but it is founded by industry vets with experience in mobile games. They are rumored to be working on a live-service mobile game. Sony has also said that they want to release games using their existing properties. This could be successful for them. I’m sure they would love to have their own Pokémon Go or Fire Emblem Heroes.
The Big 3 are all spending money on mobile games. They see the size and value of the market. Their approaches vary, but they all see it as valuable. Here are some takeaways:
Game streaming is untested, but could be an option. It is the only way that porting console games to mobile could work. Sony could try it, but right now, only Microsoft is in position to capitalize on it.
The most reliable way to execute on mobile is to use existing IP to fuel live-service games. All three companies are moving that way. Nintendo is doing the best job of it now. They have Pokémon Go and Fire Emblem: Heroes, with a few other live-service as well. Sony is doing alright. Fate/Grand Order is a hit, but they aren’t leveraging their own IP. Microsoft has no mobile, live-service games. If the Activision-Blizzard purchase goes through, they will have the most live-service games of the Big 3.
Overall: Nintendo has a head start, Sony is doing ok with Aniplex, but not as well as Nintendo, and Xbox will take the lead if the Activision Blizzard deal goes through.
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