Mobile Game Revenues Leap 16.5% To Lead The Mobile Content Market

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Don’t question the continuing strength of the mobile game market, because it continues to outpace other parts of the app and mobile content business.

A report from eMarketer shows that US mobile game revenues will grow substantially this year, showing an increase of 16.5 percent up to an estimated $3.04 billion. With that, mobile games now account for 30.9 percent of the US mobile content market, a slight increase from the 29.3 percent reported last year.

While direct purchases are doing well, in-app purchases through free-to-play games are leading the charge. Revenues are expected to top $1.82 billion for the year, which accounts for more than half of all mobile game revenues. That number will grow even more to $2 billion next year, making its market share just over 60 percent.

Mobile content revenues in all are still quite healthy in the U.S., as these services, including eBooks and music, will total $9.82 billion by the end of this year, a 10.3 percent rise from 2014’s numbers. Mobile content revenues will also pick up an estimated 6.3 percent by next year, reaching over $10 billion and accounting for just over ten percent of all retail revenues for smartphones and tablets.

That said, not everything is thriving, as mobile content purchases have dropped a little bit. It hasn’t gotten to the point of saturation, though.

“Since mobile content is native to the devices, it’s often new mobile users’ first introduction to mCommerce,” said Martin Utreras, senior forecasting analyst for eMarketer. “As the US mobile user base matures, mobile content revenues are taking a smaller share of the overall mCommerce market as consumers become more comfortable buying physical retail items and making more expensive purchases from their devices.”

eBooks aren’t doing too shabby themselves, with sales expected to reach $4.25 billion this year, an estimated 43.3 percent of total mobile downloads and in-app revenues for the U.S. this year. Video download revenues will also pick up, showing an increase of 13.8 percent this year. And that’s likely to grow with services like HBO Go offering even more expansive services.

CMO’s Are Looking To Increase Their Marketing Budgets

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Mobile ads continue to be quite effective in the market – and if new research numbers are to be believed, we’re going to see quite a bit more of it.

Adweek is reporting that brands will allot 11.7 percent of their overall marketing budgets for analytics in just a few years’ time, up from its current 6.4 percent. By 2018, that’s almost double the amount for spending.

“We observe that companies under-utilize the marketing analytics that they’ve requested and have available for decision making,” said Christine Moorman, professor at Duke’s Fuqua School of Business, and director of this latest research. “It’s clear that using marketing analytics remains a distinct challenge for companies – beyond the production of this sophisticated data.”

Mobile advertising current takes up over three percent of marketing budgets, but is expected to grow as well – to almost triple that amount, at nine percent.

Other predictions made by the team include the increase of digital marketing dollars, which will rise by 14.7 percent over the next year; brands dropping their traditional advertising budgets by 1.1 percent over the next year; and social media accounts getting 9.9 percent of spending, but expecting to rise to 22.4 percent over the next five years.

In addition, Moorman’s team also states that only 13 percent of marketers said they can measure social media effectively enough, although 61 percent feel that they experience pressure from their bosses when it comes to that – so it isn’t all necessarily on them.

Brand marketers also have more optimism when it comes to the economy, with an outlook indicating a 22.2 percent increase from six years prior, back when the recession set in.

Finally, marketing budgets overall are expected to rise 8.7 percent over the next year, marking the biggest year-over-year growth since 2012. “Compare that to the .5 percent growth that they expected in February 2009, and their confidence in markets is very clear,” said Moorman.

The video below showcases more of the data from Moorman’s study, so be sure to check it out. It could be news that’s right up a marketer’s alley.

 

Rovio Turns To Chinese Developer

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Angry Birds has become a big phenomenon in mobile over the years, especially with tie-ins with popular brands like Star Wars and Transformers. What players may not realize, though, is that it’s not just popular on our shores – it’s making a huge impact worldwide.

Ibtimes has reported that Rovio’s hit game has seen over half a billion downloads in China, an unprecedented record considering China’s usual tastes in free-to-play games. Now Rovio has decided to improve its business in that country, not only promising to open nine Angry Birds-oriented theme parks by 2018, but also teaming up with a Chinese developer to give the game a more regional taste.

The company has partnered with Beijing Kunlun to work its own magic on the Angry Birds franchise, hoping to make it more “market friendly” to Chinese game players – even though it appears that the game has no problem being accepted as it is. “China is an extremely important market for us and we’re consntatnly looking for ways to provide innovative fan experiences by bridging the digital with the physical,” said Pekka Rantala, chief commercial officer at Rovio Entertainment, back when the theme parks were announced.

“Through this partnership, we not only achieve that, but we set a strong foot in one of the world’s fastest growing theme park markets with a key player in the industry,” Pekka continued. “We are delighted at the prospect of bringing Angry Birds closer to our fans in China, in spaces where all members of the family can engage.”

The country is considered a “massively important market” to Rovio, as the “mobile games industry is growing at a very significant pace.”

In regards to the localization efforts, Rantala added, “Angry Birds has been downloaded close to half a billion times in China. Forming a strategic partnership with Kunlun is an important step that helps Rovio establish an even stronger presence in China’s game market with localized content.”

This could help the company prosper again, especially after laying off over 100 employees back in December.

Regionalizing the game is certainly a big deal, as Rovio is the type of company that can easily adapt Angry Birds to fit with any given theme or franchise. Along with Transformers and Star Wars, the company has proven that new ideas work with the series, including the artistic Angry Birds Stella and the kart-racing game Angry Birds Go!

Universal: Digital Music Needs More Experimentation, Less Ads

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With a number of services now leaning more on the digital side (like Pandora and Spotify), the music industry needs to experiment with some new ideas in order to bring in a big audience again. That advice comes from Universal Music Group CEO Lucian Grainge, who spoke at the Code/Media conference this week in California.

According to Re/Code, Grainge doesn’t believe that the ad-based services of such sites as Pandora and YouTube can’t bring in the audience alone – more experimentation is needed. “We want to accelerate paid subscription,” he explained.

With that, new ideas must be explored. One example Grainge brought up was the new deal with Jason Kilar’s Vessel site, offering a three-day exclusivity window for some videos as part of the site’s subscription service, which is currently undergoing testing in beta phase.

“Ad-funded on-demand is not going to sustain the entire ecosystem of the creators as well as the investors,” said Grainge.

Some big companies need to make moves, although Grainge isn’t quite sure what the likes of Apple and other have in mind for music. But he thinks the company could be in for great things. “I think Apple has been a fantastic partner to all of the content industries,” he explained. “They have been around for a long time. They have done phenomenally well with music. They ended up with a tremendous share of the pie.” (Its recent investment in Beats Music is likely to increase that hold as well.)

What Grainge is saying makes sense. Companies shouldn’t hold back on not having any advertising services on its sites, but that doesn’t mean they need to be the primary focus. Instead, new ideas, such as exclusive offers and special deals on subscription plans, could lead the way to a stronger customer base. That said, some, like Spotify, feel that an emotional connection with brands is the key.

You can catch the interview with Grainge below.

Sony Doubles Down On Games

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Sony is promising big things for future profits, looking to boost them to over $4 billion by the end of FY 2017, according to CEO Kaz Hirai’s three-year plan. Hirai plans to focus on devices, music, pictures, and games in order to do this, which (not coincidentally) are the best-performing areas for the company — outside of its financial services, which are little-known outside of Japan but which have consistently delivered billions in profits over the last decade.

Hirai expects Sony to be on course for a minimum operating profit of ¥500 billion ($4.2 billion) by the end of FY 2017 on March 31, 2018. Current Sony forecasts put operating margins for FY 2015 at just ¥20 billion.

Kaz Hirai

“Sony is positioning Devices, Game & Network Services, Pictures, and Music as the segments that will drive its profit growth over the next three years,” said Hirai, speaking to investors in Japan. “It will implement growth measures and engage in aggressive capital investment in these areas with the aim of achieving both sales growth and profit expansion…In Games & Network Services, the Company will strive to further expand the installed user base of the PlayStation platform and PlayStation Network (PSN).”

Hirai said that Sony’s business arms will be given more autonomy, allowing units to make more decisions and creating a more agile environment. However, integration into a wider corporate strategy remains key, with Hirai also expounding a “clearly defined positioning of each business within a broader business portfolio perspective.”

“Sony will position Return on Equity (ROE) as its primary key performance indicator and has set a target for consolidated ROE of more than 10 per cent and a target for consolidated operating profit of more than 500 billion yen for the Sony Group in FY2017, the final year of its mid-range corporate plan,” said the plan documents.

Sony is likely to spin off its mobile device business and its TV business into wholly owned subsidiaries, which may be a prelude to selling off those businesses. Despite making excellent TVs and mobile devices by all accounts, Sony hasn’t managed to do so profitably. Smartphones and TVs are highly competitive and likely to remain so for years, and absent some compelling advantage it’s hard to see why Sony should continue pouring money into those businesses.

This brings up back to the company’s focus on games and related services, which has certainly been a bright spot since the introduction of the PlayStation 4. Sony is riding high with the PS4, leading the console market in installed devices and likely to stay in the lead for years to come. The PlayStation Network is now making a lot of money, thanks to copying Microsoft’s successful Xbox Live strategy. Sony is even beginning to exploit the connections between its different businesses, as with the upcoming Powers original series distributed only through the PlayStation Network.

So it seems like a good bet to put more emphasis on the successful businesses and either revitalize or get rid of the unsuccessful ones, as painful as it might be to imagine a Sony that doesn’t produce TVs. This strategy isn’t assured of success, by any means — Sony’s had its share of clunkers in the games business, with the PS Vita and the PS TV struggling to establish themselves.

One concern is for the future, as many observers wonder whether there will ever be another generation of consoles. That may not matter much for a while; the last generation of consoles lasted a good seven years, after all. Still, it’s fair to wonder what comes next, and if Sony would be ready for it. There are certainly some publicly acknowledged efforts in the works by Sony, including Project Morpheus for Virtual Reality and PlayStation Now offering streaming games on a variety of platforms (and perhaps, someday, on nearly anything with a suitable screen and controls).

No doubt Sony’s working on a potential new PlayStation as well, or at least additional tech that could bolster the current console. For instance, if 4K TVs continue to gain market share, some smart console company will want to be there with a console that easily supports 4K output right out of the box. That could easily be Sony, when the time is right.

Focusing on games and game hardware while giving up on mobile devices could have many benefits. Imagine PlayStation Now on iOS devices, or the ability to play Destiny on your tablet no matter who the manufacturer was. Sony’s got a distinct, difficult-to-replicate advantage in its vast array of wholly owned game studios and game development capabilities. Similarly, Sony Music and Sony Pictures are among the top in their fields, and doing quite well. Using the synergies inherent in those businesses with games could indeed deliver the sort of profits Hirai envisions.

Sony’s vision for the next three years seems attainable, though it may be difficult and alarming to some. The effort begins with good communication, where Sony is already off to a good start by outlining the plan in advance. One thing is clear, at least — regardless of how well this plan proceeds for Sony, we’re all going to be seeing more great gaming experiences coming from the company for the next few years, as Sony puts even more emphasis on gaming.

SuperData: VR Will Reach 11 Million By 2016

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Virtual Reality is poised to get real, a new study from SuperData says. The market intelligence firm says that the total addressable market for virtual reality is forecast to reach 10.6 million consumers by 2016. In addition to Facebook’s acquisition, another 18 VR-focused companies received $590 million in investments. All told, that was $2.6 billion invested in VR during 2014, and this year we’ll start to see what that brings.

“Facebook has effectively revitalized the decades-old dream of virtual reality and triggered a frenzy of investments,” according to Joost van Dreunen, SuperData’s CEO. “Currently there are over 200 developers working on VR projects and we counted no less than 15 different hardware devices at varying stages of completion. We anticipate a first wave of PC-based devices to launch mid-2015.”

With full-length video still several years out, all eyes are turning towards game studios to provide the content that will popularize the new platform. Big market players have been placing bets, following Facebook’s acquisition of Oculus Rift, and now companies like Sony, Microsoft, Apple and Google are trying figure out how to bring this technology to market. Most recently, Google announced a partnership with toymaker Mattel in an effort to develop virtual reality content for the children’s market.

“Traditional publishers of interactive entertainment simply cannot afford to just jump in at such an early stage of a new platform. It is financially far too risky for them. Small studios and independents, however, have an opportunity to make a name for themselves. The question everyone is looking to answer is “Who will be the Angry Birds for virtual reality devices ”” said van Dreunen.

The report, Virtual Reality Market Brief 2015, is part of a larger research effort by SuperData to map out the emerging market for playable media and games. “In recent years the way in which digital consumers engage with entertainment has changed dramatically. Interactive entertainment now incorporates many more devices, vastly more and different types of content and a host of on- and offline streaming events. And so we’ve started offering our customers a comprehensive overview of the entertainment market, including virtual reality, streaming media and eSports,” said van Dreunen.

Key findings of the report include:

  • Virtual reality will reach 10.8 million users by the end of 2016E.
  • Games make up three-quarters (76 percent) of all currently available VR content.
  • Small studios and indie developers are best positioned as VR comes to market.
  • In 2014 overall investments in virtual and augmented reality reached $2.6 billion.

Playing The Long Game

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One of the remarkable shifts if the game industry has taken place across platforms and business models, and into the very heart of what games are. This has been the essential move from games that are fixed and finite to games that are extended over a long period of time, and continually updated and improved. Of course, there are now many games located at various points along this continuum, and a variety of business models, platforms, demographics and geographic distribution of such games. Some things are clear, though: A substantial amount of the game industry’s revenue, perhaps the majority of it, is now derived from games that designed and operated over a long term — games-as-a-service, as some would describe them. The other major point that’s clear is that such games demand a very different strategy and approach to not only the game design, but the PR, marketing, community, and business development aspects of the game.

The classic fire-and-forget game, from a publisher’s standpoint, was pretty much the only kind of electronic game since the inception of the business in the late 1970’s through most of the 1990’s (with a few exceptions, like the early multiplayer online games, MUDs and MUSHes and things like Kesmai’s Air Warrior). As the Internet began to emerge to become a widespread phenomenon, and then mobile games, we saw more MMO’s become popular — EverQuest and many others. Those games were still a small section of the business, but the amazing financial success of World of Warcraft (and the gusher of profits it delivered) drew much more attention to the segment. As Facebook games became hot, and then mobile games, and eventually games like League of Legends and World of Tanks, we saw persistent, long-lasting games become the dominant source of revenue in the game business.

Now even classic console games are attempting to become persistent, and engage their audience year-round. What else do you call regular DLC drops that titles like Call of Duty thrive on, or the year-round engagement of FIFA Ultimate Team Even the best-selling console game Grand Theft Auto now has Grand Theft Auto Online, which will probably become even more important over time as we wait years for another installment of the series on consoles. Or look at Destiny, which is trying to combine the console-dominating genre of the first-person shooter with the persistent, long-term engagement of an MMO.

There are definitely issues arising for the classic fire-and-forget games, even as they try to move to a long-playing game. Call of Duty, while still one of the top-selling console games every year, has seen those numbers drop every year for several years. Certainly the constant flow of DLC, and digital full game downloads, are helping to maintain profits. But that initial $60 buy-in, with the $40 season pass or multiple $10 buys, is a difficult hurdle compared to the “free” experience offered by League of Legends, World of Tanks, DotA 2 and others, even though those other games have plenty of DLC to purchase (you can spend far more in League of Legends than you can in Call of Duty, but the prices for each transaction can be small). That’s one reason Activision is testing Call of Duty Online, and that new games like Heroes of the Storm and Overwatch are likely to be free-to-play.

 

 

These long-term games must focus on player engagement in order to really monetize effectively. Sure, user acquisition is important, but mobile game companies are now looking very closely at how well they keep players around for the long term. Why Because though players are the ones who spend money, or are more likely to. The longer you keep them, the more you’ll make — if the game is well-designed and keeps fresh and interesting with new content.

This also means that marketing efforts must be continual. New stories need to be encouraged among the press, new videos created and disseminated. The community needs to be fostered for multiple reasons, not the least of which is that it’s good for the game. A thriving community is a rich source of new players, too, as engaged gamers become evangelists for your game.

There are still single-player experiences being created that attract a lot of attention — Ready at Dawn’s The Order: 1886, the upcoming PlayStation 4 exclusive, for example. That’s getting some chatter out there because the game may not take very long to finish, perhaps as little as six hours or so if you rush through it. Some see that as a tough sell for $60, while others counter that it should be judged on the quality of the experience as well as the quantity. Still, however you slice it, that’s a harder sell these days than an online or mobile game where you can buy in as little or as much as you like, and play for many months if you really like it.

When you think about the big changes in the gaming industry, don’t focus on the platforms. Yes, those are important and require a lot of work to adapt to — but the big change everyone in the industry has to wrestle with is this shift to thinking about games as something that last for years. Designers need to come up with concepts that can be extended readily, and systems and mechanics that won’t break easily when new things are introduced. Marketers need to figure out the key attraction points of such long-term games, and how that can be communicated over a period of years in an engaging and interesting way.

Marketers need to bear some responsibility for engaging gamers and keeping them interested for the long term — that isn’t all resting on the in-game content, or shouldn’t be. This should be a group effort, along with those running the community efforts, as well as with the players themselves. The really successful games are listening closely to what players are saying, and adjusting the content to suit the needs of the audience. This is how the game industry will continue to expand into the future — by playing the long game.

Virtual Reality Apps On The Move

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With virtual reality devices set to launch in just a few months time, including Sony’s Project Morpheus and Facebook’s long-anticipated Oculus Rift, it won’t be long before we start seeing a number of virtual reality-supported applications to come out alongside them.

Re/code has reported that Facebook chief product officer Chris Cox, speaking at the Code/Media conference in California earlier this week, believes that there are plenty of virtual-based ambitions in play for his company. “I mean, virtual reality is pretty cool,” he explains. “We’re working on apps for VR.” And he’s not the only one, as several other companies also have plans.

Of course, there’s plenty of appeal behind creating original virtual reality experiences. “Have you used some of the film demons inside of VR ” Cox asked. “You realize, when you’re in it, that you’re looking at the future, and it’s going to be awesome. When you’re in Facebook, you’re just sending around these bits of experience – a photo, a video, a thought.” With VR, you could easily be “sending a fuller picture,” according to Cox.

He also believes that the rise of applications will also bring more user-related content. “Totally,” said Cox. “You’ll do it, Beyoncé will do it.”

Facebook’s growing video community could indicate a possible growth for the company’s virtual reality interest, which would easily explain its $2 billion investment in the Oculus Rift technology last year. Cox says it’s growing “at a record pace,” and with the VR content, it could get even bigger.

Cox didn’t give a timeframe as to when these VR-based apps would be put in place, but it probably won’t be “for a while. We’re probably a long way from everyone having these headsets.”

You can check out the interview in full below. The virtual possibilities are endless with such apps, but you never know where they’ll go next. We’re totally down for an interactive movie with the Oculus, though.

 

Talking Toys Are On The Move

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Talking toys have always had some sort of appeal to kids, whether it was Teddy Ruxpin telling stories to children in the 80’s or Tickle Me Elmo wishing kids would give him a cuddle. Lately, though, “smart” talking toys have appeared to be making a move in the market, and they’re picking up in popularity.

First up is CogniToys’ Watson, which can actually have a conversation with its owners, instead of using pre-recorded software to interact with them. The toy, which is currently going through KickStarter, is the latest project from CogniToys, put together by New York start-up Elemental Path. So far, it’s already been a massive success, already surpassing its $50,000 funding goal and pushing well past $70,000, with four weeks still left to go in the campaign.

The toy, which resembles a green dinosaur with a cute little grin, uses IBM’s artificial intelligence technology, Watson, when it comes to answering questions posed by kids, who ask by pressing a blue button located on its stomach. From there, it utilizes an online knowledge database to produce an answer.

“You can ask it a plain-English question and get a plain-English answer,” said Elemental Path co-founder JP Benini about the project. That’s a far cry from Teddy Ruxpin’s limitations.

And he’s not the only one making a change to the toy scene. I4U reports that Mattel is hard at work on an innovative new doll in its Barbie line, Hello Barbie, which it recently introduced at the New York Toy Fair. It also utilizes speech recognition software, so that she will respond to questions posed by kids, using Wi-Fi based technology to come up with the best answers. In addition, Hello Barbie will also be able to play games with kids, and make all-ages friendly jokes as well.

The doll, priced at $74.99, will be released sometime this year, and comes with rechargeable batteries, as children will still be able to play with her while she recharges. You can check out the doll in action below.

 

YouTube Makes Big Changes To Brand-Sponsored Videos

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There are several video producers who work directly with brands and post links within their uploaded programs to spread the word – but YouTube could be changing the way you see these videos.

The company has amended its ad policies to block “graphical title cards” from sponsors that aim to promote certain brands and products on YouTube channels, according to Digiday. This comes from a revised FAQ document in YouTube’s support section, which indicates that video overlays of sponsor logos and product branding aren’t allowed anymore – unless there’s a deal where the sponsor pays Google directly in terms of advertising on its channel.

When speaking with a YouTube rep, Digiday pointed out that they called this a revision of its existing policy, which actually took place late last year. It was put in place to prevent advertiser conflicts and ensure viewers don’t become overwhelmed with ad presence with videos.

Not everyone is crazy about the move, as Paul Kontonis, executive director of the Global Online Video Association, deemed the change as explicit, preventing YouTube stars and multichannel networks from including necessary sponsor logos and images into their videos. He feels that Google is trying to take too much of a cut from sales.

The company also introduced a new “product card” program, which provides a six-second pre-roll spot on videos. It will remain outside of the main content of a program, but it’s built within the stream, allowing brands to sponsor certain comment. This is sure to become part of standard media packages for ad sales, according to Kontonis, but YouTube hasn’t officially commented on it yet.

As a result of these programs, YouTube could possibly take a bigger cut from certain partners, as its revenue-sharing terms currently show it gets 45 percent, while the rest go to the partner channel.

“We allow text-only title cards where there is paid product placement for the purpose of paid product disclosure only,” reads the new plan on the YouTube page. “Graphical title cards, including the use of sponsor logos and product branding, are prohibited unless there is a full Google media buyout on the partner content by the sponsor.

Kontonis explained, “YouTube needs to do it, because in their minds they are losing money to product integration and sponsorships within video. But this industry is still in the first inning, so to be putting all these constructs into place that take more revenue away from the networks that are helping build the quality of the content, audience and monetization opportunities is shortsighted.”

Creators aren’t likely to be pleased with the new program. “It’s especially poor timing on YouTube’s part with Vessel taking off at the moment, because that (platform) is specifically targeted towards content creators earning more revenue,” said Jan Dawson, chief analyst for Jackdaw Research. “If YouTube is cracking down on ways of monetizing on YouTube itself, that will just drive people into the arms of Vessel and some of those newer video platforms.”

We’ll see how it does over the next few months, but it seems that YouTube could possibly lighten up on the restrictions a little. Or maybe even a lot.