Mobile Game Marketing Trends For 2015

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Mobile games have really come a long way over the past year, with immense growth in new markets like Asia and Latin America, as well as better inclusion of native advertising so that it doesn’t get in the way of the experience. So, how can it improve from here in terms of marketing trends Applift has a few ideas…

The website posted a list of eight different trends that companies should consider following when it comes to its mobile game releases, in an effort to keep the market on the up-and-up. They are condensed below, but you can check out the site to see full descriptions.

Improved focus on video:

Video previews have become an integral part of the iOS 8 App Store, and TV and YouTube continue to be on the rise as well, in addition to mobile video advertising. As such, video eCPMs have picked up immensely, with eight times the growth of general banner ads.

Better social integration:

Social features should get better and better with 2015’s games, with King’s Candy Crush Saga being a leading example in terms of asking friends for assistance. With better ones set to be implemented, a virality-based ecosystem will give gamers more control based on their choices, and also improve both supply and ROI for potential advertisers.

Western publishers can see more global growth:

With the increase in global game markets, more publishers will work with their local firms to create a better outreach in said markets. One recent example is PlayPhone teaming up with a Saudi Arabian firm to bring its games to a Middle Eastern audience.

Ads moving away from traditional dynamics:

More natural and native advertising will take shape in the coming year, meaning less obtrusive ads when it comes to games themselves (including those pesky search ads). In addition, new formats could pave the way to benefit players, including paying them for watching ads and rating them to filter out more of what they want.

Chart position could be tougher to tackle:

With the addition of “top” charts on popular sites like Facebook and Google, landing in a top position will take more effort – which means more work from the likes of advertisers to do better.

Increased monetization:

Tablet shipments may have lowered, but phablets (smaller tablets) continue to grow in the market. It provides a big enough screen for companies to still utilize advertising, while CPMs continue to be on the rise, with more ad monetization revenue as a result.

Better control over ads:

Giving users control over the ads they open – and perhaps even providing rewards for doing so – would provide a better benefit rather than ones that pop up automatically and “get in the way,” so to speak. Personalizing a user’s experience could go a much better way in terms of involving them.

Microtargeting:

With growth in technology, marketers can develop better habits in seeing what users want from their games. As a result, better social media advertising campaigns can be made, and ad networks can be utilized for the better. It’s up to marketers to find the right way to do this.

Newzoo/Overwolf’s October PC Game Rankings

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The October 2014 rankings reveal that unlike last month, the top 5 Titles have not remained stable as consumer interest forces them to realign — despite the fact Riot Games’ League of Legends continues to remain at number 1, reaching its seven month doing so. The worlds’ most popular MOBA actually strengthened its leading position taking 20 percent of all unique game sessions of the top 20 games versus 18 percent in September.

Mojang’s Minecraft has fallen one place to Number 3, with Wargaming’s World of Tanks rising to take rank 2. It’s not too unusual to see this shift in Minecraft considering the somewhat recent news of Microsoft’s $2.5 billion acquisition of Mojang and Minecraft. Gamers were unsettled by the news, many playing a waiting game to see what will happen to their beloved indie community now that it falls under ‘Big Blue’s’ umbrella.

eSports Cements LoL’s Lead

No doubt, the build-up towards the League of Legends World Final held on the 19th of October in Seoul, South-Korea, contributed to this. The finals were held in a sold out Sangam Stadium, seating 45,000 eSports fans that witnessed Korean team Samsung White take home the $1 million first place reward. The eSports hype shows no sign of slowing down as League of Legends will also be featured together with StarCraft II: Heart of the Swarm at the huge Intel Extreme Masters event on 6 and 7 December in San Jose, California. Organizer ESL has secured the 18,000 seat NHL Sharks‘ home arena. Online video streaming of the event in Silicon Valley is set to attract a significant share of the 12.1 million American eSports Enthusiasts as well as another 15.5 million American consumers that watch eSports occasionally, as reported in Newzoo’s US eSports Country Report.

Expansion News

This same pattern of one rank up, one rank down is repeated as we move down the rankings. Blizzard’s World of Warcraft has moved up 1 place to rank 5, displacing Valve’s Counter Strike: Global Offensive down to Rank 6. The recent news of rising subscriber numbers for Blizzard ahead of the imminent release of their new expansion Warlords of Draenor could mean an even higher session rank next month. EA’s Battlefield 4, with the upcoming release of its fifth expansion pack (Final Stand), re-entered the charts at number 14. In the MMO category, only Trion World’s ArcheAge received another promising boost, rising 1 place to Rank 8. This follows a meteoric rise of 8 places just last month.

Zombies Blues

Bohemia Interactive’s DayZ has enjoyed, until somewhat recently, a steady climb and high position in the overall rankings. By May 2014 it had risen 4 places to Rank 8. August 2014 saw it shoot up again 2 places to reach Rank 6. Then it all began to change in September, where we saw it slide down a dramatic 8 places to Rank 14. The October 2014 rankings reveal it had fallen another 5 places to Rank 19 — drastic results when you compare the two months together. We might see it disappear altogether by November. Another fact to consider is the rise of more ‘Mod’ based open world zombie survival games like Facepunch’s Rust, Phosphor Games Nether and The Fun Pimp’s 7 Days to Die — all of which are giving DayZ strong competition on Steam.Â

Russian Moves

The Russian Top 10 Core PC Games by unique sessions is an interesting contrast to the worldwide Rankings. Number 1 in Russia is Wargaming’s World of Tanks while the world’s Number 1 League of Legends isn’t even an entry in the Russia Top 10. In the top 5 for both we see a few shared titles: Minecraft is Rank 4 in Russia, while it is rank 3 worldwide. While Counter Strike: Global Offensive is rank 3 in Russia and Rank 5 worldwide, in Russia Counter Strike: Condition Zero and Counter-Strike 1.6 are ranks 9 and 10. These last two Counter Strike titles don’t even appear in the Worldwide and NA + EU Rankings.

The strong contradictions between gamer habits in Russia versus the rest of the world that gives rise to these session time discrepancies have been explored in our recent reports on the Russian Gaming Market in greater detail.

League of Legends World Finals 2014 in Seoul

About Overwolf

Overwolf is a customizable in-game overlay platform that has been installed in over 8 million PCs. This community of hardcore PC gamers are consistently making their own apps within the Overwolf platform and sharing them. Why Because it’s super simple and it enhances the gameplay experience of anyone’s favorite title in a personal way. From in-game chat systems to customized controls, streaming or video capture, Overwolf allows users to implement their own visions into these games and do so in a timely manner.

About Newzoo

Newzoo is the leading global market research firm focused purely on the games market. The company provides its clients with a mix of primary consumer research, transactional data and financial analysis across all continents, screens and business models. It is also known for actively sharing a variety of insights by means of free trend reports, infographics, blogposts and monthly rankings. Newzoo’s clients include Tencent, SEGA, Logitech, Wizards of the Coast, Nvidia, Microsoft, EA, Coca-Cola and Visa/PlaySpan.

Activision’s Q3 Call Of Earnings Analyzed

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Activision Blizzard has turned in another better-than-expected quarter, beating its previous guidance handily. Activision CFO Dennis Durkin: “For the quarter, on a GAAP basis, we generated better-than-expected results, with revenues of $753 million and a loss per share of $0.03. On a non-GAAP basis for the quarter, we generated better-than-expected and record results, with revenues of $1.17 billion, including 43 percent from digital channels and record Q3 EPS of $0.23, $0.12 better than our previous guidance.”

The quarter was helped by Destiny‘s big sales, despite mixed critical reviews. Activision reports there are 9.5 million registered Destiny users, which pretty much sounds like there are at least 9.5 million copies in people’s hands. The rise in World of Warcraft subscribers, up by 600,000 in anticipation of the new expansion, also helped.

With all that, though, Electronic Arts still beat Activision for the quarter. EA’s GAAP Revenue was $990 million, with income of $3 million (1 cent per share); in non-GAAP terms, EA had net revenue of$1.22 billion, with income of $232 million (73 cents per share). Activision had GAAP net revenue of $753 million, showing a loss of $23 million (3 cents per share loss); its non-GAAP net revenue was $1.17 billion, with income of $260 million (23 cents per share, since Activision has more shares outstanding).

That wasn’t something Activision highlighted on its earnings call, as you might expect. The company did point with pride to the fact that now six major franchises are contributing to Activision’s results: World of Warcraft, Hearthstone, Diablo III, Destiny, Skylanders, and Call of Duty. That is two more major franchises than Activision had last year, which represents solid progress. Still, for a company of Activision’s size, it seems risky to have so few major contributors to the company’s revenue. Part of what is helping EA to move past Activision is EA’s more widespread contributions to revenue, including a large and varied mobile portfolio. While EA has certainly had some duds in the last few years, it’s had a good number of solid performers. That seems like a less risky strategy than depending on fewer titles, especially when some of Activision’s titles don’t necessarily have a bright future.

One of the issues for Activision is the future of the Call of Duty franchise, which has seen declining sales in the last several years. Some analysts have raised concerns that this year’s Call of Duty: Advanced Warfare may see total sales drop by 15 percent or more over last year’s Call of Duty: Ghosts, but Activision Publishing CEO Eric Hirshberg dismisses such concerns. “We expect that Advanced Warfare will go on to become the biggest game of the year, the most digitally purchased game in console history and the largest next-gen title in history and all of those by wide margins,” said Hirshberg.

That may or may not be the case, but it looks like Call of Duty has a bright future ahead in China, and that’s contributing very soon top Activision’s bottom line. “I shared in August that we had just entered large-scale beta testing with our partner Tencent [for Call of Duty Online in China],” said Hirshberg. “We have now successfully passed every development milestone, and we now plan to launch unlimited access beta testing in Q1 2015, which means the game will begin monetizing throughout China. Call of Duty Online is a major opportunity to expand our reach and build what may be our largest player community with year-round revenues.”

Activision clearly has high hopes for Call of Duty Online in China, which it would like to see generate Crossfire-like revenues — meaning close to $1 billion annually once it ramps up fully. That would be some healthy high-margin revenue. Could we see Call of Duty Online make its way to the US Possibly, though Activision certainly isn’t saying that now. With somewhere in the neighborhood of 20 million people willing to pay $60 for a disc-based version of Call of Duty, Activision’s not going to take a risk on that revenue stream any time soon. But that could change if disc-based sales were ever to decline substantially.

Meanwhile, Blizzard continues to forge ahead with the World of Warcraft expansion Warlords of Draenor will be a significant sales booster in the fourth quarter. It’s already helped by boosting subscriptions ahead of release. Those are not new players, though, for the most part. “So much of the resurgence comes from returning players, many of whom already have strong connections to the game,” said Blizzard CEO Mike Morhaime. In other words, World of Warcraft is not really appealing to new players at this point. It’s working to bring back old players for a short time with new expansions, though this effect usually lasts only a few months. It’s hard to see how World of Warcraft could appeal to a new audience, given how it’s substantially below its peak subscriber numbers and has been that way for years. Still, it looks to be a reliable profit engine for many years to come, even if it’s not poised for long-term growth.

Overall, Activision continues its transition to digital revenue, as with all traditional publishers. Most of that comes from subscriptions, DLC and virtual item sales, though full game downloads are making progress as well. Digital full game downloads “in the high teens” for Destiny and Diablo, according to Durkin.

Activision is poised to have a great fourth quarter, raising its guidance for the quarter and for the fiscal year (Activision, unlike most entertainment software companies, has a fiscal year that corresponds to the calendar year.) The company is looking for continued strength in its core franchises, and looking next year for two new major franchises to debut with Call of Duty Online and Blizzard’s MOBA Heroes of the Storm (though Blizzard doesn’t like to call it a MOBA). If Blizzard can generate the same sort of enthusiasm it’s garnered with Hearthstone, Heroes of the Storm could be a major revenue source. Even a fraction of the revenue generated by League of Legends (estimated to top $1 billion this year) would be a nice addition to Activision’s bottom line.

The bottom line is that Activision is performing well, keeping its major franchises profitable and moving forward while continuing efforts to add new franchises. There may not be any surprising acquisitions or big strategy shifts in the offing, but the company doesn’t seem to need that in order to continue growing and remaining profitable. It will be interesting to see if Electronic Arts’ more diverse strategy will put EA in the revenue lead, or if Activision’s slow and steady progress will win out in the end.

Perfecting Programmatic Video

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Over the last year, we’ve seen a rise in various advertising trends. Among them is programmatic video, in which advertisers and publishers are able to put their content front and center for consumers visiting certain sites.

According to Mobile Marketing Magazine, digital video ad spending has been on the rise, increasing 41 percent for this year alone. Overall spending in this department is likely to reach $5.89 billion by year’s end, if it continues at this rate.

Still, that doesn’t mean everyone has the process of programmatic video nailed down just yet, as they can’t find the right approach at times. Fortunately, Tremor Video is here to help, producing a useful infographic (posted below) that breaks down just how programmatic video can be used most effectively.

Titled Path of the Publisher, the infographic has a lot to take in, but it’s certainly food for thought. As you can see, it’s broken down as a chart that goes over every degree, from how much video ads could cost to statistics that break down just how many younger viewers (specifically 18-29 years old) watch or download online video. (Hint: it’s a whopping 95 percent.)

The chart then goes even further, asking about reserved inventory and how much time is spent daily watching digital video (55 minutes, a 6 minute increase from four years ago).

From there, it gets into the nitty gritty, breaking up categories even more with the options available for programmatic video options, such as finding an unreserved fixed rate, and taking part in an auction.

It’s worth noting, according to the statistics, that video RTB will account for nearly 25 percent of U.S. online video ad spend for this year alone, and over half of publishers of video content actually make inventory available directly through programmatic channels.

Connecting The Mobile Game Marketing Dots

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There’s nothing more difficult for an unknown mobile game developer than attracting enough of an audience to make a living. Thus, when you hear about a studio that’s done that twice, it’s worth paying attention. Dots is the name of the studio that created both Dots and Two Dots, both very successful mobile games. The studio is an outgrowth of Betworks, a startup studio and seed stage venture capital company in New York City that’s created other successful companies like Chartbeat and Bitly.

Dots was released in April of 2013 for iOS and quickly shot up the charts, being downloaded more than one million times in its first week. In two weeks, the game had been downloaded more than two million times, and users had played over 100 million games. The game was later released on Android in August of last year.

Dots was followed up this year by Two Dots, billed as the sequel to Dots. It’s using the same central gameplay of Dots but in a fashion that’s more akin to how Candy Crush Saga progresses, with new puzzles to solve using the basic mechanic of forming squares.

The simple, elegant gameplay has won multiple awards as well as a large audience of players. What lessons have been learned along the way about marketing mobile games The [a]listdaily checked in with Dots’ head of marketing Christian Calderon to get some insights into how developers can meet the marketing challenge.

Christian Calderon

What role, if any, has marketing played in the success of Dots?

I joined the team in May, specifically to launch Two Dots. Dots initially had tremendous success prior to my joining the company. The overall picture of how marketing played a role in the success of Two Dots was a combination of the product, the brand marketing we put out, and also the performance marketing side and how we tried to combine both brand and performance marketing.

What’s your marketing strategy for Two Dots, and how was that informed by what you learned from Dots?

When we first launched Dots, it was one of those things when people saw it they wanted to touch it and they wanted to play with it. The core game mechanic was very strong, and the brand we were building resonated with users. With Two Dots we wanted to build on that. We emphasized more on brand. We came out publicly and said that we’re trying to build a brand, we’re trying to be a game studio with a strong brand. Essentially the brand we were building resonated with our users. What we found through social media channels was that we saw every month our engagement rates would go up with the volume of followers we had, as people were engaging with the content we were pushing out. With Dots we knew something was there but we just didn’t know how far we could push that, how far we could rely on that and how our users would react. We took a chance and it worked.

It sounds like connecting with your audience through social media was a very important part of your strategy.

Absolutely. The data we that get from our users on social media is extremely helpful. It allows to know what our users are interested in, the music, what countries they come from, what their demographic is, and then we can take that data and then amplify it and find users that are very similar to them in other markets around the world. Because of that we were quickly able to launch Two Dots in over 70 countries. We were able to extract similar users who were interested in Two Dots globally. Social media has definitely had a big part in that.

Which social media channels were most important to you, and why?

The two most important ones — and I would say they are equally important — are Facebook and Twitter. Twitter actually never used to really be there for us, and it recently has emerged as a network that has been very strong, both on the performance marketing side and on the brand marketing side. We’re able to optimize for engagement on Twitter, and we can’t do that on Facebook. But then Facebook is complementary, because we can still optimize engagement on Facebook, just not to the extent that we can on Twitter. On Twitter you see these viral trends happen so quick, people talking about things. You see things trending in different parts of the world,and it’s a social construct that’s really hard to replicate. With Facebook it’s great because it gives us a lot of user insight data. Twitter also gives us some data, but it’s not as powerful as the insights we get from users on Facebook. They’re both a little different, but we use them both and they complement each other.

Do you think your marketing strategies are transferable to other games and other developers?

The exact strategy that we use is not transferable to other titles or genres. I would say the foundation, the framework we use is transferable. For example, the way we calculate LTV, the basic construct and equations we use in performance marketing, that’s very transferable to other games. The problems that we’re trying to solve of attracting users and and how to retain them, that’s very transferable. But the strategy and approach we take to do that is a little bit different, because as a casual games marketer we have various advantages and disadvantages.

What’s your best advice for mobile game marketers What should they try to do, and what should they avoid doing?

The problem of attracting users to your game is not always the responsibility of the product itself. If the product is original, beautiful, and fun, that in itself should help acquire and retain users. In terms of marketing the product itself, and figuring out how to do that, you have to learn how to navigate the ecosystem. The best thing you can do is just talk to some of the industry experts in mobile marketing and get everyone’s advice. Everyone’s going to give you different advice, and you have to take in all this feedback and figure out exactly what you think will work best for your game.

The other problem is there’s a monetary barrier to entry. On the performance marketing side it costs money, and getting over that barrier for startups is going to be hard because many times the budget’s not there. Learning how to mitigate costs is extremely important, especially in a macro environment where more ad dollars are shifting to mobile, more entrants are coming to market, and CPIs are going up. Understanding how to mitigate that cost is extremely important. That can be done by trying to employ virality, that can be done by trying to optimize for engagement — those are the two most powerful ways to do that.

The early users that come into your game are going to be the most loyal, the most valuable from an LTV perspective, they’re going to be the most engaged. Optimizing your SEO tactics are very important, and anyone can do that. Figuring out which key words are important, optimizing your app store description, those are the most helpful things for a startup when they’re first coming in and trying to market their product.

 

How ESports Influenced Activision’s Call Of Duty: Advanced Warfare

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Activision has another $1 billion Call of Duty game in its bestselling franchise. Call of Duty: Advanced Warfare is the first COD game from

Sledgehammer Games co-founder Michael CondreySledgehammer Games co-founder Michael Condrey

Sledgehammer Games. While casting Kevin Spacey as the campaign antagonist has attracted mainstream coverage, it’s the multiplayer gameplay that fans live for. Activision has partnered with Microsoft over the past three years to award $3 million to the best COD teams in the world through the Call of Duty Championship. The fourth worldwide tournament kicks off this fall with Call of Duty: Advanced Warfare as the centerpiece. Michael Condrey, co-founder and studio head at Sledgehammer Games, explains why eSports was a focus for the new COD game and how pro gamers helped the team craft the multiplayer experience in this exclusive interview.

How did you work with eSport pros in designing the multiplayer for Call of Duty: Advanced Warfare?

Really from Day 1 the multiplayer experience was based off of fan feedback, and that includes the eSports and competitive community.  We’ve had designers from the eSports community imbedded in the team. We worked closely with competitors to really listen and we view them as a loud voice of really great change to the franchise that helps everybody. They’ve come in and given us great suggestions.  They’ve helped us figure out what’s the best way to balance the game, new map designs, what modes to bring back. That intimate engagement with them and with all fans has really helped make Advanced Warfare better for everyone.

What type of feedback did they give you that impacted the game?

We got great feedback from the eSports community. We’ve received everything from returning game modes like Hard Point and Capture the Flag, which is important to everybody, including the eSports and competitive communities. They’ve helped with new ways to spectate as part of both the competitive aspect as well as the spectator aspect. They had some real ideas around how to make it better for everyone with things like tuning, new weapon types and new map designs. It’s really been across the board that their input has really helped make this game great.

“We worked closely with competitors to really listen and we view them as a loud voice of really great change to the franchise that helps everybody.”

One of the controversial things in all multiplayer games is the spawning system. How have you improved that in this new Call of Duty?

I can tell you that the spawning system was a focus from Day 1. We recognized there was an opportunity there to really revamp and focus on making sure that our spawning system was the best in the Call of Duty franchise to date. We think we’ve got something pretty special there, so I thinks fans are going to see that right out of the gate on November 3.

What are your thoughts on how good eSports pros are and how quickly they adapt to new COD games?

The pros and eSports competitors playing Call of Duty is remarkable. We live with this game for three years and they pick it up and they do remarkable things right off the bat. They’re absolutely the best in the industry. I sometimes think that I’m pretty good, and then I immediately find out it’s actually not the case when I see the pros play. These guys are remarkable.

What do you feel the exoskeleton adds to eSports?

A brand new movement set. It’s the first and most radical redesign of a full feature set of mechanics for the players from Boost and Slam and Dodge. This really has changed the speed and the strategy of how you play and I think you’re going to see that in eSports as well.

What are your thoughts on how Call of Duty Championship has evolved over the last three years?

The Call of Duty Championship has been an interesting development in my career. Five years ago that space didn’t exist and now we’re setting records with more people playing and more people watching. It’s an exciting time. You’re going to see more and more competitors, as well as spectators, getting involved. That really just drives interest to fans of all games in Call of Duty, which excites me.

We’re seeing eSports selling out NBA and soccer stadiums now. What is it like being in the middle of all this as a developer behind a multiplayer experience?

“I’ll admit when you see that many fans get together to watch people playing a game, and you see the level of competition these teams perform at today, it’s amazing.”

It’s pretty incredible. I’ll admit when you see that many fans get together to watch people playing a game, and you see the level of competition these teams perform at today, it’s amazing. It really becomes a fan event. And to have your game there and be involved in that, or the franchise that you’re a part of, is exciting and it’s rewarding for fans and for developers.

Can you talk about some of the multiplayer changes that will impact eSports.

Weapon balance is key. Balance, in general, is the key to multiplayer. We’re really focused on Pick 13 this year, and the opportunity for players to craft their play style. But you really want it to be about player skill, not about somebody’s choice of Pick 13 being overpowered relative to anybody else. We have tuning values across the weapon spectrum from mobility to range to damage to accuracy and we played with it a lot over and over again. We looked at permutations with attachments to make sure you’re measuring the power and speed of this weapon versus all of its brethren in that class. A lot of it comes from analytic data, and a lot of it comes from user feedback to make sure we got it just right.

The Console Wars: Holiday 2014

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The earnings reports are in for the three traditional console giants, and they provide an interesting status report as we enter the great marketing battleground that is the holiday quarter. This is the biggest revenue opportunity of the year for console games, and not coincidentally we see marketing efforts and spending peak during the holiday season. This year, the battle has taken an interesting shape one year in to the new console releases from Sony and Microsoft. All three console makers are in a different position, and it’s not entirely clear how things will stand as we start 2015.

First, let’s take a look at the current situation. Ars Technica has crunched the numbers to provide the most accurate look we can get at the current installed base of the three major consoles. Through the end of September, Sony is far in the lead with 13.5 million PS4 consoles sold, while Microsoft and Nintendo are essentially tied with about 7 million sold for the Xbox One and 7.29 million sold for the Wii U. It’s important to note here that the Wii U has been in the market for more than a year before either the Xbox One or the PS4, and it’s had a substantial price advantage as well. Ars Technica also notes that over the last six months, the Wii U is selling at about half the rate of the Xbox One — and that was before the Xbox One’s recent $50 price cut.

With that in mind, let’s take a look at the situations for the Sony, Microsoft, and Nintendo, as revealed by their latest statements.

Sony

Sony’s Game Division looks like a duck. Sony’s position in the console market is gliding smoothly ahead in first place, seemingly unconcerned with all the maneuvers and travails of its competition. Underneath, Sony is paddling furiously to stay in first place. The company is comfortably ahead of its competitors and performing very well indeed with its internal competition (other Sony divisions). The challenge is to keep this going at a time when Sony continues to suffer financially because of other divisions.

One of the temptations Kaz Hirai faces is to cut back on Sony Computer Entertainment’s budget in order to help the other areas of the company. No doubt SCE execs are saying something like “no, give us the resources so we can stay ahead!” However that plays out, it likely means that Sony won’t be making major new investments in the games division, and massive marketing infusions or big price cuts are unlikely unless the competition gets very much sharper.

Sony’s not taking its lead for granted, though. The company has a huge slate of games in progress, investments in new areas like Project Morpheus, original programing for PlayStation Netowrk (the new Powers series), and PlayStation Now, and its PlayStation Plus audience is at 7.9 million members and continuing to grow. Sure, PS Vita continues to languish, and the PlayStation TV doesn’t appear to be taking off yet, but overall Sony seems to be making the right moves strategically.

Yes, there have been some stumbles (the DriveClub debacle continues, and the latest PS4 firmware release had serious problems), but Sony’s position in the lead seems firm. Nothing portends explosive growth, but another year of great performance looks like a very good bet.

Microsoft

For Microsoft, the company is confirming the old wisdom that a stern chase is a long chase. This coming quarter looks like a real chance for Microsoft to gain some ground on Sony, with two winning exclusive games and a $50 price cut on the Xbox One to try and get some momentum. Still, there’s a tremendous amount of ground to make up. Microsoft is rumored to pressing ahead on the die shrink for the Xbox One’s SOC (system-on-a-chip) to a 20 nm process, which means that the Xbox One could get cheaper to manufacture. Will the price cut continue beyond January, or possibly even get larger. That evaluation will certainly be made after looking at some of the sales numbers from the holidays.

Microsoft isn’t leaving all the R&D to Sony, either. There’s that interesting Illumiroom project, and the unified development environment of Windows 10 (along with DirectX 12) has some interesting potential. Even Kinect might find some new uses in the future. Microsoft is continuing to invest in its Halo original programing despite the shutdown of Xbox Studios, no doubt hoping the Halo effect (ahem) will help Xbox One sales. It looks like Microsoft will do very well this holiday season, especially with the $50 price cut bringing the Xbox One well below the PS4, and only slightly more than the Wii U.

Nintendo

Meanwhile, Nintendo is off on a search for blue ocean, sailing away from the mainstream in search of new markets and new audiences. The company’s latest initiative, though, looks more like seeking blue ocean by pulling your ship out of the water and carrying it across a desert in the hopes of finding an ocean on the other side.

Usually when you seek to expand your large business by opening up a new product area, you look for an opportunity that takes advantage of where your company’s strengths lie, or something that your current audience might buy, or both. For instance, Apple decides to create a smartwatch, drawing on its expertise in hardware and software, creating something that it hopes to sell to its existing iPhone customers. Or Sony buying Gaikai and rolling out its service as PlayStation Now, giving its device customers a new source of games to play.

Nintendo’s Quality of Life initiative is starting off with a technology it hasn’t developed, in an industry it knows nothing about, trying to create a product that none of its existing customers will be interested in and where its brand identity is worse than no help at all — it’s actually harmful to the sale of the product. So the company is expanding in a direction where its expertise in game design is barely applicable, its massive brand is worse than useless, and where it has to develop a completely new audience for its products. How does this make sense

It doesn’t.

A more sensible initiative that built on Nintendo’s strengths would be getting into the toy business, perhaps with toys that could connect directly to Nintendo games. That’s the Amiibo product line, and it has some nice potential. Product extensions could be very interesting — what about remote-controlled toys that connected to Nintendo games and devices. This is an area where Nintendo’s brand is of enormous value, its expertise in game design and hardware design comes into play, and the products can both appeal to the existing customer base and help attract new customers to Nintendo.

Or, if the company really wants to enter into a growth market, how about mobile games Yes, others have suggested that before. But here’s a Nintendo style twist to the idea: Enter mobile games with uniquely Nintendo hardware as well as software. Imagine a Mario Kart for smartphones that came with an adjustable grip for smartphones that added joysticks and buttons; bundled together for $24.99. Or imagine Smash Bros. with the same sort of bundle. Nintendo is the one company that could get away with premium prices for its games. The company has a long history of being able to drive hardware adoption by offering must-have games with the hardware — remember Star Fox 64 and the memory expansion for the N64 The company was able to reach an astounding penetration of its installed base (on the order of two-thirds) with add-on hardware for a consoles, something that never happens to any other manufacturer.

Meanwhile, the Wii U continues to be the worst-selling console in Nintendo’s history, and the 3DS has been on a decline this year compared to last year. Yes, Nintendo is now profitable, but the long-term prospects have yet to show signs of a return to the massive profits of the Wii heyday.

While Super Smash Bros. will undoubtedly lead to a boost in Wii U sales, that will probably be short-lived, just as the Mario Kart 8 sales boost was. The basic fact is that the Wii U now lives in a different universe than the PS4 and the Xbox One, with almost none of the leading titles for PS4/Xbox One appearing on the Wii U. If you’re interested in playing the games coming out from Activision, EA, TakeTwo, and Ubisoft, you’re buying a PS4 or an Xbox One. The Wii U is your device for playing Nintendo games . . . and that’s a hard sell when there’s just not that much new content coming out compared to all the titles you can see on PS4 and Xbox One.

Nintendo will likely have a good and profitable holiday quarter, but heading into next year the Wii U installed base will be behind the Xbox One, never to catch up. Third party publishers will be unlikely to revisit their decisions to withhold support from the Wii U, so going forward the console will be dependent upon major new Nintendo releases for sales boosts. The Amiibo line will be nice, but it seems unlikely that many people will buy a Wii U just to be able to buy Amiibo toys.

It would seem that Nintendo will need a new console, or a bold new strategy of some kind, to return to the heady days of the Wii’s market dominance. A sleep sensor doesn’t look like the technology that will awaken sleeping profits. Nintendo needs to find a new Triforce to invigorate its sales.

Why Licensed Games Are Finally Hot

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For decades in the game industry, there was one sure way to spot a game that had almost no chance of becoming a critical and commercial success: Games based on a license (aside from sports licenses) were almost never a top performer. Some of them were among the very worst games (Superman 64, anyone ) you could find. A license was the hallmark of low quality gaming.

Why would licenses mean poor quality There were many reasons, but the most important one was time. Most of the licenses you’d see were movie licenses, tied to a big-budget film that game publishers expected would have a huge audience. Work would begin on a game, but usually the movie would be coming out in two years or less. This was less than the two to three years a top-quality game would often take to develop . . .  so something would have to give. Either the game would be rushed to meet the movie release, or the game would be released well after the movie had been in theaters and left. Either way, sales wouldn’t be great.

A short digression here: Sports licenses have been, and continue to be, an exception when it comes to licensed games. Sure, there have been poor sports games built around licenses, but in general sports games have been much better performers than other licenses. The major reasons are that licensed sports games are created to model actual game play, so at least you’re starting with a game that you know works as a game. When you start with a movie or a book, you have to figure out how to make a game out of it, which is often a very difficult task in itself. Second, licensed sports games are based on something that happens every year, so whether it takes one year or three to build your game, the license it’s based on is still going strong and is a great marketing opportunity every year.

Fast-forward to the modern era of game design. Yes, AAA console or PC titles still take many years to develop, but those aren’t being built around movie licenses any more. (If anything, it’s going the other way, as the Warcraft and Assassin’s Creed movies demonstrate.) Now, though, mobile and social games can be created in months rather than years, and thus top-quality games can be constructed on a timetable to take advantage of a major movie marketing campaign. The result is that licensed games have become both much better games, and much more profitable for the companies that publish them.

Look no further than a company like Kabam to see where licenses have been an effective, money-making tool. Kabam has its own IP like Kingdoms of Camelot that has done very well, but its licensed games like The Hobbit: Kingdoms of Middle Earth and Fast & Furious 6: The Game have been real moneymakers. More than that, the games have helped Kabam find new audiences for its other games.

Other game companies can show similar success with licenses, like Telltale Games. The company has been doing licensed titles for years, and finally had a breakout hit with The Walking Dead. With the success of that game, the company was able to land the license for Game of Thrones, which is very likely going to be another major hit. DeNA has been busy licensing Transformers and Marvel. Zynga has licensed Warner Bros.’ Looney Tunes, as well as Tiger Woods and the NFL, as part of its new strategy to expand its audience.

Most recently, we’ve seen Kim Kardashian: Hollywood rake in $50 million in its first month, and it looks like it will be worth hundreds of millions of dollars to Glu Mobile. There’s an example of a great way to work with the right license. Glu Mobile took an existing game, Stardom: Hollywood, that they knew worked well, and found a license that fit the game’s play style very well. The game has strong appeal to Kim Kardashian’s millions of fans, letting them feel like they have a closer association with Kardashian. The game’s style matches the desire of the fan base, and by having a proven game and a proven license Glu Mobile minimized its risk.

How do you find and take best advantage of a license Here are some key things to remember:

Find a licensor you can work with

Licensors can make your life a living hell, or they can be a terrific help. Choose wisely. Ask around, find out if you know other people who have dealt with a particular company on a license. Hopefully you’ll hear good things, but don’t be surprised if you hear some horror stories. There are licensors where approvals can talk months, or endless changes can be requested, or the materials you need to proceed with your game development take weeks to show up. There are many, many ways that a licensor can make things difficult or easy. Find a licensor who will be responsive, flexible, creative, and willing to help, if you can.

Pick the right license

Kim Kardashian: Hollywood may make people look for celebrity licenses with similar social presence, but that’s a shallow analysis. Other companies will no doubt be looking for similar licensing coups, but it’s not as easy as just finding a celebrity with a large Twitter following. The nature of the celebrity’s following has to be considered, and then that profile must be matched up with the right game. It’s also true that not every celebrity will cooperate willingly in the promotion of a licensed product, even though they may benefit substantially from the success of the product. Ms. Kardashian has been promoting her game in appearances on TV and elsewhere, especially on social media, and her efforts have certainly been a large part of the game’s success.

Get the terms of the deal right

Watch out for guaranteed minimums, hefty advance payments, penalty clauses and the like. Remember that in most cases, licenses are not transferable if you sell the company, and licenses may evaporate if your company gets into financial trouble. Unlike intellectual properties that you create, licenses don’t add value to your company in the same way. THQ found this out the hard way.

Use licenses to build audience for your company

Yes, licenses can be a remarkably cost-effective audience acquisition tool, especially as CPI (cost per install) keeps rising. The best use of a license for your company is to leverage the audience you acquire by introducing them to your other games, especially non-licensed ones. Ideally your license was chosen to bring in people who would be inclined to play your other games. If you’ve got a high-profile science-fiction license that will bring in millions of players, you should have some other science-fiction games they would be interested in. Or games in other genres that have a similar play style — if they liked playing the licensed game, you should be able to introduce them to a number of your other games and get some good results. Otherwise, you’re not getting the full value from your license.

Do it well, and do it swiftly

If you are going to do a licensed game, do the best job you can. Get it on the market expeditiously — if he development effort drags on too long, you risk missing the best opportunity to take advantage of the license, if there’s anything time-dependent on the license.

Latin America: The $4.5 Billion Game Market

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As the game industry heads swiftly to the $100 billion annual revenue mark, it’s important to keep informed on the rapid growth around the globe. Part of the explosive growth of the games business is due to the globalization of gaming, not just the widespread adoption of mobile devices. Twenty years ago if you had said China would be a multi-billion dollar game market, you’d have been laughed out of the room. Now, other regions once mostly ignored by the gaming industry are growing rapidly and becoming major opportunities. Latin America is a rapidly-growing example right next door.

SuperData has released a fascinating report on the state of the Latin American, focusing on digital games. Limiting the scope of the study to digital games is not the kind of limitation that it would be in the United States or Europe, since physical retail stores that sell games are few and far between in Latin America — and, indeed, most other regions of the world. A major factor in the growth of gaming worldwide is the growth of digital distribution of games on both PCs and mobile devices. Creating a retail infrastructure and then convincing customers to travel to stores to buy games in boxes just isn’t going to happen in significant numbers anywhere in the world that it hasn’t already happened. The future of gaming is digital, and Latin America shows that clearly.

The numbers that SuperData has compiled are impressive, showing the Latin American market growing from $3.6 billion in 2013 to an estimated $4.5 billion this year, forecasting $5.3 billion in 2015. You can see that console games represent only 6 percent of this total, and it’s not surprising given how expensive consoles are in most of Latin America, especially compared to the average incomes. Mobile accounts for 43 percent of the revenue, the largest share, while social games deliver 27 percent of the revenue and free-to-play MMO games are 17 percent.

Latin America accounts for 10 percent of the worldwide digital games market, and SuperData forecasts that will grow by 7 percent next year as the region experiences 16 percent market growth. Brazil accounts for more than a third of all the revenue in the region with 40 percent share, but the rapid growth in countries like Mexico, Argentina, and Chile are decreasing Brazil’s market share.

The average lifetime value of these players is nearly $88 for a single game, with a lifespan of 169 paying player days. The players spend close to $16 per month on a game, so if you can engage someone you’re going to make some good money.

It’s also very interesting, and instructive, to look at how customers in Latin America are paying for their digital games. Bank transfers are the method of choice for 24 percent with mobile payments close behind at 21 percent — mobile is projected to grow rapidly as a payment source. The implication of all this is that if you want to make good money on games in Latin America, you’d best work with someone familiar with payments in each country. Credit cards only account for 20 percent of the revenue, unlike the situation in North America where credit cards are the standard payment method.

Looking more closely at Brazil, SuperData found that social games and free-to-play MMOs are growing rapidly there, with social games growing 35 percent and MMOs growing by 20 percent by 2015. The muliplayer online battle arenas (MOBAs) like League of Legends and Dota 2 have more than doubled revenues in Brazil during the past year. While Latin America is not yet fielding world-class teams in MOBAs, the rapidly growing user base should help produce players with greater skills in the future.

Another solid indicator of the growth in Latin America is the rapid rise of the consumer game shows in the region. The Electronic Game Show (EGS) announced record-breaking attendance of 40,000 for its 13th edition, further establishing Mexico as a major video game market in Latin America. “With the 40,000 attendance mark being surpassed for the first time in EGS history, this is a clear sign of the momentum of the Mexican market,” said Alejandro Bertoldi, EGS Manager.

Companies that attended included: Microsoft, Sony, Electronic Arts, Ubisoft, Activision Blizzard, Disney, Warner Bros. and Bandai Namco. These companies exhibited at large booths and made major announcements during the weekend of Oct. 3-5 at Centro Banamex, one of the most renowned venues in Mexico City.

Similarly, the Brasil Game Show has grown from a few thousand people to well over 250,000 attendees this year. The enthusiasm for games in Brasil is huge, even though consoles are lagging behind in efforts to reach the country. Brasil’s import regulations make it difficult to put reasonable prices on game consoles.

In a report published in March this year, Bloomberg named Brazil as the most expensive country in the world to buy a PlayStation 4, its suggested retail price of 3999 Reals (R$) putting it ahead of second-place Argentina by more than $300, and ahead of third-place Sweden by more than $1000. To put that figure in its proper context, the Xbox One launched at a suggested retail price of R$2200, cheaper than Sony’s console by more than $700 at the current exchange rate. It should be noted that both consoles were available at the Brazil Game Show from the retailer Saraiva for substantially lower prices, but that yawning chasm remained: an Xbox One without Kinect was R$1599, a PlayStation 4 was R$2499.

“[International] companies should be paying attention to this market. They should come here to research the market and try to understand the passion of the Brazilians. If they have their games in Portuguese, if they have their games at a good price, they will succeed here,” said Marcelo Tavares, head of the Brasil Game Show.

The Latin American game market is a great opportunity for companies that can find ways to bring games into the market. This is just one more piece of the global game industry puzzle that companies large and small are seeking to solve in order to get their share of that $100 billion. Whether it’s setting up offices in different countries, or finding partners who know the market, there’s clearly money to be made in Latin American games if you can find the right path.

Electronic Arts Powers Ahead

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The times are finally changing for Electronic Arts, after years of less-than-stellar returns. The transition of the company to embracing the new digital realities of the game industry has been a rough one, but things are finally looking pretty good for Electonic Arts, as the latest earnings report demonstrates amply. The company may well pass up arch-rival Activision in total revenue this year, which would certainly be the occasion for some high-fives among the executive team.

The numbers EA posted were impressive in many ways: The company’s net (non-GAAP) revenue of $1.22 billion beat the previous guidance of $1.14 billion, and earnings per share (EPS) of $0.73 was above the guidance of $0.50. Operating cash flow was also up by $189 million, and the company has now stacked up an impressive $2.39 billion in cash, and 67 percent of this cash and short-term investment balance is held onshore. That’s a pretty good war chest for funding strategic moves, whether that’s new game development, acquisitions, or marketing expenditures.

CEO Andrew Wilson noted some usage stats during the call. EA had 155 million monthly active users for mobile games during the quarter. “Mobile generated $115 million for the quarter, up 11 percent over the prior year,” noted CFO Blake Jorgenson. “$105 million, or 91 percent, of this was from digital extra content and advertising. This was up 35 perfect versus the prior year and continues to more than offset the decline in the premium business.”

Essentially, EA is going all-in on free-to-play in the mobile space, and the strategy is working. The company is doing very well with its sports titles on mobile, too, and it looks like those titles are helping to drive console game sales as well. Wilson noted that Madden games played are up 48 percent year-over-year, with 89 million games played this year. There are 50 percent more players online in FIFA 15, and the aggregate Ultimate Team player base increased by over 40 percent. EA Sports mobile game audiences are up over 250 percent from last year.

EA may not have a chart-topping mobile title like Clash of Clans, but it’s doing quite well overall with its mobile games. It does lead you to wonder if the company will be looking to create more original (or licensed) mobile games to try and garner some of the juicy revenue available at the the top of the top-grossing charts. It’s worth remembering that EA has the Star Wars license, and it’s easy to imagine some Star Wars mobile games that could do very well indeed if the movie does well.

Overall, despite the weakness of console game sales in general, EA has been doing well there. Wilson noted that gamers spent1.9 billion hours of playing EA games during the quarter — or, if you look at it another way, the company is making less than a dollar for every hour of fun. That’s a pretty good deal for gamers, though no doubt EA would like to boost that ratio a bit.

“EA’s non-GAAP net revenue was $1.22 billion, which was 17 percent higher than the prior year’s results and 7 percent above our guidance,” said Jorgenson. “The excellent performance was led by FIFA 15, Madden 15, and The Sims 4. ” EA announced that Battlefield Hardline is now set to launch on March 17, 2015 in North America, and that Star Wars Battlefront is headed for the holidays in 2015. Both of those titles are expected to do very well.

Moving on to other areas, the emergence of China as a huge and growing market for games has been hard for Western companies to take advantage of, in part due to the restrictions of the Chinese government that preclude non-Chinese companies from doing business easily without a local partner. EA is making progress in generating significant revenue from Asia, but there’s a lot of market potential the company is not yet realizing. FIFA Online 3 is one of the top games in revenue for Korea, so that’s a positive step.

Still, the truth is that EA needs to get substantially stronger than it is in the world’s largest game market. — China. “On Asia, we don’t break out our revenues. It is obviously the smallest part of our international business,” said Jorgenson. That’s got to be a major area of concern for EA going forward, especially as Chinese companies are using their market growth to power acquisitions of Western game companies.

Meanwhile, the company continues its transition to becoming a more digital company than a physical one; on a GAAP basis the company’s digital revenue last quarter exceeded its physical revenue. “Full game PC and console downloads generated $94 million, up 71 percent over the prior year,” said Jorgenson. “Although the percentage varied considerably by title, platform, and geography, the trend towards full game downloads continues. Subscriptions, advertising, and other digital revenue contributed $91 million, up 47 percent over the same period last year.”

One way that EA is performing well is by improving its gross margins. In part, this is due to the higher-margin digital revenue taking an increasing share of the business, but Jorgenson also pointed out how reductions in marketing expenses have contributed to this. “Our non-GAAP gross margin for the quarter was 66.1 percent, an increase from last year’s 61.7 percent and better than our guidance of 65.5 percent. The increase over the prior year was primarily due to growth in our digital business, both full game downloads and extra content, and by The Sims 4 launch,” noted Jorgenson. “Our lower operating expenses compared to guidance were largely driven by quarterly phasing of key expenses in marketing and contracted services, combined with continued cost discipline. We expect some of these marketing and services costs to be incurred in future quarters.”

Activision will be delivering its earnings report on November 4, and it will be interesting to see how these two companies compare in their handling of the game industry transitions — and how successfully they are doing so.