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Gaming Spotlight 2018 Review

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Mar, 2019 Gaming Spotlight2018ReviewMARCH 2019

Agenda1.2018 Gaming Trends2.Console / PC Developers in Mobile Games3.Key Themes and Takeaways2

05010015020025030020142015201620172018 Mobile Ga ming PC a nd Mac Gaming Home Game C onsoles Handheld Game ConsolesWorldwide Consumer Spending on Games, by Device, 2014–2018Source: App Annie & IDC3•Mobile gaming first overtook both home game consoles and PC and Mac gaming for highest consumer spend in 2014•Mobile gaming extended its global lead to 2.1x PC/Mac gaming and 2.8x home game consoles in 2018, driven by both an increase in users and spend per user•All totals include applicable digital and physical game spending, but exclude ad revenue.•Mobile gaming includes all app stores (iOS App Store, Google Play, Windows Phone Store, Amazon, Samsung Galaxy and third-party Android stores).•Home game console total includes discs, digital games and gaming-related subscription services (Xbox Live and PlayStation Plus).Indexed Consumer Spending on Games

•Games represented nearly 75% of total worldwide consumer spend for combined iOS App Store and Google Play in 2018, but only accounted for just over 35% of downloads•In-app subscriptions have helped drive the consumer spend share point growth for non-gaming categories•Games made up a larger share of Google Play’s consumer spending share than on iOS; in terms of amount spent on games, however, consumers spent nearly 50% more on iOS than Google Play worldwide in 20180%20%40%60%80%100 %iOS App StoreGoogle Play0%20%40%60%80%100 %iOS App StoreGoogle Play20172018Games: Share of App Store DownloadsGames: Share of App Store Consumer SpendingSource: App Annie4Source: App AnnieAmong Mobile Apps Worldwide, Games Continued to Generate a Significantly Higher Share of Revenue Than Downloads

0%25 %50 %75%100%20 1 720 1 8 2017 2018 2017 2018 2017 2018North AmericaWestern EuropeAsi a-Pac ifi cRest of World•North America gained in share of game spending for iOS App Store and Google Play combined last year, mostly due to growth on iOSin the United States and Google Play in Canada; Asia-Pacific’s share ticked down in 2018, partially due to a tighter new game approval processin China•Despite the freeze on new game releases in China for much of 2018, Asia-Pacific still modestly outperformed in PC/Mac spending growth•North America showed strong 2018 results from a home game console perspective, largely due to Nintendo Switch’s solid performance •In handheld game consoles, the loss of the Pokémon franchise on Nintendo 3DS/2DS contributed to a share of spending contraction in Asia-Pacific in 2018, especially in Japan, which ultimately boosted the shares in the other three regions5Source: App Annie & IDCCombined iOS App Store and Google PlayHandheld Game ConsolesHome Game ConsolesPC and Mac Gaming+2.2 pts+0.5 pts+7.5 pts+3.4 ptsWorldwide Consumer Spending Shares on Gamesby Region 2018

Source: App Annie & IDC6RankiOS App StoreGoogle PlayHandheld Game Consoles1Honour of KingsTencent, ChinaLineage MNCSOFT, South KoreaPokémon Ultra Sun / Pokémon Ultra MoonN3DS; The Pokémon Co. / Nintendo, Japan2Fantasy Westward JourneyNetEase, ChinaFate/Grand OrderSony, JapanMario Kart 7N3DS; Nintendo, Japan3Fate/Grand OrderSony, JapanMonster StrikeMixi, JapanYo-Kai Watch Blasters: Red Cat Corps / White Dog Squad3DS; Level 5 / Nintendo, Japan4Candy Crush SagaActivision Blizzard, United StatesPokémon GONiantic, United StatesAnimal Crossing: New LeafN3DS; Nintendo, Japan5Monster StrikeMixi, JapanCandy Crush SagaActivision Blizzard, United StatesLuigi’s MansionN3DS; Nintendo, Japan= Incorporates Real-Time Multiplayer or Co-op Game ModesTop 5 Worldwide Grossing Portable Gamesby Platform 2018

Competitive Real-Time Multiplayer Games Advanced in 2018In mobile gaming, real-time multiplayer games expanded their presence in the top 5 grossing games on both iOS and Google Play•Three out of top five games by consumer spend on both app stores featured real-time multiplayer game elements –from PvP battle, co-op play, to MMORPGs –and many come from a PC gaming heritage •In 2018, mobile further matured into a sophisticated gaming platform, offering large scale multiplayer experiences –such as battle royale gamesFortnite, PUBG MOBILEandFree Fire –that are similar to console games; we expect this to drive further engagement and monetization opportunities in 20197On handheld consoles, for the first time since tracking began in 2015, all five top-grossing titles supported live PvP or co-op gameplay last year•Pokémon Ultra Sun/Moonfeatures live PvP battles; Mario Kart 7has supported live races with up to 8 players since its debut in 2011; Yo-Kai Watch Blasters offers live co-op battles with up to 4 players; Animal Crossing: New Leaf has up to 3-player live co-op; Luigi’s Mansion has a local 2-player co-op mode•It’s also worth noting that, unlike 2017’s comparable list, all five top-grossing handheld console games were at least co-published by NintendoFor definitions of player vs. player (PvP), co-op and battle royale, please see methodology notes.

Key Gaming Themes and Takeaways, 2018•Games generated nearly 75% of combined iOS and Google Play app spending in 2018 even though games garnered well below 40% of total app downloads worldwide; mobile gaming was both larger and grew faster than PC/Mac gaming or home console gaming•Three of the top five grossing games on both iOS and Google Play in 2018 featured real-time multiplayer gameplay, demonstrating that hardcore-leaning multiplayer experiences aren’t just possible on mobile devices, they’ve proven to be popular and quite lucrative when done right•Relative to other regions, Asia-Pacific’s share of mobile game spending ticked down in 2018, partly due to the approximately nine month freeze on new game license approvals in China; as China represents over 50% of regional revenue, future growth will depend significantly on the resumption of steady game approvals in 2019•Among the top five grossing titles across iOS, Google Play and handheld games consoles in 2018, all but two camefrom companies headquartered in Asia-Pacific, further demonstrating the region’s large and growing influence in aggregate spending, game origination and gameplay innovation•Handheld console gaming faced significant challenges in 2018, with Sony announcing that Vita would wind down hardware and game card production in early 2019, and Nintendo’s 3DS family losing the Pokémon franchise to other platforms as Nintendo’s internal development efforts shifted more towards Switch and mobile projects8

Agenda1.2018 Gaming Trends2.Console / PC Developers in Mobile Games3.Key Themes and Takeaways9

RankAppCompany1Helix JumpVoodoo2Subway SurfersKiloo3PUBG MOBILETencent4Free FireSEA5Rise UpSerkan Ozyilmaz6Love BallsSuperTapx7Candy Crush SagaActivision Blizzard8Happy GlassAppLovin9Sniper 3D AssassinTFG Co10Kick the BuddyPlaygendaryMost Top Mobile Game Publishers, As Measured by Download Volume, Didn’t Have PC or Console Game Development Coverage in 201810= Developers/Publishers with a PC or home console gaming coverageRankAppCompany1Helix JumpVoodoo2PUBG MOBILETencent3FortniteEpic Games4Happy GlassAppLovin5Rise UpSerkan Ozyilmaz6Love BallsSuperTapx7ROBLOXRoblox8Hole.ioVoodoo9Hello StarsFastone10Kick the BuddyPlaygendaryRankAppCompany1Helix JumpVoodoo2Happy GlassAppLovin3Hole.ioVoodoo4Love BallsSuperTapx5FortniteEpic Games6Rise UpSerkan Ozyilmaz7Word LinkWorzzle8PUBG MOBILETencent9GrannyDVloper10Baseball BoyVoodooRankAppCompany1Knives OutNetEase2Happy GlassAppLovin3Identity VNetEase4Disney Tsum TsumLINE5FillMagicAnt6Balls VS BlocksVoodoo7PUBG MOBILETencent8Hole.ioVoodoo9Human TowerShion Honda10Monster StrikemixiWorldwideUnited StatesUnited KingdomJapanTop Games by Combined iOS & Google Play Downloads, 2018

RankAppCompany1Fate/Grand OrderSony2Honour of KingsTencent3Monster Strikemixi4Candy Crush SagaActivision Blizzard5Lineage MNCSOFT6Fantasy Westward JourneyNetEase7Pokémon GONiantic8Dragon Ball Z Dokkan BattleBANDAI NAMCO9Clash of ClansSupercell10Clash RoyaleSupercell11RankAppCompany1Candy Crush SagaActivision Blizzard2FortniteEpic Games3Pokémon GONiantic4Clash of ClansSupercell5SlotomaniaGiant Network6Candy Crush Soda SagaActivision Blizzard7Toon BlastPeak Games8ROBLOXRoblox9Final Fantasy XV: A New EmpireMZ10Clash RoyaleSupercellRankAppCompany1Candy Crush SagaActivision Blizzard2Pokémon GONiantic3ROBLOXRoblox4Gardenscapes -New AcresPlayrix5Clash of ClansSupercell6Candy Crush Soda SagaActivision Blizzard7HomescapesPlayrix8FortniteEpic Games9Toon BlastPeak Games10Lords MobileIGGRankAppCompany1Monster Strikemixi2Fate/Grand OrderSony3Puzzle & DragonsGungHo Online Entertainment4Dragon Ball Z Dokkan BattleBANDAI NAMCO5Knives OutNetEase6Disney Tsum TsumLINE7GranBlue FantasyCyberAgent8Pokémon GONiantic9THE IDOLM@STER Starlight StageBANDAI NAMCO10Jikkyou Pawafuru PuroyakyuKONAMIWorldwideUnited StatesUnited KingdomJapanTop Games by Combined iOS & Google Play Consumer Spend, 2018Most Top Mobile Game Publishers, As Measured by Consumer Spend, Have PC or Console Game Development Coverage in 2018= Developers/Publishers with a PC or home console gaming coverage

12U.S. Casual-and Hardcore-Leaning Mobile and Handheld Gamer Type Survey, 3Q15 Versus 3Q18: Gamers Trend HardcoreQ: What genre / type of games have you played on [your favorite mobile/handheld gaming device] in the past three months? [The hardcore-leaning and casual-leaning samples, as defined below, are shown]§Casual-leaning mobile/handheld gamers were defined as those played 1+ game in the following six genres in recent months (on their primary smartphone, tablet or handheld console): Playing card, casino and billiards; Puzzle –hidden object or escape; Puzzle –match 3 and tile-matching; Puzzle –Physics or similar; Life, job, farm, city or social simulation; and Word and trivia§The hardcore-leaning mobile/handheld gamer type was defined as those who played 1+ title in these six genres: Battle Royale (3Q18 only); Fighting; Flight and air combat simulator (3Q15 only); MOBA; Racing and driving; Shooter; and Sports§The Both (Overlap) segment shows the share of respondents that qualified for boththe above gamer segments, and the black dotted line denotes the dividing line between the casual-and hardcore-leaning types (irrespective of the overlap share)§The key differences from 3Q15 to 3Q18 are that the hardcore sample gained share (+3.5%) and the Both segment fell (-4%); the ratio of the casual-to hardcore-leaning gamer type sample sizes thus also declined from 2.6:1 in 3Q15 to 2.2:1 in 3Q180%10%20%30%40%50%60%70%80%90%100 %3Q18 gamer base share3Q15 gamer base shar eCasual-LeaningBoth (Overlap)Hardcore-Leaning3Q15 n=2,389; 3Q18 n=3,367Source: IDC’s 3Q15 and 3Q18 U.S. Gamer Surveys

Key Themes and Takeaways: PC and Console Developers Made Inroads In Mobile Gaming•The mobile gaming marketplace grew to cover more of the total addressable gaming market worldwide in 2018 —further amplified by the fact that 4.1 billion consumers, including most hardcore gamers, now use a smartphone or tablet•Mobile gaming historically leaned towards the casual side of the experience spectrum, but it shifted appreciably last year towards the hardcore end of the spectrum —including a stronger orientation towards hardcore mechanics such as real-time action (live, fast-twitch titles) and strategy-and shooter-type genres that, in some respects, now rival home console gaming experiences (typified by the rise of Epic Games’ cross-platform smash hit Fortnite)•At the same time, a new wave of hyper-casual games opened up the potential to build a massive audience at scale that primarily monetizes associated gamers via in-game ads•A case can be made that the mobile games market bifurcated along this casual-hardcore fault line last year, and if this divide widens in 2019, it may have important ramifications for developers and publishers worldwide; in 2018, just threeof the top 10 iOS and Google Play mobile game publishers, by downloads, have PC or console gaming coverage (and many of 2018’s hyper-casual hits from these providers had a strong in-game ad orientation) while the comparable top 10 list, as measured by direct gamer spending, featured sevenpublishers with a PC or home console gaming coverage13

Agenda1.2018 Gaming Trends2.Console / PC Developers in Mobile Games3.Key Themes and Takeaways14

Key Themes & Takeaways•In 2018, direct spending on mobile games exceeded the combined spending total on home console, PC/Mac and handheld console games by nearly 20%; this is up from a 14% deficit (by the same measure) as recently as 2016, an outcome that underscores how quickly mobile games have moved front and center globally•Rapid growth in a few key markets, most notably United States, Germany and United Kingdom, helped fuel mobile gaming’s ascent in 2018; despite slower growth, over 55% of mobile game spending in 2018 occurred in Asia-Pacific, a region that continued to dominate in share despite the game licensing freeze in China for much of 2018•Mobile games with real-time multiplayer features made particular inroads in 2018, taking three out of the top five consumer spending slots on both iOS and Google Play; given that four of the five most lucrative handheld game console titles also offered live multiplayer features (and the fifth offered a local co-op mode), it appears that live multiplayer games will be a vital subtheme in the broader mobile game spending story moving forward –and that the rise of hyper-causal hits that heavily rely on in-game ad business models also warrant close scrutiny in 2019•With a clear majority of revenue from the top multiplayer mobile games coming from Asia-Pacific, it will be interesting to see if multiplayer titles can significantly increase their popularity in North America and Western Europe in 2019, following the success of titles like Fortnite, Clash Royale, and ROBLOX•With battle royale games like PUBG: MOBILEand Free Firebecoming increasingly popular on mobile devices, this specific mode of live multiplayer gameplay is expected to have a growing impact on mobile, particularly in Asia-PacificReport methodology and updates are available here.15

For More Information@AppAnnie@LewisAWardpress@appannie.comlward@idc.com16