The Future of Video Games… Coming to a Phone Near You

Long ago there was darkness… and then… suddenly… there was Pong. Pong was a revolutionary video game that allowed one or two users to play virtual ping pong against each other or against the computer. Fast forward to today and we have virtual realities of battlefields which can leave you with PTSD after playing, due to how realistic it is. In the world of video games, we have come a long way from Pong. But now that we are here, the next question is, where are we going?

Pong: The First Video Game Megahit

In recent years, companies like Microsoft and Sony have dominated the video game market with their consoles, the Xbox and the PlayStation, respectively. In order for a company to reach the end consumer with their game, they had to go through these giants. But in recent years there has been a shift away from these consoles. Thanks to Moore’s Law, and the improvements of smart phones in the past couple years, users now have access to great quality video games in the palm of their hands… literally. With this, video game producers no longer have to go through Microsoft or Xbox to get to their end consumer. The barriers to get to the consumer have fallen and now these video game creators are storming the gates.

The mobile gaming market is huge, and it is only getting bigger each year. In 2019, the global gaming market produced revenues of $150 billion, with $68.5 billion coming solely from mobile gaming. And in 2020, mobile gaming accounted for $76.7 billion. Just like we have learned with the fall of movie theaters and the rise of companies like Netflix, consumers will pay for convenience. And right now, that is what mobile gaming offers the end user that typical consoles cannot always offer. Platforms such as Facebook and Instagram have even started producing innovative mobile games, in order diversify their product offerings, as well as enhance their advertising strategies through these games.

Newzoo: Global mobile game revenues will hit $68.5 billion in 2019 |  VentureBeat

In order for the mobile gaming market to continue to grow, the industry must make a multitude of strategic moves. Customer experience must be at the forefront of mobile game design, while focusing on the use of Big Data Analytics to help evaluate customer insights and make decisions. Currently, 23% of apps that are installed are deleted after one use. This is truly a testament to how important engagement is. If consumers are not able to easily and efficiently engage with the app, they while delete it and move on to the next one. And with the current rate of how quickly these apps are changing in the mobile gaming industry, the ability to adapt and innovate the customer experience are of utmost importance.

In order to generate more revenue, mobile gaming companies must redefine their retention and monetization strategies to reflect this focus on engagement. In the past, marketers would focus on new user acquisition and total number of downloads. Essentially, they focused on quantity. But in recent years, the industry has shown that quality is where the profits truly lie. In 2015, the apps’ cost for New User Acquisition rose by 117%. This led companies to start focusing less on new customers, and more on the ones that they already had. Due to this, in 2016, the apps industry overall user retention rose by 36%. Overall, retention has an intimate relationship with engagement and overall customer experience, and in order to retain consumers and ultimately profits, app companies must focus on these aspects.

In the current landscape, a major development to follow is the upcoming trial between Apple and Epic Games, the producer of one of the most popular video games in the world, Fortnite. Fortnite was originally available on the Apple App Store but Epic and Apple had a fallout over the payment allocation from the game’s in app purchases, and Epic decided to sue Apple for alleged antitrust violations. This brings up one of the biggest problems with mobile gaming, which is just how new it is. With this, there aren’t widespread revenue sharing practices and that is why this trial is so important. This trial could help influence and possibly determine the future of mobile app payments and could have a major effect on the future of the entire mobile gaming industry.

Tim Cook and other Apple executives will testify against Epic in Fortnite  trial - CNN

In the end, the video game industry, just like the world, is constantly evolving and adapting. What started with a ball bouncing between two ends of the screen has become something that no one could have imagined during the time of Pong. And with the development of the smartphone, there has been a goldrush of sorts for the mobile gaming industry. But as the dust settles, it is no longer about who is first to market or who gets the most downloads. It is about customer engagement and experience, and if an app is to be successful it must be focused on quality and not quantity.

file:///Users/mbball/Downloads/Sutherland-Point%20Of%20View-Gaming%20Console%20%20Mfgrs%20and%20Mobile%20Apps.pdf

https://www.businesswire.com/news/home/20201201005996/en/Global-Mobile-Gaming-Market-Growth-Trends-and-Forecasts-2020-2025-Free-to-play-Pricing-Model-Offers-Potential-Growth—ResearchAndMarkets.com#:~:text=The%20mobile%20gaming%20market%20is,developing%20the%20mobile%20gaming%20industry.

10 comments

  1. conoreiremba · ·

    Awesome post Rich, and I loved the nostalgia of thinking back on my early video game habits, right back to the Super Nininteto (showing my age here). I used to press my parents (Santa) each Christmas for the latest console right through to the PS3 until I grew out of video games, although with the gamification of so many things we do like you mention with Facebook, I feel myself getting sucked back into the thrill of gaming. Because of my experiences with more primitive gaming consoles, I have definitely been out of the loop for a while and missed the boat on mobile gaming so this refresher course is very much appreciated.
    I love how you mention the switch from focusing on quantity to quality. You often see with so many subscription services, especially streaming, that focus on user numbers but revenue per gamer varies so much more in comparison to revenue per viewer like with Netflix/Hulu, etc. There are far more incremental revenue opportunities for companies that can focus on their most engaged gamers. I know subscription services like Peloton have been incredibly successful by focusing on retention and by engaging their most frequent users, and their customer churn rates are incredibly low as a result. It will be very interesting to keep tabs on this trial and the impact it will have if any, not to mention how AR/VR will impact gaming further in the future. Thanks for sharing.

  2. Nice post. I definitely fall into the category of people who download a game, use it once and then delete it. I usually don’t find the value in the game or get bored of it rather quickly. However, I do think mobile games have the ability to become the dominate form of gaming in the future. We constantly hear about how the younger generations have less of an attention span and cannot focus. Console games require a greater level of focus and time because you have to make an effort to get it booted up and going. The mobile games are accessible much more easily and can be finished quicker as well. I will be interested to see how AR and VR work their way into mobile gaming as well. We saw it integrated with PokemonGo, but it feels like it has not really caught on mainstream yet.

  3. sayoyamusa · ·

    I enjoyed reading your blog! While I always prefer the conventional game consoles like PlayStation and Nintendo as an old-fashioned person, mobile games have definitely changed the industry. When I saw many of my female friends, who had not engaged in heavy video games, play with their smartphones in an addictive manner, I realized that mobile games were able to succeed to expand the customer-base by taking in light users. I haven’t noticed its focus should shift from quantity to quality (great point!), but that makes sense given that it is now easier for both providers and costumers to join that digital ecosystem. With only volumes, they cannot sustain advantages in such a highly competitive market. I’m curious how the platform business models in the game industry will evolve and how the traditional players will react to this move.

  4. I confess that my first ever videogame was Pong, back probably around 1977 ish.

  5. I’d be curious how they actually measured your optimism. Some HR do really bad measurement. BUT, I’m glad that you could turn your experience into a good blogpost!

  6. williammooremba · ·

    Great post. Due to being fairly into video games as one of my hobbies I am somewhat familiar with the video game industry. One additional point I will add is based on my understanding for mobile games a lot of their revenue is consolidated to a couple of key players. According to a 2014 report from Swrve 0.15% of mobile player account for 50% of mobile game revenue. These players known as a “whale” can spend thousands on a particular game. I think in a lot of those case more addictive elements of mobile gaming can be used on players susceptible to that sort of stimulus. I think this is something companies need to keep in mind since where a company’s responsibility ends, and individual responsibility begins seems like it could be a grey area. This is not to mention where it will end up for government regulation.

    Related Forbes article: https://www.forbes.com/sites/insertcoin/2014/03/01/why-its-scary-when-0-15-mobile-gamers-bring-in-50-of-the-revenue/?sh=3a712f044065

  7. Wonderful post. One item that I think is interesting for gaming companies is the monetization of digital currencies within the actual game itself. Echoing off William’s point, being able to draw users into digital marketplaces to spend dollars on upgrades and add-ons can incentivize more time spent in the game.

  8. courtneymba · ·

    Great post! There’s a lot of great detail and stats here. It’s believable and unbelievable that 23% of apps get deleted after the first use. I wonder to what extent these companies are having to weigh bragging rights on # of downloads against actual engagement and money generated. I am very curious to see the outcome of the Fortnite/Apple suit. That will shape the future of payments in gaming.

  9. AndraeAllen · ·

    As mentioned in the comments above, I am also more into console-based video games over mobile gaming apps. On the other hand, I don’t think my 7 year old son has formed any bias yet. As long as it’s racing or shooting, he’ll play it. It’s great that video game produces now have other options to get their games to market without going through large corporations like Sony. However, console-based games undoubtedly have superior processing speed and controller dexterity. App-based games, of course, have the advantage of access. They can be low- to no-cost, and most people have smartphones, making the games easily accessible at all times. Great post and perfect infographics!

  10. Very data-driven and detailed blogpost! Mobile Gaming is really popular nowadays, that is why Apple introduced a subscription business model for its Arcade product. Although I do agree that more and more tend to play games on mobile devices, there are certain games that will probably not entirely migrated to mobile platforms from console platforms, such as those pursuing extreme video and audio quality and immersive experience. From my perspective, I believe mobile gaming targets a different customer group than console gaming. I understand the technology will make the smartphone more and more powerful, but as the processing power improves, I still believe the need for more process power will always exist. For example, the unreal engine introduced the ray tracing effect in the games when the GPU in the computer has the capability of proccing such complicated algorithms. When the smartphone has the capability of processing ray tracing without lagging in the future, there may be other needs for more advanced GPU power that can only be accomplished by the computer at that time.

    Here is an example of the latest features introduced in game development from Unreal engine 5.

    https://www.unrealengine.com/en-US/blog/a-first-look-at-unreal-engine-5

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