The myth of mobile gaming consolidation

Talk to smart people about mobile games for long enough, and a common refrain is that the days of the small mobile game developer are numbered. Gameplay standards are rising, which means it costs more to develop artwork, sound, and game play. Discoverability is a crapshoot, which means most games need to buy distribution.  And there is a long-list of post-launch tasks to tune retention and monetization that require both technology and in-house experts.

All of this is true, and logic would tell you that giant publishers with big budgets and armies of analysts should be steam-rollering the market. Cue evil laughs in fancy glass skyscrapers.

The problem with all this smart logic? It’s not happening.

The 300 top grossing games are made by 161 different publishers, and only one of them has more than 10% share. Supercell has ~11% of US daily revenue between Hay Day and Clash of Clans. King.com has 9% with Candy Crush Saga. EA has lots of titles that add up to a measly 5% share of revenue. 158 publishers split the remainder. Not only is that a ton of fragmentation, but it’s fast turnover: the top two players weren’t around 2 years ago.

So what’s really happening? Our guess is that it’s a combination of a few things:

1) Google & Apple promote fragmentation. The app store providers have a big economic incentive to ensure that no one publisher gains too much leverage. We’d expect that there’s some bias towards promoting diversity in both publishers and game play styles. As gamers, we like this too. Keeps everybody honest.

2) Authoring & monetization tools are cheap and improving fast. Unity provides authoring tools to build high-fidelity games in less time. Think Gaming provides a monetization platform to turn that can quickly turn developers into sophisticated self-publishers. As e-commerce platforms and web frameworks drastically lowered the cost of building a website, so too these tools will allow great games to get built faster & cheaper.

3) The freemium and mobile waves are changing the publisher playbook faster than anyone expected. Everything is happening fast, with 82% of the top grossing games using virtual currency to monetize, and 93% using a freemium model

Our prediction: none of these factors are going to change fast. Instead of the relentless consolidation of the giant publisher, we’ll see several years where smaller development shops look like web startups, deploying great new games at a breakneck pace. A new publishing model may emerge, but it will happen over time.

Long live the indie developer! Cue a nerdy giggle in someone’s garage…