Data & trends 2014 the digital games industry in review joost van dreunen

DATA & TRENDS—2014
The online games !industry in review
!
!
Joost van Dreunen
SuperData Research
!
!
Prepared for
Game Connection Europe
October 29, 2014

Market data and research What we do.
MARKET-LEVEL DATA
10 YEARS OF DATA
200MM+ TRANSACTIONS
37MM UNIQUE PAYING USERS
50 CONTRIBUTING PUBLISHERS
450+ UNIQUE TITLES
4 KEY METRICS
country-level and regional data available
regional data available only
We take a ‘big data' approach when establishing market size. By analyzing millions of transactions
worldwide, we are able to gain both a macro- and micro-level grasp on how digital gamers pay
and play. Our transactional dataset goes back over a decade and offers reliable payment insights that
we couple with other market data such as device penetration rates, population and spending
power to create our proprietary model. We report on key metrics such as monthly active users,
conversion rates, average revenue per paying user by both month and year. Our estimates span
across six key digital gaming segments, including mobile, social, free-to-play and pay-to-play MMO,
PC and console.
6 GAMING SEGMENTS 26 COUNTRIES
SuperData | Digital games market intelligence
Copyright © 2014 SuperData Research. All rights reserved. | www.superdataresearch.com

About Who we are.
SuperData provides market intelligence on the online, digital and mobile games industry.
Every month we collect point-of-sale data directly from developers, publishers and payment providers,
across six major digital game categories: social games, free-to-play MMOs, subscription-based MMOs,
digital console, downloadable PC games, and mobile games. Based on the spending of 37 million unique
digital gamers, we are able to provide an accurate reading of the global digital games market, identify
key industry trends, offer reliable forecasts, establish market share, and evaluate marketing spend.
SuperData offers insight into the next generation of interactive entertainment.
Using our proprietary panel of 37 million unique digital gamers, we establish key industry benchmarks
such as monthly active users, conversion rates, average revenue per paying user, and title-level
revenue estimates. Combined with qualitative consumer studies, customers use our data to evaluate
their performance, identify key growth opportunities, assess revenue potential, optimize their efforts,
and better understand their audience’s wants and needs.
For more information, please visit: www.superdataresearch.com
Copyright © 2014 SuperData Research. All rights reserved. | www.superdataresearch.com 4

Index What’s in here.
1 OVERVIEW
Index
Methodology
!
2 LANDSCAPE
Worldwide Digital Games Market, Regions, 2014E
Worldwide Digital Games Market Forecast, 2013 - 2017E
Digital vs Retail-based Revenue for Major Publicly Traded Publishers, Q1 2010 - Q1 2014
Digital-only Game Company Profiles: King, Nexon, Supercell, NCSoft
3 SEGMENT BREAKOUT
Mobile Games
Worldwide Mobile Gaming Revenue, 2013 - 2016E
U.S. iOS Cost-per-install vs. Average Revenue Per User (indexed), January 2013 - July 2014
Social Games
Worldwide Social Games Revenue and Audience Market Share, Regions, 2014E
Social Games Revenue and Audience Percent Change, Regions, 2013 vs. 2014
MMO Games
Worldwide MMO Revenue (Free-to-play vs. Subscription-based) and Compound Annual Growth Rate, 2011 - 2014E
MMO Microrevenue Ratio (Free-to-play vs. Subscription-based), 2014E
Worldwide MMO Monthly Active Users (Free-to-play vs. Subscription-based), 2014E
Digital PC Games
Worldwide Digital PC Market Size, 2013 - 2017E
Digital PC Revenue Market Share, Regions, 2014E
Average Revenue Per Paying Digital PC Player in the U.S., January 2014 - December 2014E
For terminology definitions, please visit http://www.superdataresearch.com/superdata-terminology
For an overview of our methodology and data collection, please visit http://www.superdataresearch.com/methodology

Index What’s in here.
3 SEGMENT BREAKOUT (cont.’d)
Digital Console Games
Worldwide Digital Console Revenue and Audience, 2013 vs. 2014E
Worldwide Digital Console Additional Content Spending Metrics, Q3 2013 vs. Q3 2014
!4
OUTLOOK
eSports
Worldwide eSports Viewers and Prize Money, 2011 - 2014E
Largest Prize Pools in 2014
Virtual Reality
Virtual Reality Timeline, March 2013 - Summer 2015
!
4 CONTACT
7
For terminology definitions, please visit http://www.superdataresearch.com/superdata-terminology
For an overview of our methodology and data collection, please visit http://www.superdataresearch.com/methodology

How do we define “digital games”? Six categories
★ Social network-based
★ Mobile
★ Free-to-play MMOs
★ Subscription-based
★ DLC PC
★ Digital console
!
!
More information: http://www.superdataresearch.com/terminology/

LANDSCAPE

WW digital games revenue close to $50B in 2014E Digital games revenue increases 15% as Asia’s booming mobile market drives growth.
Worldwide digital games market, 2014E
North America $12.2 billion
Latin
America $4.3 billion
Asia $18.6 billion
!
Europe $11.7 billion
Rest of
world
$2.1
billion
Worldwide digital games market forecast
$48.8 $51.7 $53.2 $56.0 $42.5
2013 2014E 2015E 2016E 2017E

Digital steadily rises, outselling retail in mid-2013 Digital games revenue rises above annual retail market lulls for increasingly longer periods.
Digital revenues close the gap on Q1 retail as they set out to surpass boxed sales in another
Q2. 2013 was the first year digital games outsold retail in Q2, and the trend is set to
repeat once again this year as digital revenues continue to steadily climb. The
combined releases of next-gen consoles and highly-anticipated AAA games last holiday
season gave retail games a record-breaking boost, but with a lack of new hardware to
excite consumers, retail is unlikely to see the same magnitude of sales this holiday
season.
Digital vs Retail-based revenue for major publicly traded publishers
2010 2012 2011 2013 Revenue ($M) 2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Digital vs retail revenues from quarterly filings and estimates for: Activision, EA, Ubisoft, Take Two, Zynga, IGT, Glu Mobile, Williams Interactive, GameLoft, Square Enix, Konami, Capcom, Nexon, NCSoft, Disney, THQ.

Digital-only companies shaking up the status quo Mobile and PC gaming goliaths prove there’s room for long-term success in digital.
KING
Revenue
2013: $1.9 billion
Q2 2014: $611 million
!
Top games & MAU
Candy Crush Saga: 260M+
Farm Heroes Saga: 83M+
!
Founded in 2003 as a social gaming
company, King has grown to be one of
the most successful digital companies
in recent years. Games like Candy
Crush Saga and Farm Heroes Saga
frequently top mobile and social
gaming charts. After the company’s
IPO in early 2014, stagnating bookings
have left investors uneasy about the
company’s financial future.
Digital-only game company profiles
SUPERCELL
Revenue
2013: $892 million
!!
Top games & MAU
Clash of Clans: 110M+
Hay Day: 50M+
!
The Finnish mobile games company
Supercell was founded in 2010 and
has been noted for its massive
success with a famously small team
and small portfolio of games. In 2013,
Japanese gaming companies
SoftBank and GungHo acquired 51%
of the company for a reported $2.1B.
Like King, Supercell has also seen a
leveling-out of its top-ranking games
Clash of Clans and Hay Day.
NEXON
Revenue
2013: $1.5 billion
!!
Top games & MAU
MapleStory: 12M+
Kart Rider: 4M+
!
Korean gaming giant Nexon has been
in the industry since 1994 and was
one of the earliest major publishers to
the free-to-play arena. The company,
now headquartered in Japan, has a
huge portfolio of games, many of
which still perform well despite long
tenures. Nexon also runs a pre-paid
game card service, Karma Koin, and
has made substantial investments in
other gaming companies.
NCSOFT
Revenue
2013: $714 million
!!
Top games & MAU
Guild Wars 2: 3M+
Aion: 1M+
!
NCSOFT was established in 1997 in
Korea, and a year later launched its
still-active MMO Lineage. The
company has seen success in both its
free-to-play and subscription-based
titles, but recently transitioned some
subscription games (Aion) to hybrid
free-to-play models. In 2012, Nexon
acquired a 14.7% stake in the
company.

TOP 10 MMOs by Worldwide Revenue for 2014 YTD
Rank Title Publisher/
Developer
Revenues
(millions, YTD)
Worldwide
Marketshare
Rank for
same period
in 2013
1 League of Legends Tencent/Riot Games $946 11.9% 4 p
2 Crossfire SmileGate/Neowiz $897 11.2% 2 pq
3 Dungeon Fighter Online Nexon $891 11.2% 1 q
4 World of Warcraft Activision/Blizzard $728 9.1% 3 q
5 World of Tanks Wargaming $369 4.6% 5 pq
6 Maplestory Nexon $240 3.0% 6 pq
7 Lineage I NCSoft $178 2.2% 7 pq
8 Counter-Strike Online Valve/Nexon $148 1.9% 8 pq
9 DOTA 2 Valve $136 1.7% 20 p
10 Hearthstone: Heroes of Warcraft Activision/Blizzard $114 1.4% —
Worldwide MMO Revenues $7,974
Notes: Revenues shown are for the period January to September, 2014. Ranking based on approximate share of the worldwide market, here defined as the
combined revenues (“Worldwide MMO Market Revenues”) for both free-to-play MMOs and subscription-based MMOs categories. All revenue figures are based on
the spending data we collect from developers, publishers and payment service providers active in the space, totaling 37 million unique paying gamers across digital
platforms. We welcome both questions and comments: www.superdataresearch.com

TRENDS

Mobile games revenues breach $21 billion Asia’s booming mobile growth pushes worldwide revenues up by almost 20%.
Worldwide mobile gaming revenue
$17.7B
Rest of world
Europe
North
America
Asia
$21.1B
$25.3B
$28.2B
2013 2014E 2015E 2016E
Worldwide mobile gaming revenues hit
$21.1B in 2014E, seeing a 19% increase
year-over-year. Asia accounts for over
half of the worldwide mobile market.
Despite growing revenue and audience
figures, mobile still presents challenges to
many publishers. As larger publishers
conglomerate maintain their control on
the top grossing apps, marketing
dollars and branding remain major
hurdles for small developers.
U.S. iOS cost-per-install vs. average revenue per use, indexed*
200
160
120
80
J F M A M J J A S O N D J F M A M J J
2013 2014
Growing marketing budgets drive up
acquisition costs. Large publisher
spending drives up industry-wide
marketing expense, raising barriers
for smaller studios, possibly stifling
innovation.
*Index compares a metric to a particular base month, specifically January 2013, represented by the value 100.

Devs strategize to compete in maturing mobile market Either by becoming a premium work-for-hire shop, or pursuing their own IP.
REVENUE
AUDIENCE

Social gaming still grows, exceeding $8B in 2014E Despite high spending, N. America shows decline as China and LatAm continue to emerge.
Emerging social gaming markets
China: China is showing tremendous growth in social games as
localized sites like Qzone and Sina Weibo continue to increase user
engagement. While revenue and audience in Asia’s largest gaming
market has jumped since 2013, player preferences are uniquely
different from those in the west. A deep understanding of the
country’s gaming culture continues to be key in order to drive
discoverability and success in this saturating space.
Latin America: Brazil, one of the social networking capitals of the
world, successfully migrated users from the once dominant Orkut
to Facebook, which currently boasts almost 80 million Brazilian
users. Along with the rest of Latin America, Brazil has seen social
gaming audiences increase substantially in the past few years,
although growth is beginning to stagnate. However, social gamers
throughout the region are getting increasingly comfortable
spending, with the average revenue per paying social user rising
above $20 in Mexico, Chile and Argentina, and revenue growing by
more than a quarter in 2014.
Other
Latin
America
High social spending in North America makes up for Percent change, 2013 vs. 2014E
its small share of players. Average spending in North
America is higher than any other region at more than
$40. Thus, North America is estimated to rake in a
quarter of global social revenue by year’s end with
only 15% of the world’s monthly active users. While
Western Europe boasts spending close to $40,
social spending in Eastern Europe comes in under
$20, keeping the continent from outpacing North
America despite its large player base.
7% 5%
-2%
-2%
14%
26%
9%
22% 21%
*Social gaming audience is measured in average monthly active users.
REVENUE
AUDIENCE
Asia North America
Europe Latin America
5%
13%
22%
27%
33%
7%
17%
22%
14%
40%
Worldwide
social games
market, 2014E
$8.7B 1.4B REVENUE AUDIENCE*
Asia
N. America
Europe

Free-to-Play MMOs continue to triumph P2P MMOs see sustained declines in revenue and audience in the face of F2P’s growth.
Worldwide MMO revenue, free-to-play vs. subscription-based CAGR*
2011 2012 2013 2014E
Free-to-play MMO revenue shows 15% CAGR while subscription-based revenue continues to decline. World of
Warcraft stands as one of the only sustaining pay-to-play MMOs and, even then, the once triumphant MMO
makes less than half of what it did 3 years ago. Meanwhile, more free-to-play MMO gamers are becoming
spenders as conversion rises annually and spending has almost doubled since 2011.
Free-to-play micro-spending and audience figures dwarf that of pay-to-play. Subscription-based MMOs earn
just under 30% of their revenues from additional content sales, unlike free-to-play which sees all of its revenue
from these transactions. Thus, pay-to-play MMOs still rely heavily on the dying subscription model and are
bleeding players to leading free-to-play games like League of Legends, Crossfire.
$8.0B 11:1
Worldwide MMO revenue, 2014E Microrevenue ratio, 2014E Worldwide MMO audience (MAU), 2014E
$2.5B
*CAGR (compounded annual growth) for period 2011-2014E
+15.3%
- 5.4%
23 million
370 million

Subscription MMOs recover with content expansion P2P MMOs see sustained declines in revenue and audience in the face of F2P’s growth.

Digital PC revenue pushes past $6B in 2014E N. America accounts for almost half of revenues and is expected to grow through 2017.
2013
2014E
2015E
2016E
2017E
$8.9
$8.0
Worldwide digital PC market size ($ bil)
$7.1
$6.1
$5.2
0 2.25 4.5 6.75 9
$50
$25
Full game
Additional content
*Digital PC is calculated by combining full-game download revenue with additional content revenue.
Digital PC revenue market share, 2014E
2%
5%
7%
39%
47%
Average revenue per paying digital PC player in the U.S., 2014
$0
J F M A M J J A S O N D
Digital PC revenue is expected to reach 11%
compound annual growth by 2017 thanks to
North America and Europe. Nearly 90% of digital
PC revenues come from North America and
Europe, and this trend will continue for the next
few years. Thus, digital PC growth largely hinges
on audience and spending increases in those
two markets. Piracy, payment security concerns
and stifling government regulations continue to
stunt growth in smaller markets like Asia, Latin
America and Eastern Europe.
Wroervlednwuied e $6.1B
• North America
• Europe
• Other
• Latin America
• Asia
North American spending on additional content is forecasted to reach
$36 during the holidays. The North American PC market shows a
unique potential for downloadable content since it is the only region
where DLC spending rivals and will surpass average full-game
spending.
Digital marketplaces like Steam makes purchasing digital PC content
increasingly easier and secure. A large impetus for increasing digital
sales of games and additional content in the U.S. is the growth of
the digital gaming marketplace. Steam sales, for instance, are a
major indicator for increased online PC revenue in the west.

Digital console sees increases across the board The current console generation’s focus on digital boosts revenue 26% year-over-year.
27
North America and Europe account for
almost 80% of digital console revenue in
2014E. North American and European
spending makes up for the fact their player
bases add up to less than half of digital
console players, pushing their combined
revenue to just under $2B.
Digitally-focused next generation
consoles help grow digital console
revenue and player base. The importance
PlayStation 4 and Xbox One have placed
on digital, as well as the increased
incorporation of downloadable content
(DLC) into console games, have helped
boost revenue year-over-year by 26% and
audience by 9%.
Average revenue
per paying user
Conversion
rate
3.5% 3.8% $16.84
$16.26
Worldwide digital console market
Audience
Revenue
2014E 2013
Audience
Revenue
196MM
$1.9B
214MM
The percentage of digital console players who purchase
additional content has increased by almost 9% year-over-year.
More players are swayed toward DLC and microtransactions as
they become more commonplace in console games.
Almost a year after the release of the PS4 and Xbox One, digital
console spending goes up by more than 50 cents. Games like
Grand Theft Auto Online paved the way for mobile-like in-game
purchases, helping to increase spending by almost 4% since last
year.
Q3 2013 Q3 2014 Q3 2013 Q3 2014
*Revenue includes full-game downloads, additional downloadable content and microtransactions. Audience is measured as monthly unique users.
$2.4B
Additional Content

OUTLOOK

eSports viewership grows 65% in 2014E As eSports attracts more viewers, total prize money shows 32% CAGR over four years.
viewers
2014E
2014E
$32 million
prize money
As more people
watch eSports,
the stakes
get higher
118 million
Largest prize pools in 2014
The International 2014: Dota2
$10,931,103
League of Legends Season 4 World
Championship
$2,130,000
Call of Duty Championship 2014
(Call of Duty: Ghosts)
$1,000,000
2011 2012 2013 2014E
Commercial brands take notice as eSports sell out stadiums. League of Legends Season 3 World
Championships sold out the Staples Center in L.A. in an hour and the ESL One Dota 2 Tournament will be
coming to New York’s Madison Square Garden. Large commercial brands are showing increasing interest in
eSports while brands like Coca-Cola, RedBull and American Express already sponsor teams and events.
Gaming and media companies continue to put forth effort to grow awareness of the space. Riot agreed to
increase its support and prize money contributions for League of Legends tournaments, and Major League
Gaming and ESPN recently partnered-up to feature Call of Duty: Ghosts in the 2014 XGames.
Amazon acquires Twitch for close to $1B, showing the increasing viability of streaming in eSports. Game-streaming
service Twitch, the site with the fourth-highest traffic on the internet, currently boasts 55 million
monthly viewers and 1 million broadcasters. Amazon, the world’s largest e-tailer, vouched for the massive
potential of eSports and streaming by acquiring Twitch for $970 million.

Oculus revitalizes the promise of virtual reality The Oculus-powered Samsung Gear will be the first commercially viable VR device.
June 2014 - Google Cardboard instructions are
published. Paired with the Android
app, the DIY device creates a VR
experience for under $20.
Summer 2015 - Projected
launch of consumer
beta of the
Oculus Rift.
The first commercially viable device, Samsung Gear VR, will be launched as early as October 2014, with others set to
follow in 2015. The first attempts at VR devices were in 1980’s and found limited commercial success.
However, technical innovations by Oculus VR in 2012 led to renewed interest not only for the gaming
industry but other sectors like television and education.
Oculus VR ignited the market after crowdsourcing $2.4 million on
Kickstarter. The company has since sold roughly 120,000
development kits for its Oculus Rift device and was acquired
by Facebook for $2 billion.
Virtual reality timeline
March 2013 - First
Oculus Rift developer
kits are
shipped.
March 2014 - Sony announces Project
Morpheus, a VR device designed for
the PS4.
September 2014 - Samsung Gear VR is
unveiled. The device works with the
Galaxy Note 4 and will have
a library of “original
programing”.
March 2014 - Oculus
VR is acquired by
Facebook for $2
billion.

“It is an anti-social technology, but we will
support it to the extent it’s brought to market
and it works for our games.”
-- Strauss Zelnick, CEO Take-Two Interactive
“VR would need to sell at least 1 million units to be
viable for development.”
-- Ubisoft VP of Creative, Lionel Raynaud
We’ll pay
for it!

Highlights
★ Digital games market continues to grow, forecast to reach
$56B by 2017E
★ Traditional publishers adapting to new markets
★ Digital-only publishers exploit market vacuum
★ Shift in gamer demographic starting to shift market
★ Content always king, business model innovation is key
competitive advantage: marketing, distribution, licenses

Thanks!
!
joost@superdataresearch.com
!
@_SuperData
@joosterizer

Data & trends 2014 the digital games industry in review joost van dreunen

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Data & trends 2014 the digital games industry in review joost van dreunen

Similar to Data & trends 2014 the digital games industry in review joost van dreunen (20)

More from Mary Chan

More from Mary Chan (20)

Recently uploaded

Recently uploaded (20)

Data & trends 2014 the digital games industry in review joost van dreunen