The following article kicks off a series of daily year-end content on GamesIndustry.biz analyzing the most notable news and trends we've observed over the last 12 months
After a few years as a bubbling pot of new ideas and executions that fairly regularly turned unknown companies into industry superstars overnight, the mobile market began to simmer down around 2013. A handful of games and companies established themselves at the top of the charts, and while the market overall has continued to grow (by some estimates, it's grown around 20% this year compared to last), command of that market and its profits was rapidly consolidated by a small number of key players through 2014 and 2015.
Last year, in particular, the market was almost entirely stagnant; the top games in the global charts were all familiar, heavily marketed titles that had launched years previously.
"That's the good news; the possibility of shaking loose the dominance of established mobile games and scoring a hit with a new release still exists"
This year, at least, there was some new blood in the global top ten. Nobody will be surprised to hear that Niantic's Pokemon Go debuted at number one worldwide in App Annie's monthly tracking charts (which compile data from both the iOS store and Google Play); indeed, for a few months over the summer, Niantic itself was the largest mobile game company in the world by revenue, beating off industry giants like Supercell and Tencent. Pokemon Go was not the only new game to crack the global top 10 in 2016, however. Supercell's Clash Royale, which launched at the start of the year, also topped the charts at its debut and hung around the top ten for most of the year; while Chinese firm NetEase scored the number six spot globally with Onmyoji following its launch in September, propelling itself to the top of the global publisher revenue chart in the process.
That's the good news; the possibility of shaking loose the dominance of established mobile games and scoring a hit with a new release still exists. The bad news, of course, is that the only companies which achieved it this year were either already mobile gaming behemoths (Supercell and NetEase are both comfortably global top five mobile publishers with enormous financial clout), or were using one of the most popular gaming IPs of all time, Nintendo's Pokemon. The chances are that the mid-December launch of Super Mario Run will yield the year's fourth and final new entry to the top ten, assuming Nintendo doesn't botch the game's monetisation - leaving the scorecard at two for the established mobile gaming giants, and two for Nintendo's most beloved franchises' mobile debuts.
Beyond those debuts, the charts look very, very familiar. The biggest games of 2016 were Mixi's Monster Strike (launched in 2013), Supercell's Clash of Clans (launched in 2012), Machine Zone's Game of War - Fire Age (launched 2013) and Mobile Strike (mid-2015), and NetEase's Fantasy Westward Journey (launched 2015, a mobile version of a PC MMORPG from 2001). Also rarely straying from the top ten were 2012's Candy Crush Saga and Puzzle & Dragons. Clash Royale and Pokemon Go were the only 2016 titles to enjoy significant chart success.
The lesson from 2016's mobile market, then, isn't all that terribly different (or more optimistic) than the lesson from 2015; the mobile gaming gold rush is long gone. The games which succeeded this year are mature games that have been on the market for years and are supported by enormously expensive, high-profile advertising campaigns. Monster Strike is advertised heavily on Japanese prime time television, as are Puzzle & Dragons and other major local titles such as Colopl Rune Story (Shironeko Project) and Granblue Fantasy. Machine Zone's marketing department seems to be on a mission to put its Mobile Strike ads - featuring Arnold Schwarznegger in a lead role - in front of everyone on the planet at least once a day, while Supercell has promoted its games with hugely expensive out-of-home marketing.
"The marketing budget needed to gain entry to the upper reaches of the mobile sector is far beyond the reach of even many established companies"
These strategies are clearly effective, but they create a high wall around the upper reaches of the mobile sector; the marketing budget needed to gain entry is far beyond the reach of even many established companies. Pokemon Go is the exception, but then again, all the marketing budget in the world couldn't buy the brand recognition of a 20-year-old game series fondly remembered by almost every potential game consumer under the age of 30.
The sense of stability bordering on stagnation in the mobile market is supported by looking at how publisher rankings have changed over the course of 2016. With the exception of Niantic bursting onto the scene in July (though by October it had fallen back to number 8 in the ranking), the top global publishers have simply jostled for position this year. Supercell, Tencent, Activision Blizzard (which swallowed King in February, thus taking its place in the ranking; prior to this, Activision Blizzard wasn't even a top 20 mobile publisher), Netease and Mixi are the global elite, and the only publishers to have a top-five ranked month during 2016. In the second tier are companies like Bandai Namco (which between itself and subsidiary D3Publisher has a large line-up of successful games largely based on popular anime series), Korea's NetMarble (which is one of the top publishers on the Kakao messaging platform), Japan's LINE (which publishes games on its own eponymous LINE messaging platform) and GungHo (creator of Puzzle & Dragons).
A few key takeaways. Firstly, the mobile market is producing very mixed results for traditional publishers. Activision Blizzard bought entry to the ranks of the top publishers in the sector for $5.9 billion. Bandai Namco is the only traditional publisher to have secured a solid place in the top ten through its own development efforts. Within the remainder of the traditional publishing market, only Square Enix and Electronic Arts have built respectable mobile businesses; they occasionally flicker into the lower reaches of the top ten.
Square Enix is of particular interest since it has managed to tie its mobile game business to its console game business in a mutually beneficial way. Dragon Quest mobile games did well around the launch of a new PS4 title in the middle of the year, while Final Fantasy mobile games have both helped to prepare the ground for, and will likely benefit from, the launch of Final Fantasy XV. This is the model Nintendo hopes to cultivate with its mobile titles, so Square Enix' success is a good dry run for how Nintendo will fare as it ramps up both mobile and NX next year.
"It's not unreasonable to argue that mobile games presently lack the genetic diversity to survive a major environmental change"
The importance of East Asia in mobile continues to grow year on year. Of the world's top publishers, two are Chinese (Tencent and NetEase), and Tencent's acquisition of Supercell makes it far and away the largest mobile gaming company in the world. Two are Japanese (Mixi and LINE), with several other Japanese firms (Bandai Namco, GungHo, Square Enix, Colopl, and Sony) in the second tier. One is Korean - Netmarble. Taking into account Supercell's acquisition by Tencent, prior to which a majority stake was owned by Japan's Softbank, the only remaining western companies in the top ranking are the USA's Activision Blizzard, Machine Zone and Niantic (whose only success is a game based on a Japanese IP).
Something interesting to note about this is that while western companies tend to succeed globally, with games by Activision Blizzard, Machine Zone, Supercell and Niantic all being hits across Asia as well as in western countries, the same is not generally true for Asian publishers. China's publishers mostly succeed in China; Japan's publishers generally succeed in Japan; Korea's publishers succeed in Korea. The failure of publishers in these territories to cultivate major markets overseas is undoubtedly a source of concern, but at the same time, the fact that they can dominate the global charts even without overseas success is a testament to the extraordinary strength and resilience of their local markets.
Another division is emerging in the ranks of the top publishers which is also worth watching. There are two types of publisher up there; those whose success is based on one or two stratospherically successful games, and those who don't have a single break-out success but rather a large portfolio of moderately successful games. In the former category are Activision Blizzard (Candy Crush Saga), Mixi (Monster Strike), Niantic (Pokemon Go), GungHo (Puzzle & Dragons) and Colopl (Shironeko Project). Formerly in that category, but now experiencing some success with diversifying into a larger number of profitable games, are Supercell and Machine Zone (Mobile Strike being proof that it can repeat the success of Game of War).
Meanwhile, in the second category, we find companies like Tencent, NetEase, Bandai Namco and Square Enix. Some of these companies' games are more successful than others, of course, but by and large their position in the top ranks of global publishers are based on a wide portfolio, not a single hit. It's tempting to think of this as being a stronger position to be in; these companies have a proven track record of launching successful games and the decline of a single title won't damage the company overall, while firms like Activision Blizzard and GungHo continue to struggle to repeat the success of the slowly declining Candy Crush Saga and Puzzle & Dragons.
"Pokemon Go was fresh water poured out in an endless desert of lightweight, combat-heavy RPGs, short session puzzle games and heavily automated strategy titles"
On the other hand, though, the death of the AA sector in console gaming provides a cautionary tale. If the massive hits at the top of the mobile market continue to outbalance the rest of the sector both in terms of revenue and in terms of marketing spend, it will become progressively more difficult and expensive for publishers with large portfolios of second-tier games to win the attention of consumers. That's what happened to AA; it's arguably what the "AAA+" long-term games like Overwatch and League of Legends are doing to AAA right now. Mobile may not repeat the pattern, but it's hard to see how it will avoid it as it starts to touch the edges of its potential demographics.
It would be nice to sum up with some analysis of trends in terms of games the world is playing, but with the exception of noting the continuing importance of local content in the hugely profitable Asian markets, there's not really a great deal to say. Pokemon Go aside, the world is for the most part playing the same kind of games on its smartphones as it was in 2015 and 2014; indeed, the overwhelming majority are playing exactly the same games they were last year and the year before. This is a remarkable achievement for the creators of those games, but should also worry those concerned with the long-term health of the market.
Consumer fatigue is a real thing; look at how genres of film, literature, music and games have boomed and then rapidly declined as people's interest shifted away. It's not unreasonable to argue that mobile games presently lack the genetic diversity to survive a major environmental change - if people's attention does drift, the lack of variety may cause it to drift entirely from mobile gaming, rather than shifting to a new game.
While the success of Pokemon Go is largely attributable to the Pokemon IP, it's important not to forget that the IP was combined with a style of play that was dramatically different from anything most consumers had played on their phones. Its longevity is still questionable, but Pokemon Go was fresh water poured out in an endless desert of lightweight, combat-heavy RPGs, short session puzzle games and heavily automated strategy titles. The problem is that without the Pokemon IP, nobody would have got to see that innovation.
The high barriers to entry that have been erected around mobile's top tiers mean that the only studios with the capacity to innovate dramatically in the sector are those which already operate its increasingly long-in-the-tooth blockbusters. It's the innovator's dilemma writ large; those with the motivation to innovate and take risk cannot access the market, while those with market access have little motivation to take such risks. There's no doubt that 2017 will be another blockbuster year for mobile, but if this market stagnation continues, investors and creators should be watching very carefully for the warning signs of instability or decline.