Periods of transition bring both opportunities and threats, with established orders crumbling and new systems raised in their place. Over the last 12 months it has become very clear that a great many of mobile's biggest companies are preparing for that kind of change. Kabam's Aaron Loeb described it in terms of increasingly sophisticated players. His boss, CEO Kevin Chou, framed it as a matter of focus, on fewer products with larger returns.
As Kabam's former president of worldwide studios, Andrew Sheppard knows both Loeb and Chou very well, and he recognises the need for reflection and change every bit as much. Indeed, he has been deeply engaged with those two principles ever since he took the role of COO at GREE International in August 2014: working from 50 direct reports and countless meetings to assess the company's various functions, identifying the problems, and attempting to better position it for the coming years in mobile games.
"The strategies that I helped put in place at Kabam, you can see them playing out now," he says. "To have jumped in, two years forward, and tried to replicate those would not have been a durable strategy.
"People are becoming much more nuanced with their preferences in free-to-play, both likes and dislikes"
"[GREE International's] capabilities relative to the market, our staffing relative to the needs of the existing business, it just wasn't lined up. Y'know, a difficult, difficult decision overall. I was always relied on to do this at Kabam, and oftentimes on my own. It was never something... I hate having to restructure."
That restructuring resulted in the closure of GREE International's Vancouver office in May, and the loss of 30 per cent of its total remaining workforce a few months later. It was, Sheppard says, "a harder reset than I would have liked," but necessary if the company was to meet the new demands of operating at the very highest level in the mobile market.
Certain aspects of Sheppard's strategy for GREE are evident in its activities immediately following the job cuts. Almost 90 per cent of GREE International's revenue comes from North America, Sheppard says, "which is stunning, given the size of the business and the age of the portfolio." In July, it established a new office in Berlin, a focal point for a European market that Sheppard believes offers more potential for growth for GREE's existing portfolio. At the same time, the company established another new studio, in Australia, largely due to the acquisition of the Melbourne-based developer, Twiitch. The technology platform used to create Twiitch's Heroes of War will provide the basis for GREE's internal development going forward.
"The best game developers in the world understand their audience to a T, but in free-to-play you were necessarily not building for yourself, because the market is so broad," Sheppard says. "However, there are increasingly nuanced and specific sub-audiences within free-to-play. People are becoming much more nuanced about their preferences, both likes and dislikes."
"I think a lot of companies just mail it in on the strategy side, to be blunt"
Sheppard describes GREE as a "mid-core studio" based on the talent within its ranks, but that's more a matter of day-to-day experience than on-paper skills. It is possible to identify and fully understand how a huge hit like Candy Crush Saga works in terms of lifetime value, he says, but that doesn't mean you can replicate that success. "Because we haven't practiced it. And practice in today's world is so important.
"I think a lot of companies just mail it in on the strategy side, to be blunt, and then get into the feeling of building a game. Which feels great. Everybody loves to do that, but ultimately that can be deferred pain. You want to deliver success to your team. Teams that are successful are the most happy."
And at the level GREE wants to compete, success is now predicated on focus and specialisation. On both occasions that I have met Sheppard in 2015, he rhapsodised the boldness of Machine Zone, backing Game of War at a difficult time to the exclusion of almost everything else. "It speaks to how important it is to be incredibly strategic about where you place your next bet, and also to have the utmost conviction behind it," he says. "That was my major learning from Machine Zone: they want all-in on building a game to turnaround the company. GREE's not in that same dire level of challenge, but you still want to apply that same degree of discipline and conviction to whatever you're going to do going forward.
"Mobile gaming is becoming artisanal. That's a good thing. It started off as just being, like, throw a million things at the wall, for free-to-play. But that artisanal quality is a double-edged sword. You have to respect that people doing something that you're not doing definitely know how to do it better than you."
"It is harder, and it is gonna be a lot harder for people who are building with their gut"
This treads similar ground to Sheppard's point about King and Candy Crush - success is in the practice, and not necessarily the principles. You can analyse Game Of War and map out the way it works, the way it retains its players, and the way those players spend, but the relationships between these systems in the biggest games are increasingly complex and idiosyncratic. Due in part to their sheer scale and lengthening life-spans, the biggest mobile games are really only like themselves.
"There are certain things that are scorched earth, that you can't chase," Sheppard says. "The level of experience required to execute in the market is growing. I think the degree of specialisation required for teams to be exceptional is higher than ever before... People need to be mindful of what they're doing. It is harder, and it is gonna be a lot harder for people who are building with their gut. You need to align with the market."
To be clear, Sheppard is speaking in the context of those developers with ambitions towards the top-rank of the mobile industry. There will still be breakout hits, like Hipster Whale's Crossy Road. There will still be passion projects from larger, better resourced developers, like ustwo's Monument Valley. There will still be stunningly creative studios that seem to care not at all about earning millions a day, like Sweden's Simogo. But, if Sheppard and others at a similar level of the mobile industry are accurate, the '1 per cent' of the market may soon look as distinct from the majority of mobile games as AAA console products once did.
Earlier this year, Sheppard gave a talk at Quo Vadis in Berlin, in which he emphasised the need for mobile companies to, "step up production qualities, to step up marketing sophistication, to move beyond UA, move to even longer horizons of financial planning, but also operational planning. It requires a very different mindset, and it's happening on a timeframe that's faster than anyone could have imagined." I was reminded of that talk when listening to Aaron Loeb describe the, "throw spaghetti at the wall and see what sticks," era of mobile free-to-play games, which he hoped would be consigned to the garbage can of history. Speaking to Sheppard following Loeb's talk, it's clear that a frisson of chaos still lingers in the mobile market, promoting damaging business practices and threatening stability for all.
"Digital distribution has tipping effects towards winner-take-all. It favours people who spend crudely, blindly, to just crowd out the competition"
"It is also feeling harder for a lot of people because you have some people that are irrational," he says. "People that are not in it to be in gaming for the next 10 or 20 years, who are just trying to buy [users], make as much money as they can, do secondaries. A lot of the pre-exit companies are acting in irrational ways. On the opposite side you also have, sadly, the smaller companies that are on the margin of not being profitable and fighting to stay there, who are also spending irrationally on marketing and what have you. All of that is accruing massive benefit to the ad networks."
Beyond that, though, the benefits are difficult to spot. Sheppard noticed Apple's furtive glances toward a firmer hand with curation during the summer, and he believes both the App Store and Google Play will drive further in that direction in an effort to stabilise business conditions. More specifically, by focusing on better curation, improved search algorithms and other means of optimisation based on individual preference, Apple and Google can diminish the influence of those irrational spenders.
"The tricky thing with all digital distribution is that it has tipping effects towards winner-take-all," he says. "It favours people who spend crudely, blindly, to just crowd out the competition. That is hurting the market, and it's hurting a lot of the smaller developers as well.
"Honestly, it's not a good long-term thing. You don't want another situation where there's a shock to the profitability of the ecosystem too fast, and it leaves a lot of developers gasping for air. There's too much good talent in the market that's settling into areas of specialisation. If that margin pressure comes too fast it's not going to allow the industry to settle into a state that has more than just a few products.
"From a consumer standpoint, I don't want to see that. And I don't think you want to see that either."
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