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Wrist and Reward

WearGa's Paul Virapen sees blue ocean markets and "unicorn-like valuations" in the future of smartwatches

I founded WearGa because I believe that games for smartwatches are going be a very exciting market within a short space of time.

While others have made the dubious claim of being the first wearable games studio, we launched our first title on Pebble back in Summer 2014. Pixel Miner, a simple incremental game, asks the player to make a miner dig first with his hand, and then with ever more elaborate and bizarre equipment. Within a few weeks it became the top rated game on the Pebble store and it stayed there. Today, it's the sixth highest ranked app of all time for the platform.

"The Apple Watch, while not perfect, is a huge leap forward for smartwatches"

Unlike other Pebble game developers, we didn't decide just to port a Flappy Bird or 2048 clone. We built something specifically for how people use these devices. We made a game that had short, high frequency sessions, navigated with a UI in exactly the way the device was designed.

Taking the lessons from Pixel Miner, we raised our ambitions for our second game. Cupcake Dungeon, an Apple Watch launch title and one of a handful of games featured by Apple on day one, took just under three months to develop. While there's been a lot said about session length and control mechanics, I am now looking beyond these cursory observations to deeper questions about smartwatch devices, the market and the games that will win it.

Where the Smartwatch market is at

The Apple Watch, while not perfect, is a huge leap forward for smartwatches, handily beating its two most significant rivals: the Android Wear, a feature-packed but frustrating experience, and the first generation Pebble, a more elegant but lower utility product. Apple Watch brings us to generation two, where the basic utility expectation is set, yet the hardware, OS and apps have a lot of room to grow. This transition is much like the leap from keyboard to touchscreen smartphones, and also marks the point on the adoption curve between early adopter and early majority.

Indeed, a recent poll of analysts from Fortune has pegged the mean average forecast for Apple Watches sold in 2015 at 22.5 million units. If you extrapolate that to a full year you reach a number just under 34 million units. That is comparable to iPhone sales in 2010, which stood at 40 million units.

"While we're in the early stages, the market indicators are that we're at a tipping point for rapid growth"

We don't know who else might throw their hat in the smartwatch ring, but I think it's reasonable to expect that Android Wear and other incumbents can be pulled up by the Apple Watch marketing machine. The new Pebble Time was sold for $160 during its Kickstarter campaign, and the Moto 360 has now dropped to $180, so we're likely to see a very competitive market both below the $349 entry level Apple Watch and for non-iOS phone users.

But there's a strong throttling factor for the market: all of the current smartwatch functionality is tied entirely to a phone. The good news, however, is that 1.3 billion smartphones were sold last year alone. Additionally, it may be possible that cheap, small and self-sufficient smartwatches might entirely replace the phone in developing markets in the future.

So while we're in the early stages, the market indicators are that we're at a tipping point for rapid growth. Assuming that games will play as much or more of a part on smartwatch as they currently do on phones, it leads me to my next question.

What will games on Smartwatches look like?

Our goal for Cupcake Dungeon was to take the lessons from our first game, Pixel Miner, and apply them to a more advanced platform. To see firstly how developing for Apple Watch was, how far we could push the limits of WatchKit, and then see if we could recreate Pixel Miner's success while getting first-hand data before anyone else.

The project, therefore, was an experiment. We knew at launch that the Apple Watch market was going to be small, with no on-device in-app purchases and therefore unlikely to generate a meaningful revenue stream straight away. So we made the game totally free, with no monetisation.

"The games we'll see on smartwatch will be vastly different from those on smartphones"

So far the data looks great, with day 1 and day 7 retention figures above 40 per cent and 20 per cent respectively. The game hasn't been out long enough for day 30 retention figures, though it's looking likely it'll be around the 10% mark. However, we don't see Cupcake Dungeon and titles like it - commonly known as "incrementals" - dominating smartwatches in the future. While the frequent short sessions are a perfect fit for the device, the monetisation potential is relatively small.

I think the games we'll see on smartwatch will be vastly different from those on smartphones, but I expect the market to follow some similar trends. Specifically, a divide between causal, mass market, low lifetime value titles and core, niche, high lifetime value titles. I also believe some genres will quickly become red ocean markets as they become too crowded.

We will likely see a gold rush of mobile studios and publishers coming to smartwatches and not fully understanding the platform, making bad calls and ultimately failing. Meanwhile others will ignore the opportunity smartwatches represent, move too slowly and struggle to stay relevant. This puts WearGa and other early studios at a huge advantage if my analysis of the market growth is correct. But that doesn't mean that we don't face serious challenges.

The primary problem that smartwatch developers face is knowing exactly what kind of game experiences will fit the platform best. What we have seen with the Apple Watch launch are a few genre trends: Interactive fiction (Spy_Watch, Lifeline), incremental a.k.a idle RPGs (Runeblade, Cupcake Dungeon), word puzzles (Letterpad, Letter Zap) and virtual pets (Hatchi, Tamagotchi Classic). I have varying expectations for the success of each of these genres, but I feel the industry needs to dig deeper to find a better fit.

"Apple believes that games are going to be a major part of smartwatch usage, and it is willing to back that assertion"

Many of the core titles currently on mobile are dependent on high information density and a level of socialisation through chat that's simply not possible on a watch. Meanwhile, traditional casual titles are reliant on fine input or action that again doesn't fit a smartwatch well. This means that the average mobile developer carries less advantage to smartwatches than one might initially expect.

After much consideration, I believe the DNA of a winning title for the smartwatch will be one that has a wait-limited core loop and high activity density that leads to a possible 5 to 30 second session every 5 to 30 minutes. The main interactions will be UI driven or otherwise super simple, suiting the digital crown and small screen. Additionally, it will be connected and in some dimension social, having player-on-player interaction at its heart.

With the app store wide open the drive will be towards free and, ultimately, free-to-play, so much of a game's value will come from its monetisation, but more importantly from its ability to retain players and draw more in organically.

The Smartwatch is going to be a meaningful sector for games

I've sunk a lot of time into shaping WearGa and building our games, so obviously I believe that smartwatch games are going to be big. However, I recognise that it's feasible - but looking less and less likely - that Apple Watch will be rejected by consumers, or that games will play only a small part.

The featured section of the Apple Watch app store heavily promoted a number of titles, including Cupcake Dungeon, indicating that Apple believes that games are going to be a major part of smartwatch usage, and it is willing to back that assertion. With Apple predicted to have sold more Watch units by the end of the year than Sony has sold PlayStation 4's to date, then Apple Watch starts to look both addressable and sizable rather quickly. And this, of course, ignores the opportunities that will be presented by other platforms in the space.

Smartwatch is going to be a meaningful sector for games, it will create new business that reach unicorn-like valuations. The questions that remain are who they will be and how quickly they'll get there.

Paul Virapen is a games industry veteran and serial founder. Previously Head of Games at Disney and CEO of mobile studio Big Pixel Studios. He is now founder and CEO of smartwatch games focused start up WearGa who are based in London's playhubs.

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