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May 06, 2015

Mobile Revenue Dominates Gaming Space with Double-Digit Growth

Games software revenue is forecasted to grow from $88 billion in 2015 to $110 billion by 2018—and it’s a changing industry, as console and online giants give way to mobile insurgents.

According to Digi-Capital’s Games Digest and Games Report for Q1 2015, the industry will sustain an 8 percent annual growth rate.

“In a single digit growth market, games leaders with hit IPs, user scale and cash-flow are spending more on marketing (Superbowl ads included) and development to drive shareholder value,” said Tim Merel, founder at the analyst firm, in a column. “This dynamic has eaten into games industry margins, and made it more expensive for newcomers to break through (although indie games like Monument Valley will always capture the imagination).”

Mobile revenue is by far the fastest-growing. Digi-Capital forecasts that mobile games revenue will grow from $29 billion in 2015 to $45 billion by 2018, a 15 percent annual growth. Where mobile games will take $3 of every $10 spent by gamers on software in 2015, that figure will go up to $4 out of every $10 by 2018.

Interestingly, it’s Android that’s making the most money in the mobile space, mostly thanks to high adoption in Asia.

Asia has dominated mobile games revenue since 2013, compared to both North America and Europe, and Digi-Capital forecasts Asia to take over 50 percent of all mobile games revenue in 2018.

“Accepted wisdom and research tells us that iOS makes more money than Google Play, despite Google Play having more downloads,” Merel noted. “But what about iOS vs Android at a global level? Include the massive Chinese Android app stores, and Android didn’t just dominate download volumes, it made more money than iOS last year.”

That said, iOS remains the easier app store for monetization per download—Merel reported that it takes over two downloads on Google Play and over eight downloads on Chinese Android app stores to make the same amount of money as one iOS download. That means Android would need to sustain a huge volume to remain the leader going forward. But, the existence of so many third-party app stores for Android (thanks to Google’s more open model) will help it in its quest.

“While in 2018 iOS should still have the highest mobile games revenue of any one individual app store globally (followed by Google Play and Chinese Android), mobile games revenue from all Android app stores combined could top iOS,” said Merel. “In other words, Android could make more money for games developers than iOS by 2018. And that’s a big deal.”

Mobile may be on top, but advances in augmented reality (AR) and virtual reality (VR) could turn the entire market on its ear.

“AR and VR could give rise to an entirely new set of disruptive insurgents,” Merel said. “Let the games begin!”




Edited by Dominick Sorrentino


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