2019 Predictions #7: There Is a Billion to be Made in the Wake of Machine Zone
The next in our series of Mid-core category predictions - Strategy Games To make sure you don’t miss all the following prediction posts, please do subscribe to the Deconstructor of Fun infrequent but powerful newsletter. Also, the other 2019 Predictions can be found here.
Before you jump in, let us sum up how we arrived to the predictions.
First we created a taxonomy together with Game Refinery dividing the games market into four different genres: Casual, Mid-Core, Casino and Sports. Then we further broke down the genres into categories based on games and then we further divided each category into a sub-category based. As as example, Candy Crush Saga is in a) Casual Games genre > Puzzle Games category > Match & Blast sub-category
Then we pulled the data of top 500 games (excluding China, Japan and Korea) from Sensor Tower and aligned the data with the genres, categories and sub-categories. Once we had a clear view of what happened, we got together and wrote our predictions.
Please, take the numbers presented with a giant grain of salt. They are there more to show trends and to give rough estimates.
First: a sneak peak into the Mid-core market as a whole
As you’ve noticed from the previous prediction post, we actively refer to categories, genres and sub-genres. In this post, we discuss Strategy Games, which we see as category in Mid-core genre. More specifically, we will deep dive into 4X, Build & Battle and Synchronous Battlers, which are subcategories of Strategy Games. To understand our taxonomy in details, please read this. To understand it at a glance, please look at the image below.
Strategy games account for the biggest revenue in mid-core games and second largest in all mobile games after Puzzle games.
As a whole, the Strategy games category has declined due to decline of Clash Royale. That decline was set in motion due to rise of Fortnite.
4X offers two strategies to reach Billions in revenue
4X games (4X = explore, expand, exploit, exterminate) are midcore strategy games that have a heavy focus on meta systems and progression with almost zero core gameplay. These games are extremely difficult to build and run but they also offer the best the best return for investment and an opportunity for scalable business. Best example is the current undisputed and undefeated subcategory leader Lords Mobile. 4X games are also the second biggest subcategory on mobile after Match & Blast games. And these two largest subcategories couldn’t be furthest apart whether we’re talking about core audience or key KPIs such DAU, LTV, ARPPU and CPI.
Before we look into the future, let's take a look back. In 2017 Machine Zone took a beating. The company lost its long-lasting position at the top as both Game of War and Mobile Strike entered freefall the moment Final Fantasy was launched. What is interesting to notice is that MZ launched all of the three of their mega hits (Game of War, Mobile Strike and Final Fantasy) under different publisher names, which indicates that their publisher name carries more negative than positive value.
FunPlus (Guns of Glory, King of Avalon) and IGG (Lords Mobile) took over the lead in the subcategory when Machine Zone (Final Fantasy, Mobile Strike, Game of War) slipped. The fall of Machine Zone from the top position also opened up the market for numerous new publishers not shown in the graph.
While MZ was tumbling down, IGG and FunPlus made big strides and became the new kings of the subcategory without having any previous 4X games. IGG's Lords Mobile made close to $300M in net revenues in 2017 and continued growth in 2018 closing at over €350M. To sum it up, Lords Mobile is a true masterpiece. Whilst most of 4X titles copy a vast amount of their elements from MZ titles, Lords Mobile introduced more features, increasing its overall complexity while also making it more digestible in places. The game has base building elements and a Summoners War-style role-playing loop in an addition to the genre-specific territory captures. Lords Mobile is the first successful game to add more proven midcore mechanics to a 4X game, which accompanied with a typical midcore art style and high production values brought new players into the genre.
Due to incredible marketability and extremely powerful featureset, Lords Mobile earns well over $100M a year than the second best game in the subcategory. The marketability of Lords Mobile can be seen in the incredibly wide distribution of countries where the game is grossing high. Competitors tend to be more Western focused with bigger percentage of revenues coming from US.
While IGG took over the charts by focusing almost solely on Lords Mobile (in addition to Conquerors, which is a 4X game for Arabian audience), FunPlus became the biggest player in the category revenue wise delivering 4 different titles in just over two years.
FunPlus (Kingsgroup) is the biggest 4X publisher as of date. While IGG and MZ focused on growing their flagship titles, FunPlus took a page out of Kabam’s playbook and focused on resigning their original hit in search of improved marketability and new player segments.
Based on the company’s recent success, FunPlus has mastered both live operations and user acquisition and scaled these learnings by creating well marketable reskins of its inaugural hit King of Avalon. As you can see from the revenue graph below, FunPlus has launched (under KingsGroup) two megahits, one clear miss (Dino War) and one promising new game (Z Day). All four game are almost identical, which makes you assume that the most important differentiator is the theme as it sets the limitations for user acquisition both in what types of players the game attracts and in how much it costs to attract those players at a scale.
FunPlus has achieved incredible growth by launching reskins of its original hit, King of Avalon. In other words, while competitors were growing their hit game, FunPlus focused on building a 4X platform allowing them to create and run a portfolio of strategy games.
As said, theme and art style are crucial to success in 4X games. After all, when the feature sets are more or less the same, marketability becomes even more important factor. When talking about marketability, we have to talk about IPs. As we mentioned in our first prediction of the year, IPs are not a factor in Puzzle games. But they are a factor in 4X games. Warner Bros, got in on the act with their 4X game using the Game of Thrones: Conquest grossing over $120M in net revenue with less than 10M installs. Scopely’s Star Trek Fleet Command is no slouch either. This truly different and absolutely fantastic strategic space exploration game has in two short months amassed close to $14M in net revenue with just 3M installs. Not to mention Machine Zone’s mega hit, Final Fantasy.
While Final Fantasy is the biggest IP 4X game, WB’s Game of Thrones is definitely a killer hit that has been growing for soon two year straight. Scopely’s Star Trek looks also like a massive hit and on to a start to make it biggest grossing game from the publisher.
Unlike in any other subcategory on mobile, the top in strategy games is wide, accepting of new games, new game mechanics, new themes and new-to-market publishers. This is mainly due to the fact that each of the top games has quite limited DAU of few hundred thousands at best. Because the relatively small size of each game’s audience, you’re not fighting to poach players from one or two dominant games in a category. Instead the focus on feature parity and marketability.
To oversimplify it there are two ways to strategies to succeed. Either put a laser focus on your flagship title and push it to the top by employing aggressive and highly capable user acquisition and world-class live operations. IGG is a great example of this. The second option is to find success with one game, turn it into a platform and re-skin it to target new audiences with lower CPIs and higher yield. Just like FunPlus. Machine Zone in a way proved that both options work as it first focused on two games and then cut the focus to only one new title.
The top in 4X games is high and wide with top 9 games all making over $5M in revenue a month. In addition, the long tail of each game, once marketing has been cut-off, is very long and very profitable.
We predict that:
4X games will continue to see innovation along the lines of Lords Mobile (RPG elements), Star Trek (focus on exploration rather than extermination) and Rise of Civilizations (UX) with more midcore themes, mechanics, and art styles being introduced. Not to mention that improvements in UX is where the lowest hanging fruit is at.
Publishers will continue coming up with ever more captivating themes with a goal of increasing marketability.
More IPs will enter the subcategory. The best ones are those, which attract target audience of 30-45 males.
The market size in terms of revenue will continue to grow Worldwide as IPs and more casual themes will attract wider audiences
Read more about 4X games in our four part analysis:
The Secrets of Machine Zone's Success
Build & Battle continues to slowly evolve away from Clash of Clans
Clash of Clans continues to take the majority of yearly revenues in the Build & Battle subcategory but every year the game’s share of the pie is getting slightly smaller as rivals take an increasingly larger share bite by bite.
Supercell has been fantastic in creating and dominating a category known as Build & Battle games. Clash of Clans is a legendary game, which has inspired numerous follow ups such as IGG’s Castle Clash, which carved a spot by beating Supercell to Android and Space Ape’s Samurai Siege, which was the first clone of Clash of Clans in the West. Other follow ups found success via marketability. Disney’s Star Wars: Commander and Nexon’s DomiNations being a great example. Then there are games than innovated on the genre, like Pocket Gems’ War Dragons and Lilith’s Art of Conquest.
But let's put things into a perspective. Clash of Clans together with Supercell’s own follow-up, Boom Beach, grabbed together 85% of the category lifetime revenues. Games that were considered hits when they launched, like DomiNations, grossed less than a fifth of what Boom Beach did.
Kixeye has been the most unfortunate publisher in the Build & Battle subcategory. This once genre defining publisher who basically defined the category on Facebook has been left stranded on mobile. Backyard Monsters, VEGA Conflict and War Commander were powerhouses on Facebook, got translated into beautiful mobile games but nevertheless failed to find their groove.
We predict that:
Supercell will continue to dominate powered by company’s unforgiving focus on Clash of Clans and an upcoming push of Boom Beach. The company’s revenues are on decline (though still monstrous) and it just makes sense to give some love to some of the great older titles like Boom Beach and Hay Day.
Genre innovators that match 4X elements, such as Art of Conquest, will continue to carve sizeable pieces of the pie of the sub-category. Adding 4X and/or RPG elements offers the biggest product improvement opportunities.
Synchronous Battlers is a Valley of Death for everyone but Supercell
This is the closest you can get to a monopoly on mobile. Event IPs like Titanfall, South Park, Star Wars and Command & Conquer were unable to make any damage in the Synchronous Battlers subcategory.
If Supercell dominates Build & Battle category, it straight up owns the Synchronous Battlers. After Clash Royale launched in 2016, we saw several follow up titles appear on to the market only to crash and burn. The clones and slightly altered clones did indeed hit the market with titles such as Titanfall: Assault (Nexon), Star Wars: Force Arena (Netmarble), South Park: Phone Destroyer (Ubisoft). While these were high profile titles that received significant featuring support, they didn’t even show up on the radar of Clash Royale’s revenues. Latest one to throw in the gauntlet has been EA’s Command & Conquer Rivals. But given subcategory history it is highly unlikely that the game can make a dent. And again, this is no nock on the quality of Command & Conquer or any other synchronous battler. The fact is, the only game to affect Clash Royale’s run rate has been Fortnite. Which should tell you about the magnitude of Clash Royale.
We predict that:
Supercell will continue to own this category while Clash Roayle will very slowly decline
Command & Conquer is just less than a month old when writing this article and we predict that this beautiful game will suffer the same fate as its predecessors Titanfall and Star Wars.
If you want to dive deeper in mid-core, here are some relevant articles:
Prediction for 2018: Mid-Core Games
7 Reasons Why You Can't Stop Playing Clash Royale
Clash Royale - Deconstructing Supercell's Next Billion Dollar Game
5 Reasons Why You Want To Quit Clash Royale
Will Clan Wars Get You Back to Clash Royale?
