The next in our prediction series - Casino category predictions! 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.

1. 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

2. 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.

3. 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.

Special thanks to Abhimanyu Kumar and Steve Moy for writing this one.

First: A Quick Overview of the Casino Category

As the 3rd largest category by revenue in the industry, Casino games have seen a healthy revenue growth trend over 2018 too. All three sub-genres (Bingo, Poker/Cards and Slots) saw double digit YoY revenue growth percentages and the total category revenue ended at $2.3b (+23% YoY). Most definitely it was Slots that contributed to ~70% of this uptick.

Before we jump into sub-genre specific analyses, let’s take stock of things at a category and market level, as there is more than meets the eye in the category’s revenue growth story.

Show me the DOWNLOADS!

The above mentioned YoY category revenue growth is not very surprising, given how the Casino space has prided itself with regular QoQ revenue growth for the longest time. But there is no industry that continues to grow revenues infinitely without also growing its user base. And 2018 was another year of no downloads growth for Casino games!

As can be seen in the graph above, downloads market size stagnation has been a problem plaguing the Casino space for at least the past 2 years. Moreover, this is contributing to slowed down category revenue growth too. Needless to say, that is not a great place to be if the category wants to stay relevant long term. The time to respond is dawning, and we’d expect various industry developers to respond in one or more of the following ways to grow revenues and/or downloads market size/share.

First - market entry with a disruptive product/marketing idea to attract new kinds of the users to the Casino space. It is no secret that the Casino space has not seen too many disruptive ideas. Key developers have focussed on improving production values, running great live ops, adding a lot of content depth and implementing minor innovative engagement features. Most definitely, this led to the rich becoming richer, while making it quite hard for the Casino market to attract fresh users (from other genres, for example) - unless some major innovation was brought to the table. And “Coin Master” by Moon Active seems to be just that! Not only is it attracting non-slots mobile gamers to the space, but also is growing rapidly in markets like India and Israel that are not traditional land-based slots market, which is usually a strong indicator for a lucrative slots game market to expand into. We expect similar growth to continue in 2019 in markets like Japan, APAC and more of Europe.

Second - continued M&A activity to grow company market shares and grow downloads market size. The Casino space has been no stranger to heavy M&A activity in the past 5-7 years, especially with real world (or land based) casino companies acquiring social casino focussed developers and both parties profiting from some truly beautiful synergies. We don’t think 2019 is going to be any different in that regard. Though there has been one significant change in the kinds of acquisitions happening, with one of the hottest deals of 2018, Playtika (a social casino giant) acquiring Wooga (no experience in the social casino space whatsoever). Such moves combined with Coin Master style products taking the market by storm indicate that key Casino category developers will look to develop genre-blender products that continues to attract new downloads from other genres and hence expand market size even further. More on this later in the post.

Third - continued monetisation growth to boost LTVs, and hence fuel increased UA. The Casino space has been heavily dependent on IAP revenue for the longest time, but also entertains an audience that would be willing to be ad monetised. Luckily enough, 2018 was the year of Hypercasual - and its supercharging of the ad monetisation value chain to make ads a safe and proven lucrative revenue source across the industry. Further, a healthy percentage of Casino revenues are generated from loyal VIP payers, and subscription based offerings are another monetisation tactic that the mobile gaming industry has gotten closer to perfecting over 2018. Given how squeezing the monetisation lemon even more is inevitable and with the wealth of knowledge and experiences already available to mine from, we’d say that ad and subscription based monetisation is going to gain ground in the Casino category over 2019. If any developer can improve product LTVs through the above, then spending more on UA will follow and will drive further downloads growth in the category. The only problem of course will be scaling against rapidly rising CPIs, given key industry developers essentially fighting for the same users.

We’d most likely see the above mentioned points to play out across the category, but let’s now go deeper and figure out what is to come on a sub-genre level.

Bingo

As the smallest sub-genre by revenue, Bingo games have been growing revenues QoQ since Q3 2017. The sub-genre brought in a total of ~$170m (+50% YoY) over 2018, even with a dropping download volume of ~23m (-25% YoY). The massive revenue growth was majorly driven by Playtika’s “Bingo Blitz” (+$30m, +55% YoY) due to its deep gameplay and monetisation systems. The second major driver was NGames Interactive’s “Bingo Party”, which more than doubled its annual revenues (+$15m, +250% YoY) over a +35% increase in annual downloads. It is currently the highest downloaded of all the considered Bingo games. Having said all this, the massive growth period on its way to a conclusion as the revenue growth curve has been slowing down QoQ.

In terms of 2018 publisher market share, things have remained relatively stable. Key publishers have maintained their respective market positions and there were no major new releases that shook up the market. Playtika continues to maintain its dominating position at a ~25% downloads share and ~50% revenue share. After acquiring Uken Games and thereby expanding its operations to Toronto, Jam City now owns 10% of the Bingo market. As for long time Bingo games publisher Game Show Network (GSN) Games, Sony and AT&T are currently considering sale prices for the social gaming unit - indicating not very exciting internal business results here. Meanwhile, Storm8’s efforts to slap on IPs like “Monopoly” and “Clue” to their Bingo products have gone in vain due to poor product monetisation.

In summary, market shares are relatively stable, growth has slowed down and products have reached a point of almost no differentiation. All very strong signs of a greatly matured market, and therefore a market primed for either continued stability or some kind of shake up in 2019.

Poker/Cards

As 2018’s second largest sub-genre by revenue, Poker/Card games grew revenues to ~$315m (+40% YoY) over a relatively stable download volume of ~100m (-5% YoY).

In terms of market share positions, a select few publishers wasted no time in making huge strides in boosting their product revenues - GSN (+$25m, +93% YoY), Playtika (+$20m, +31% YoY) and Supertreat (+$15m, +1500% YoY). Further, Playtika just completed its acquisition of Supertreat, thereby making it the market leader in the Poker/Cards space too!

Both Playtika and GSN grew revenues through great live ops in “WSOP” and “TriPeaks Solitaire” respectively, while Supertreat released “Solitaire - Grand Harvest” to directly compete with the TriPeaks experience. The highly polished “Solitaire - Grand Harvest” has been paying off for Supertreat, as can be seen in the nearing top grossing rankings of both products. At the same time, Supertreat still has some ground to cover to beat TriPeaks with quarterly revenues currently at half that of TriPeaks. But with Supertreat now on Playtika’s side of the ring, we are sure of good things to come for Grand Harvest.

It should be noted that these two games have also resulted in the Solitaire category seeing significant revenue share growth over 2018 - though Poker continues to dominate. Blackjack games were another major growth category, moving from a <1% downloads market share in 2017 to >10% by the end of 2018.

But whats up with Zynga Poker?

In a slight shocker, Zynga lost over half of its downloads market share (50% to 23%). This was due to a major drop in its “Solitaire” game downloads (down -25m, -65% YoY) and also some softness on Zynga Poker downloads (down -3m, -20% YoY). Further, it also lost a quarter of its revenue market share (40% to 31%) between the start and end of 2018 even though portfolio annual revenues grew (up +$5m, +5% YoY).

While Zynga continues to blame Q2 2018’s Facebook Connect bug for Zynga Poker losing steam, there is news around Zynga using its multi-year partnership deal with renowned poker tournament series “World Poker Tour” (WPT) to breathe back life into Zynga Poker during 2019. While it is clear that this dog is not going down without a fight for a sub-genre it has historically dominated, would the collaboration with WPT prove to be enough in 2019 to win the battle against Playtika’s WSOP?

In terms of 2018 download volumes, WSOP and Zynga Poker made up 60% of the poker specific card game market - each holding 30%. On the revenue side of things, both ate up an 80% share - with WSOP at 35% and Zynga Poker at 45%. While it is clear that these two titles dominate the market, WSOP has been growing revenues (+20% YoY) at a much faster rate compared to Zynga Poker (flat YoY).

Given the data above, we would argue that bringing WPT into Zynga Poker is majorly driven by Zynga not only wanting to compete with WSOP at a product level, but also at a branding level. We’d guess this is due to the fact that WSOP has always been able to grow its downloads during WSOP season and reaches new download baselines, while Zynga Poker doesn’t see the same lift - all resulting in WSOP finally beating Zynga Poker on download volumes during Q4 2018, and revenues seem to be on the same positive trajectory too.

Based on the table on the above, it is also clear that WSOP is clearly the bigger of the two Poker events - and therefore the more well known of the two on a global scale. It is imperative for Zynga to focus on great feature design and a stellar marketing collaboration with WPT to reap the rewards of this brand integration, because the WPT IP alone will not carry Zynga Poker back to the market leader for too long - especially given how Zynga Poker gains only 35% of its revenues from US.

Slots

Though being the largest sub-genre in the Casino category, Slots have unfortunately been the least colourful. Downloads were flat YoY in 2018, while revenues steadily rose and saw an approximately +20% uplift YoY - mainly driven by a gradual rise in portfolio revenues of Playtika, Product Madness, Huuuge Global and Scientific Games International. Yes, the Slots segment is still growing - just not like it was two or three (or six) years ago.

In terms of market share, there hasn’t been too much of movement happening over the year - Playtika, Aristocrat (Product Madness + Big Fish Games), Huuuge Global and Scientific Games International continue to fight to hold their market leader positions. This means the year ahead will hold increased pressure to deliver on operational expertise - regular content releases (at least twice a month) with a wide array of fun and engaging live op activities, and all anchored behind the scenes by top-notch product and data science organisations.

Oh, by the way, Playtika is market leader in this sub-genre too!

On the product side of things, Slots games have not seen too much of innovation over the past few years. Product offerings are quite constant amongst the top performers - enter the lobby → choose from a multitude of slot machines → bet → win → repeat. Product differentiation is driven by product UX, art styles, production quality and minor meta systems such as quests and saga maps. Further, slots game economies are still stuck largely in the digital dark ages of the single currency economy. Many games feature secondary and even tertiary currencies, but slots players still largely only care about coins. Given all this, one could say that the sub-genre is primed for innovation.

“Coin Master” is turning out to be that spark of innovation. With deep content wrapped into a single slot machine, a more substantial meta, strong social features, hyperactive live operations and great UX/art/production value, Israeli developer Moon Active has almost flipped the traditional Slots games design model on its head. The resulting numbers don’t lie, as this bold move by Coin Master is proving to be very successful and is quickly growing to become the new face of social casino. Be sure to check out our Coin Master deconstruct next week!

Given how Coin Master opens up slots to new audiences/markets and thereby grows the pie, we think it is a massive disruption to the space. It is very likely that top Slots games developers will move closer to such genre-blending game designs in 2019, so as to evolve and grow not only the Slots sub-genre, but also possibly the other two Casino sub-genres. A strong indicator of this transition probably taking shape in 2019 would be key Casino category players acquiring non-Casino related acquisitions  -

• Playtika’s late 2017 acquisition of the makers of Pirate Kings, Jelly Button Games

• Aristocrat’s late 2017 acquisition of mid-core game developer, Plarium

• Playtika’s late 2018 acquisition of casual game developer, Wooga (the hottest one of the lot)

2019 Casino Category Predictions

On a Category Level

• 2019 will see a number of new hybrid/mashup apps that are chasing Coin Master, Pirate Kings, and Board Kings, thereby leading to category downloads growth through UA and expansion to non-traditional Slots markets.

• The category will see an accelerated growth of monetisation compared to 2018, due to key players getting more serious about ad and subscription based monetisation tactics.

• M&A activity will continue in 2019 with social casino players also acquiring non-social casino players to evolve/grow the market from an innovation standpoint.

• With Scientific Gaming’s possible 2019 IPO of its social gaming unit, it will strongly compete with the omnipresent Playtika for market leader position.

Bingo

• Market will continue to stay stable through 2019 with all key players holding their market positions.

• Possible innovations in monetisation and design, as mentioned in the category level predictions.

Poker/Cards

• Playtika’s WSOP will take the throne as the new Poker market leader.

• Zynga’s WPT brand integration will not reap required rewards during 2019.

• Poker games will continue to dominate the card game market, followed by Solitaire and then Blackjack.

• With Playtika’s expertise, Supertreat’s “Solitaire Harvest” will overtake GSN’s “TriPeaks” on the grossing charts.

• More “Solitaire Harvest” clones will emerge, but with other card games at the core to create new market niches.

Slots

• There will be more new apps that stretch the boundary of what a Slots app can be. While existing games still won’t mess with the traditional “lobby with a bunch of multiline slots with a single currency economy” design, we will see a number of new hybrid/mashup apps that are chasing Coin Master, Pirate Kings, and Board Kings. Necessity breeds innovation, so this should be exciting to see.

• Existing top apps will incrementally improve live ops and content, and experiment with new meta concepts, additional currencies, and deeper/more complex social structures.