Written by Stanislav Yushenko, an ex-M&A lawyer who transitioned to the business side of gaming.

Stan previously worked at Playrix but took a two-year sabbatical to earn his MBA and sharpen his business acumen. Now he’s scouting for his next role—ideally somewhere that values both spreadsheets and strategic vision.

I was recently playing a mobile game. It urged me to jump from one small isle to another in order to get my virtual hands on a chest looming just a few levels ahead. I was not alone on this journey: the chest was hunted by small avatars of my alleged competitors falling into an abyss with each level, making the reward look larger with every step. The game was fun, though I forgot the name. Can you help me recall it?

Playing casual games often gives me a sense of déjà vu. I’m seeing similar-colored buttons with similar prompts. Completing the level is marked with similar stars, and similar islands are popping up inviting me to hop to a chest full of similar boosters. The difference is rather marginal: the islands move from some Caribbean setting to a gloomy volcano with lava. 

Based on a long tradition in mobile gaming, the companies get inspiration and borrow mechanics from each other to the point when the original creator becomes hard to trace. While borrowing mechanics, they sometimes occasionally borrow something more: an expression of those mechanics. As a result, we see a ubiquity of near-clones that can usually be described as “[Name of a well-known game] [preposition] [some new setting or feature] (like in Pokémon with guns).

In this article, I will argue that the ubiquity of cloning is a sign of a weak IP, which is a big problem for gaming companies that want to be on the market in 10+ years, and the only way to create long-term value is to invest in IP differentiation. But first, I will give a brief overview of the IP rights framework and explain why copying is the name of the game (clichéd pun intended) and is unlikely to go anywhere anytime soon.

IP: so many rights, so little help

Let’s start with the basics. When lawyers talk about Intellectual Property (IP), they usually mean one of three things: patents, trademarks, or copyright. Patents protect inventions and are of a shorter duration. It costs a lot to register them, and the process takes ages. It’s also hard since you need to show that whatever you are about to register, meets the criteria of patentability. You can check here for some examples of what has been patented in games before. My opinion, however, is that patents in games can give only a false sense of security since it’s usually not that hard to find a way around the patent or to challenge it in court.

Trademarks are called to protect the link between a producer (game developer) and service (game) in the eyes of consumers. The main question is whether consumers playing a game are tricked into thinking that the game was developed by someone else. Unless a clone game actually copied a big part of your game’s title, that will be really hard to prove.

Now, there is also copyright. In theory, that should be a go-to way to protect the game. Almost anything creative can be copyrightable. However, copyright does not protect the “rules of the game,” and most mechanics will fall under this definition. Moreover, copyright will protect only a part of the expression which is original. If you took a stock character and added a mustache, your copyright ends there. You might be able to prevent someone from copying the exact same mustache but let me slightly change the color and the shape, and I can walk free (together with the character with its freshly-groomed facial hair).

This is something called “thin” copyright––when you can only claim protection against virtually identical copying. The more you add to the game and the character, the broader your scope of rights. Conversely, a plain vanilla character will be hovering just above the chasm of the common domain––where any recycling is a fair game (another pun, this time not intended).

A thin layer of mobile games’ IP

Now let’s turn to the question of the IP in mobile gaming. Mobile game developers face rising production and UA costs and a lack of financing. The natural response is to double down on creative borrowing and cut corners on any storyline and character development to release the game asap––and then see how it goes. After all, Dream Games became successful with only light meta. The players seem to care more about the game speed and the color intensity of visuals than the uniqueness of art. Creating something different involves risk, and why change something that works so well? Right?

That depends on your perspective. In hindsight, following stories of the companies that reached the top of the charts in the last decade, the recipe for success seems to be a good amount of innovation processed by a powerhouse of data analytics and spiced up with imitation. With just enough skill and luck, developers were able to get to the top of the charts and stay there for some time, reaping first-movers’ benefits.

However, the situation does not look that clear going forward. If you are a wannabe Playrix or Dream Games, it’s getting increasingly hard to beat them in their own game. The market is already saturated, and the attempts to get an even faster game, even more boosters, and an even bigger boom once you match those two TNTs together are not going to bring as high of an ROI. On a flip side, if you are already at the top of the game, your innovations will be copied by every new entrant with even lower development costs that will bite off your market share piece by piece. Eventually, some new Dream will come up with something fresh, and you will need to pass laurels to the next in line. Reiterating the title of some of the classic pulp nonfiction, “What got you here won’t get you there.” To get to the top, one needs innovation, but to stay at the top, one needs a moat. And that is what is lacking.

Digging up the moat

Morningstar offers five possible sources of moat: switching costs, network effect, cost advantage, efficient scale, and intangible assets. Switching costs would mean that players stick to the game because they already renovated so many rooms and beat so many levels that they become unwilling to start from scratch. The network effect can lock players in via co-promos. Cost advantage is applicable if the company is able to develop a game in a low-cost market and launch more efficient marketing campaigns, lowering eCPI. Finally, a buttoned-up management structure, well-oiled back-office, and gigabytes of real data from users definitely help market leaders. Yet, under further scrutiny, the moat made of those four elements looks more like a drying puddle.

Switching from one castle to another (or from a mansion to a castle) doesn’t seem to be an issue for players, especially if the locations are weakly connected by only a general concept of renovation without any strong stem of a storyline. Network effect is very limited and few companies that are not called Roblox or Epic can proudly claim successful attempts to create a closed ecosystem. Weaker currencies in developing economies, government cash hand-outs, and AI co-pilots will help newcomers get cheaper games to the market faster. The same AI, used as a plug to replace real users’ data, will make it easier to bridge the analytics gap. The biggest major source of a moat will be the pool of talent with unique expertise that, alas, will still leak to competitors or start their own games, despite increasing salaries and non-competes with questionable legal force. The above scenario increasingly looks like a race to the bottom, and a dread of any CFO: a perfectly competitive market. To prevent this, developers need to resort to the last important source of moat: intangible assets, a.k.a. IP.

All you need is IP. IP is all you need

There are two powerful reasons why strong IP is important. One is legal. If you have an elaborate storyline, unique style, and well-delineated character with catchphrases and an emotional range wider than that of a teaspoon, the game is easier to protect in courts against infringers. The second is behavioral. It goes to an attachment players have to a character and the game. Think of Tamagotchi––players would like the character to have moments of joy and sadness, and evolve continuously rather than just freeze in time, applauding each new level the player beats or encouraging them to buy boosters. I would argue that the emotional attachment to the character and the game is a more powerful source of retention than just clever level design and daily challenges.

As a final thought, I want to go back in time to the 1930s to the cradle of animation. Steamboat Willie (the first cartoon featuring Mickey Mouse) was the first to use synchronized sound. This technological innovation allowed Disney to quickly get an upper hand among its competitors. However, what allowed Mickey to have a better run than its contemporaries like Felix the Cat or Popeye was a greater emotional depth and Disney’s eagerness to capitalize on the character by merchandising and licensing that triggered a virtuous loop of sales. I believe that some companies, like Scopely with Monopoly Go!, are making a step in the right direction, utilizing a strong hundred-year-old IP and causing a virtuous cycle by releasing a Monopoly Go! board game. My bet is that more mobile game companies will have to do that to get to and, more importantly, to stay at the top of the charts.

* * * 

Back to the game I was playing––I eventually got to the treasure chest and received some coins as a reward. Alas, there was another player who reached the chest, so we needed to split it. I’m afraid that for game developers on a treasure hunt, splitting chests with many other players will be a norm, unless they start thinking seriously about IP.