THE MOBILE GAMES MARKET HOW TO COMPETE IN THE CROWDED MARKETPLACE

CASUAL GAMES SECTOR REPORT 2016

CGA. Consumers will spend $6.5 Bn more on mobile games this year than last, how can you claim your share?

Competitive? Yes. Opportunities to Outsmart Competition? Yes.

Gamers worldwide will generate a total of $99.6 billion in revenues in 2016. For the first time, mobile gaming will take a larger share than PC with $36.9 billion, up 21.3% globally. The top ranks are continuously dominated by a select number of companies. Still, the long tail on mobile devices allowing smaller studios to make a good living is much larger than on PC or Console. Chances of success for smaller studios increase dramatically by making smart decisions in their international roll-out strategy, focused marketing effort, and optimizing gameplay and monetization using the correct metrics.

The Long Tail of Mobile Games on iOS Based on 2015 net revenues (excl. 30% fee)

>$100M= 1,436 mobile games generated net = $10M-$100M revenues of

= >$1M $1M-$10M on iOS alone = in 2015 27 164 1,245 GAMES GAMES GAMES

Source: Newzoo App Store Data/PrioriData COMPETING Know the Future of Your Market IN MOBILE

Global Games Market Revenues | Per Device | 2016

The Mobile Gaming Opportunity Gamers worldwide will generate CONSOLE PC a total of $99.6 billion in $30.8Bn $31.9Bn revenues in 2016. For the first time, mobile gaming will take a +2.2% YoY 31% +2.1% YoY 2016 32% larger share than PC with $36.9 TOTAL billion, up 21.3% globally. $99.6Bn +8.5% YoY 14.6% 2015-2019 CAGR for mobile revenues vs. 6.6% for the 37% total games industry

MOBILE $36.9Bn $52.5Bn +21.3% YoY revenues globally by 2019 Source: Newzoo Global Games Market Report Premium

Mobile Revenues | Selection of Key Markets | 2016 vs. 2019

RUSSIA $0.4Bn CHINA 2016 USA UK $10.0Bn $0.6Bn $6.7Bn $1.1Bn 2016 2019 JAPAN 2016 2016 $13.9Bn $7.8Bn $1.3Bn 2019 $6.5Bn 2019 2019 2016 SAUDI $7.1Bn ARABIA TAIWAN 2019 $0.4Bn $0.6Bn 2019 2016 2016 $0.6Bn $0.8Bn 2019 2019 BRAZIL $0.4Bn 2016 SOUTH $0.9Bn AFRICA AUSTRALIA 2019 $0.1Bn $0.5Bn Indonesia 2016 2016 $0.2Bn $0.6Bn will jump from #16 in 2019 2019 the global mobile revenue ranks in 2016 to #7 by 2019

COMPETING IN MOBILE | CASUAL GAMES ASSOCIATION 3 Source: Newzoo Global Games Market Report Premium Choose Your Battleground Wisely

Where Does This Year’s Growth Come From? Global Revenue Growth by Region | 2016

2016 CHINA REVENUE GROWTH $2.91Bn $6.5Bn REST OF APAC $0.89Bn NORTH AMERICA $0.61Bn MIDDLE EAST &AFRICA $0.57Bn

2015 LATIN AMERICA REVENUES $0,49Bn $30.4Bn WESTERN EUROPE $0.47Bn

JAPAN $0.27Bn

EASTERN EUROPE $0.14Bn

SOUTH KOREA $0.09Bn

OCEANIA $0.03Bn

Where is Growth? Mobile gamers will spend $6.5 billion more this year than last. The vast majority of this revenue growth will come from APAC, with China alone contributing an impressive $2.9 billion.

Source: Newzoo Global Games Market Report Premium

Share of Mobile Revenues Per Genre | North America vs China | 2016

7% 16% 13% 6% 39% 25% 11% $10.0Bn $7.2Bn 11% Mobile Mobile revenues revenues

23% 17% 20% 14%

Action/ Adventure Casual Casino & Card (Incl. trading card games)

Roleplaying Strategy & Simulation Other

4 Source: Newzoo Global Games Market Report Premium COMPETING Research Realistic Opportunities IN MOBILE

Top 1,000 Games Revenues By Company | iOS | Global | April 2016

Top 10 grossing Top 10 grossing 9% Publishers on iOS Publishers on Google Play (2015) (April 2015) 8% 44% of revenues 6% from Top 10 4% 56% SUPERCELL 1 SUPERCELL TENCENT 4% 2 KING KING 3 LINE CORPORATION 3% NETEASE GAMES 4 BANDAI NAMCO 3% MACHINE ZONE 5 NETMARBLE GAMES 3% LINE CORPORATION 6 MIXI 3% BANDAI NAMCO 7 COLOPL 3% MIXI 8 SQUARE ENIX EPIC WAR LLC 9 GUNGHO COLOPL 10 ANIPLEX OTHER

Source: Newzoo App Store Data / PrioriData

Consolidation versus the Long Tail The top grossing mobile game charts are consistently dominated by familiar names. In April, the top 10 mobile publishers accounted for 44% of revenues generated by the top 1,000 games in the iOS store. For Google Play, the share is 42%. This consolidation of mobile revenues will continue as these publishers funnel their significant resources into R&D, marketing, and user acquisition. In April, 80% and 77% of app store revenues of the top 1000 games went to the top 50 developers in the Apple App Store and Google Play, respectively. This means the remaining publishers (447 on Apple App Store and 431 on Google Play) took around 20% of the money spent on mobile apps in April.

Top 1,000 Games Revenue Share by Top 50 Companies | iOS | Global | April 2016 39% 447 431 COMPANIES COMPANIES

20% 23%

Top 50 77% Top 50 80% COMPANIES COMPANIES

COMPETING IN MOBILE | CASUAL GAMES ASSOCIATION 5 Understand Your Power User

A Demographic Profile of the North American Big Mobile Spender | Age Split

of North American mobile gamers 70% 30% 6% spend over $25/month on mobile games MALE FEMALE

16% 11% LIVES WITH 45% CHILDREN 12% 6% SPENDS BIG 50% 9.6 ON PC GAME MILLION 15% 15% WATCHES TWITCH 53% >1/MONTH

14% 12%

FAVORITE SPORT TO PARTICIPATE BASKETBALL 10-15 16-20 21-25 26-30 MAIN TELEPHONE iPHONE 31-35 36-40 41-45 46+ BRAND

Reasons to Pay for a Game | North American Big Mobile Spender

35 Hearthstone Gamers 38% Candy Crush Gamers 31% 29% 30 28% 25% 25 21% 20% 21% 20 19% 18% 17% 17%

15 14%

10% 10 8% 8% 7% 7% 6% 5 3%

0 COMPETITIVE NEED TO PAY IN UNLOCK TO BE ABLE TO PREMIUM GET RID OF MAKE GAMING TO BE ABLE AVOID OTHER ADVANTAGE ORDER (EXTRA) COMPETE WITH ACCOUNT ADVERTISEMENTS EXPERIENCE TO PLAY WAITING TO PLAY LEVELS OTHERS MORE FUN EXTENSIONS (NO FREE TRIAL) 6 Source: Newzoo Global Games Market Report Premium COMPETING IN Outsmart Competition MOBILE Using Metrics

Average is not good enough Top Countries by Conversion All game monetization and retention metrics on this Rate on iOS | April 2016 page are 75th percentile figures (for a full month). The reason is that, in general, average performance is not enough to secure a profitable game. Using average metrics in a business plan provides the wrong benchmark for companies that are seeking success in this competitive space. 1. Switzerland 4.5% 4.9% Appstore data is only part of the equation 2. Australia 4.2% 4.9% Mobile intelligence can help developers to outsmart 3. US 4.1% 3.0% competition by setting priorities in terms of 4. Austria 3.9% 2.5% countries, stores, devices, marketing effort and game 5. UK 3.8% 2.9% optimization targets. This total picture also ensures realistic business plans that have a non-traditional approach with a higher chance of success. Many developers focus solely on app store data, which only provides one single angle to the mobile challenge. Source: Newzoo Mobile Monetization Metrics / deltaDNA

Mobile Intelligence on Australia | KPI Examples Casino Genre | FY2016 / April 2016

PRIORITIZE APP STORE & GENRE FOCUS u TARGET GROUP PROFILING OPTIMIZATION METRICS COUNTRIES u u

2016 MOBILE GAME iOS MARKET SHARE SPENDERS ON iOS ARPDAU iOS GAMES REVENUES 67% 1.3 M $0.12 $510 SHARE CASINO GENRE SHARE OF iOS SPENDERS D7 RETENTION 2015-2019 REVENUES ON iOS PLAYING CASINO RATE FOR iOS CAGR 24.5% 8.0% 23.7% +4.2% M/F RATIO OF CASINO TOP GROSSING CASINO SHARE OF iOS SPENDERS PLAYERS ON iOS 2019 MARKET SIZE GAME ON iOS THAT CONVERTED

$580M HEART OF VEGAS 55% MALE 21.8%

DEVELOP FOR TOP DEVICES APPLE DEVICE COVERAGE | 2.1M APPLE DEVICES IN AUSTRALIA | MARCH 2016

1. iPhone1. 6 iPhone 6 5. iPad Air5. iPad Air 9. iPhone 6S 1. iPhone 6 15.8% 15.8% 5. iPad15.8% Air 6.2% 6.2% 9. iPhone6.2% 6S 9. iPhone4.9% 6S 4.9% 4.9% 2. iPhone2. 5S iPhone 5S 6. iPad Mini 10. iPad 4 2. iPhone 5S 11.3% 11.3% 6. iPad11.3% Mini 6. iPad6.0% Mini 6.0% 10.6.0% iPad 4 10. iPad 4.0%4 4.0% 4.0% 3. iPhone3. 5 iPhone 5 7. iPhone 4S 11. iPhone11. 5C iPhone 5C 3. iPhone 5 9.5% 9.5% 7. iPhone9.5% 4S 7. iPhone5.5% 4S 5.5% 11.5.5% iPhone 5C 3.7% 3.7% 3.7% 4. iPhone 6 Plus 4. iPhone 6 Plus4. iPhone6.4% 6 Plus6.4% 8. iPad 2 5.2% 5.2% 12. iPad 12.Air 2iPad 3.6%Air 2 3.6% 8. iPad6.4% 2 8. iPad 2 12.5.2% iPad Air 2 3.6% COMPETING IN MOBILE | CASUAL GAMES ASSOCIATION 7 See you in Tel Aviv

Casual Connect returns to Tel Aviv in 2016. For press inquiries, please email [email protected]

Great speakers, interesting and professional industry Learn more about the games industry with the best insiders, and of course, signature evening events. speakers, networking, lectures and data to help you http://telaviv.casualconnect.org succeed in a crowded market at:

Casual Connect Tel-Aviv 1 - 3 November 2016 Casual Connect Europe in Berlin 7 - 9 February 2017

Casual Connect Tel Aviv 1 - 3 November 2016

About Newzoo ABOUT THE CASUAL GAMES ASSOCIATION Newzoo is the global leader in mobile, games, and eSports market intelligence with offices in Amsterdam, When it comes to the health of your business, the more things that work Shanghai, and San Francisco. We provide our clients together, the better. Which is why the Casual Games Association is a with a mix of market trends, platform data, in-game critical portion of the success of your company and the industry as a metrics, revenue projections, and consumer insights whole. It means that you and your team have access to cutting-edge across all continents, screens and business models. We educational resources and are connected to thousands of other game are proud to work for the majority of top game and industry professionals, members of the press and service providers eSports companies worldwide along with many around the globe. independent game developers and leading global Learn more at http://www.cga.global technology, internet and media companies. CGA.