Hardware & Esports at the Core of 1. The mobile gaming 4 opportunity 2. Immersion and competition are key 9 trends 3. Hardware facilitates 20 and drives mobile trends Fast-rising hardware capabilities facilitate new game formats COMPETITIVE FREE-TO-PLAY Competitive mobile games and mobile esports MULTIPLAYER GAMES AS A SERVICE continue to rise in popularity, taking an increasing share of gamers’ time and money. With new cross- IMPROVED platform innovations, mobile gamers now have the HARDWARE possibility to play and compete directly with PC and IMMERSIVE console gamers. At the same time, mobile games SINGLE PLAYER SPECIFICATIONS have become more immersive, offering realistic and engrossing game environments and experiences. The convergence of these two trends, made possible by fast-rising hardware capabilities, has paved the way MAXIMUM for new game genres such as battle royale to emerge GAMING and thrive. EXPERIENCE In this report, we explore the mobile gaming opportunity and how the desire for increasingly core, competitive, and sophisticated experiences on mobile has led hardware brands such as Razer and Asus to release dedicated mobile gaming devices. PAY-TO-PLAY © 2018 NEWZOO GAMES AS A PRODUCT MAXIMUM VIEWING JELLE KOOISTRA EXPERIENCE Head of Market Analysts © Newzoo 2018 3 1. THE MOBILE GAMING OPPORTUNITY Global games market revenue forecast | Per device and segment MOBILE PC $70.3Bn $32.9Bn +25.5% YoY +1.6% YoY 3% 24% TABLET GAMES 10% BROWSER PC GAMES $13.9Bn 21% $4.3Bn Mobile games will account for +13.1% YoY -13.9% YoY 2018 TOTAL BOXED/ (SMART)PHONE 51% $137.9Bn DOWNLOADED GAMES PC GAMES +13.3% of the global $56.4Bn 41% YoY $28.6Bn games market this year. +29.0% YoY 25% +4.5% YoY 25% CONSOLE $34.6Bn +4.1% YoY © Newzoo 2018 Source: 2018 Global Games Market Report newzoo.com/globalgamesreport 5 Global games market revenue forecast | Per segment toward 2021 TOTAL MARKET Boxed/Downloaded PC Browser PC Console Tablet Smartphone CAGR 2017-2021 $180.1Bn $165.9Bn $151.9Bn 18% $137.9Bn 19% 1% Mobile games alone 20% $121.7Bn 2% will generate more than 22% 21% 2% 22% 23% 3% 24% 10% 4% MOBILE 25% 10% MOBILE $106.4 in revenues by 2021. 27% 10% MOBILE $94.2 Bn 10% MOBILE $82.3 Bn MOBILE $70.3 Bn 10% $56.0 Bn 49% 47% Bn 44% 41% 36% 2017 2018 2019 2020 2021 Source: 2018 Global Games Market Report © Newzoo 2018 newzoo.com/globalgamesreport 6 Number of mobile gamers per sub region | Global NUMBER OF MOBILE GAMERS % OF THE TOTAL PER REGION | 2018 POPULATION China 577.9M 41% Middle East & Africa 346.4M 20% Rest Asia 303.6M 17% In 2018, Latin America 195.8M 30% Western Europe 166.0M 41% North America 165.6M 46% of the total population in the West will play Southeast Asia 24% 158.8M mobile games. Eastern Europe 142.5M 40% Japan 59.3M mobile gamers 47% globally South Korea 23.7M 46% Oceania 11.2M 27% 0MM 100M 200M 300M 400M 500M 600M Source: 2018 Global Games Market Report © Newzoo 2018 newzoo.com/globalgamesreport 7 Global mobile games market revenue | Per region with year-on-year growth rates EUROPE, MIDDLE-EAST & AFRICA $10.3Bn CHINA TOTAL $23.0Bn +19.5% YoY 15% In 2018, China and Japan NORTH AMERICA ASIA-PACIFIC combined will account for over $13.0Bn 2018 TOTAL $44.7Bn 19% +22.5% YoY $70.3Bn +27.7% YoY +25.5% YoY 64% of all consumer spend on mobile games. LATIN AMERICA 3% $2.2Bn JAPAN TOTAL +29.4% YoY $12.9Bn Source: 2018 Global Games Market Report © Newzoo 2018 newzoo.com/globalgamesreport 8 2. IMMERSION AND COMPETITION ARE KEY TRENDS With new hit core and immersive PC games being quickly adapted for mobile downloads of PUBG Mobile and Fortnite Mobile occurred on iOS since their release #1 globally, including PUBG: Exciting Battlefield in China. downloaded iOS game* in June PUBG Mobile and Fortnite Mobile were both launched in mid-March and were immediately the most downloaded games worldwide. The success of these mobile adaptations of the two largest PC battle royale titles has proven that today’s mobile gamers are increasingly looking for immersive and competitive gaming #2 experiences on their mobile devices. Epic Games has revolutionized the gaming downloaded iOS industry by making cross-play with PC, game in June console, and mobile possible. We believe that this will be a growing trend in the industry in the coming years, with publishers and hardware manufacturers playing a key role in the development and evolution of the process. * Downloads of PUBG Mobile include downloads of PUBG: Exciting Battlefield in China. Source: Mobile Metrics Tracker © Newzoo 2018 newzoo.com/mobile-metrics-tracker 10 Publishers are seeing huge success with immersive mobile titles in revenues have been generated by Arena of Valor (Honor of Kings in China) on iOS since its release at the end of 2015. It has been the top grossing mobile game in China since November 2016. of PC gamers play mobile games at least once a week.* There is a big opportunity to offer these PC gamers portable versions of the same core and immersive experiences that they are accustomed to on PC. Lineage Revolution, a mobile adaptation of PC MMO Lineage 2, grossed $924 million in its first 11 months of release. * Source: Newzoo Games Consumer Insights from 28 countries/markets © Newzoo 2018 www.newzoo.com/consumer-insights 11 Mobile esports remains small but it is growing, especially in Asia TOTAL Total Revenues REVENUES (Media Rights, Advertising, Sponsorship, By 2021, the esports Merchandise & Tickets, Game Publisher Fees) +27.4% market will be worth CAGR Brand Investment Revenues 2016-2021 (Media Rights, Advertising, Sponsorship) $1650 globally with the majority MILLION of revenue coming from TOTAL brand investments. REVENUES $1385 TOTAL +38.2% MILLION REVENUES YoY +33.0% In 2018, there are YoY $906 MILLION $655 MILLION $694 MILLION Esports Enthusiasts* across the globe with 57% of them $468 in APAC. There will be 264M MILLION ©2018 Newzoo globally by 2021. 2017 2018 2021 *People who watch esports content more than once a month Source: 2018 Global Esports Market Report © Newzoo 2018 newzoo.com/esportsreport 12 China is the world’s largest mobile market for gaming TOP MOBILE ESPORT LEAGUES/TOURNAMENTS IN ASIA MOBILE esports is more popular in the East than in the West, especially in China, accelerated by the mobile-first culture of the region. In Asia, mobile esports is expected to follow a similar structure to that of PC, with the top mobile games being played and large stadium events taking place with large viewership. CASUAL mobile games hold a strong position in the esports scene in Asia, while competitive genres dominate the Western market. KING PRO BATTLE OF BALLS VAINGLORY WORLD TERMINTOR2 Giant Network’s Battle of Balls Professional League was the world’s LEAGUE PROFESSIONAL LEAGUE CHAMPIONSHIP SUPER LEAGUE Tencent Giant Network Super Evil Megacorp NetEase first casual mobile esports league and its 2017 Global Final will be the first mobile esports event held in Shanghai’s Mercedes-Benz Arena, the former exhibition hall of World Expo 2010. TOP FRANCHISES IN ASIA SOCIAL functions are largely adopted in mobile games in Asia, creating strong bonds between gamers. In China, for example, all of Tencent’s mobile games can be connected to either QQ or WeChat where gamers can easily access the leaderboards and any updates of the games they are playing via the embedded game centers. Gamers can also play with/against their friends by using the social system. HONOR OF KINGS CROSSFIRE MOBILE BATTLE OF BALLS MONSTER STRIKE Tencent Tencent Giant Network Mixi © Newzoo 2018 13 Tencent’s King Pro League is the world’s largest mobile esports league KING PRO LEAGUE 2018 SPRING SPLIT FINALS people attended the King Pro League (KPL) 2018 Split Finals in Shanghai on July 8. Honor of Kings is by far Tencent’s most successful mobile MOBA game. Launched in November 2015, the game now has more than 200 million users in China. King Pro League, the largest Honor of Kings league in China, was first introduced in September 2016 and has grown into the largest mobile esports league in China and the world. The 2018 KPL Spring Split Final attracted a live audience of more than 18,000 with a total prize pool of $1 million. #1 Tencent is promoting the game and its mobile esports competitive space in the West by league launching the Western adaptation Arena worldwide of Valor and jointly organizing esports events with large organizers such as Dreamhack and ESL. © Newzoo 2018 14 Esports will be included in the Asian Games for the first time, as a demonstration sport The Asian Games, held every four years, is one of the largest multi-sport events in the world. The 2018 edition, to be held in Indonesia from August 18th to September 2nd, will include esports for the first time. The official titles being showcased at the games are League of Legends, Hearthstone, Starcraft, Pro Evolution Soccer and two mobile titles – Supercell’s Clash Royale and Arena of Valor from Tencent. While esports is still a demonstration sport at the 2018 Asian Games, it has been confirmed by the Olympic Council of Asia that 2022 will be an official medal event. ESPORTS AT THE OLYMPICS? In July 2018, the International Olympic Committee (IOC) and Global Association of International Sports Federations (GAISF) met in Lausanne to discuss the topic of esports at the Olympics. While no firm plans were made to officially integrate esports into the Olympics, the bodies announced that they will form an Esports Liaison Group to keep the conversation going.