Are Free-to-Play Mobile Games the Future of Video Game Marketing?

Screenshot taken from Tim's iPad Mini. Batman: Arkham Origins property of Warner Bros. Interactive.

Time Warner (NYSE: TWX  ) is about as it good as it gets when it comes to marketing video games.

An outrageous claim? Sure, especially when you consider that Take-Two Interactive (NASDAQ: TTWO  ) is setting records with Grand Theft Auto V console and online editions.

And yet it was only a handful of months ago I swore I'd never again purchase a video game console. With three kids and a job that leaves me with little free time -- not a complaint, I love this job -- I just didn't see the point. Then Injustice: Gods Among Us came along and took over my iPad Mini. Batman: Arkham Origins followed last week. These free-to-play iOS giveaways tease console versions that are no doubt richer, more complex, and more rewarding.

They're the gateway drug to a wider video gaming world to which I'm in danger of becoming addicted.

Behind the buzz
The high comes in the bonuses. Completing a certain number of missions in the mobile version of Injustice unlocks special characters in the console version, and vice versa. Arkham Origins features a similar design. An iOS version shipped last week while the console edition ships tomorrow.

Warner has good reason for connecting its titles this way: Mobile gaming is huge. In May, Newzoo had the market growing by 35% this year to $12.3 billion in revenue, accounting for about 18% of the entire video game industry. Impressed? Wait till you see the projections. Newzoo expects mobile to account for 30% of gaming industry revenue by 2016.

Such heightened growth expectations may explain increased investor interest in mobile gaming companies. Last month, King, a U.K. publisher of top Facebook game Candy Crush Saga, filed a confidential S-1 to offer publicly traded stock on U.S. exchanges. A recent report put the company's revenue run rate north of $480 million.

Just this week Japan's Softbank spent $1.5 billion to acquire a 51% stake in Finnish mobile game maker Supercell, whose Clash of Clans and Hay Day help the company generate about $2.4 million in daily sales, Reuters reports. I'm not privy to their thesis for investing but if I had to guess, I'd say Softbank believes casual gamers comprise a substantial market opportunity, and they don't need to spend $500 on a console.

Gamers gone bye? Not exactly
An increasing number of "core gamers" may be feeling similarly. In a March report, NPD found that only 29% of those who play console video games more than five hours per week would purchase the next-generation platform following release.

So is it time to write off Take-Two and Time Warner? Not at all. Console and portable game device sales zoomed 52% to $754 million last month after a 23% jump in August, NPD reports. A record-breaking start for Grand Theft Auto V no doubted helped boost the industry's late summer haul.

Next month,  Microsoft and Sony are expecting strong sales of the new PS4 and Xbox One consoles. GTA V could sustain industry momentum in the meantime. The game topped the U.K sales charts last week in all formats. On the individual charts, the Xbox 360 version led the way while the PS3 version ranked third. Take-Two released GTA V worldwide on Sept. 17.

So, for now, it's fair to say console gaming is enjoying a comeback. How long the rally lasts depends, I think, on how well the industry's marketing machine turns casual iPad players into "core" video gamers who might love a good gateway shooter but which need the satisfying thrill of a console epic.

Or in simpler terms, a new generation of addict ... I mean, hero.

The Gamescon trailer for Batman: Arkham Origins. Sources: YouTube, IGN, Warner Bros. Interactive.

The superhero stock your portfolio needs
There's no such thing as an invulnerable stock, but The Motley Fool's chief investment officer believes he's found one that gets close. Find out more in our new special report: "The Motley Fool's Top Stock for 2013." It's free for the asking -- just click here to start reading now.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2696644, ~/Articles/ArticleHandler.aspx, 7/25/2014 7:56:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement