Market Overview

Is mobile gaming dying?

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By Patrick Foot, financial markets writer at IG

Before the release of the current generation of machines last year, the overarching story for console gaming – and occasionally ‘traditional’ video games as a whole – was one of impending doom.

The popular opinion was that spending hundreds of pounds on a dedicated gaming machine, tied to the TV in your living room, would be rendered pointless  by the proliferation of the smartphone and tablet during the last console cycle (the original iPhone was released in 2007, a year and a half after the Xbox 360, and seven months after the Playstation (PS) 3).

Now, we are approaching the second year of the new generation. And based on Microsoft and Sony’s last pronouncements on sales volume, 15 million new generation consoles have been sold (the figure is almost certainly far higher: Microsoft last released a figure in April).

In the UK, the Playstation 4 is second only to the Wii in terms of fastest sales performance, and it is outselling the PS2 – still the most sold console ever – over the same period. The release of FIFA 15 last month saw Xbox One sales overtake PS4 for the first time, so both are competing healthily. This Christmas should see sales of all consoles ramp up again.

The good feeling in video games has trickled into publishers. At the end of September Activision Blizzard was worth 20% more than when PS4 launched, Ubisoft 33%, Take-Two 36% and Electronic Arts (EA) 55%; in the same period the Nasdaq has grown just 14%.

Whilst EA produce mobile games, they amount for just 9% of revenue, and that figure is lessening (down from 12% a year ago). EA’s moves away from mobile have seen their stock price and financial performance improve, as FIFA’s Ultimate Team on consoles drives massive amounts of revenue, up 80% on the previous year.

When compared to the growth for dedicated mobile gaming companies, that performance looks even more compelling. Gameloft have dropped 32% in value since PS4 launched, Zynga 40%; King have fallen 33% despite only being on the markets for six months. Only Glu Mobile have grown for the period – off of the back of the amazing success of Kim Kardashian: Hollywood – and it is still down 30% since the end of July.

EA, Gameloft, Zynga and Take-Two in the months since the launch of the new generation. Data from IG’s online stockbroking platform.

Even the announcement of a new contract allowing the company to continue making games under the Kim Kardashian license until 2019 has failed to arrest the fall in Glu’s share price. Perhaps, in a situation similar to King, the markets doubt the continuing appeal of Glu’s flagship title: despite its strong revenue so far.

The success of titles like Kim Kardashian: Hollywood is probably indicative of why mobile gaming has failed to seriously damage its rivals on console and PC. Whilst the game undoubtedly has appeal, it is unlikely to appeal to the same audience considering investment in an expensive machine.

The more casual, user-friendly and portable Nintendo 3DS has also been a major success in the past few years, however. It is now in entering its third generation in three years, and is approaching 50 million unit sales. Even in the casual space, mobile has failed to undermine more traditional platforms.

Furthermore, the previously ‘niche’ gaming industry is now being taken extremely seriously by major businesses. In recent months, we have seen Facebook put huge amounts of money into buying virtual reality system Oculus Rift, Amazon purchasing video game streaming service Twitch, and Microsoft taking over Minecraft developer Mojang for $2.5 billion. Whilst those companies are also investing in mobile, mobile gaming investment is a rarity.

To be fair, mobile gaming has never been hugely popular on the stock markets, largely viewed as too risky and fast-moving for most investors. But that viewed has also applied to video games, and as they are going from strength to strength whilst mobile gaming seems increasingly marginalised, the industry may need a major new development sooner rather than later if it is to keep pace.

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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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