09/08/2022
In November 2008 was released the second addition to World of Warcraft of the Lich King, which managed to earn 112 million on the very first day of sales. It became the record in the video games industry. The previous addition The Burning Crusade released in 2007 earned less than 100 million.
It must be mentioned that the year of 2008 was the first year of a massive economic recession when the sales in the sphere of entertainment dropped almost 1,5 -2 times, while the sales of luxury goods decreased 4-5 times. Video games, on the contrary, demonstrated the growth. From 2007 to 2009 the sales of Activision Blizzard rose by 80 %, EA and Take Two by 40%. Video games got the status of a retention proof product.
These days a new massive recession is spreading in the major mobile games markets. Could we be sure that it is not going to impact the profitability of mobile games?
On the one hand, these days the profit in mobile games is mainly generated from free to play games. If video games are the cheapest entertainment, then free video games are beyond competition as substitute goods, the sales of which increase even in the period of recession.
On the other hand, the expert on mobile games economy Eric Seufert believes that in-app purchases in free to play games are classical luxury goods and the sales will drop several times. Free to play model was not almost present in the market during the previous recession. So we will have to find out whether it is true or not
It was only Turkey which from top 20 countries in terms of in app incomes experienced a real recession. Last December when the national currency devalued 2 times, in app incomes of top 10 mobile games dropped by 20 %. In June 2022 in app incomes decreased 2 times compared to November 2021.
Mobile games incomes in the main markets are unlikely to drop 2 times. It is wrong to believe that in app purchases are triggered only by the desire to show off. Net vanity purchases, such as décor, could be considered as a luxury component. At the same time in app purchases of content and progress acceleration must be assessed separately.
A very interesting revenue redistribution between 2 top market players of the same genre happened in Turkey between November and December 2021. PUBG`s revenues dropped by 50%, while Garena Free Fire improved by 30% and equalized to PUBG`s income. In PUBG all purchases are vanity décor. In Free Fire it is possible to buy the increase of your power.
But there is one nuance. PUBG was not falling for the whole half of 2022, while Fee Fire was going down non-stop and now is earning only one third of what PUBG earns. It means that the depth of Free Fire economy has appeared to be too little and the purchases for a power increase are burning out very fast, and therefore the game loses to a stronger brand.
What must be done to avoid reducing of in app incomes?
1) The main focus must be addressed to the content selling, but not the décor selling.
2) Great attention must be paid to the game economy, its depth and variety. More content must be produced, more cycles for the power increase must be implemented, considering the fact that everything burns out very quickly.
3) Be the leader in your genre