Mobile Gaming: A Pirate-Free Future?

August 13, 2009

Some 90-95% of video games in emerging markets are said to be pirated – which is not good for console makers and game developers. One company doing something about it is mobile content provider KongZhong.

Console manufacturers and game developers have unsurprisingly avoided countries with a lot of piracy — and not only because disposable incomes there tend to be much lower. However, mobile handset penetration levels in these countries are increasing, the capabilities of mobile devices are becoming more sophisticated, and networks are gradually enabling higher data speeds. These trends are opening a big opportunity for gaming on mobile devices. As analyzed in our recent report Mobile Gaming in Emerging Markets, a wider range of business models are gaining traction to exploit this opportunity while addressing issues such as piracy and affordability. Games based on virtual worlds with in-game transactions, for instance, are gaining traction, as seen by the strong performance of KongZhong.

Beijing-based KongZhong offers a range of content including games, ringback tones and sports information. On August 11, 2009, it announced strong second quarter results, including a strong uptick in its online mobile games revenue.

Mobile games are the fastest-growing segment of KongZhong’s business, contributing more than 20% of its total revenue in Q2 2009, up from just 6% during the same period in 2008. This was in part driven by China Mobile successfully completing tests of KongZhong games and making them available on its portal. Moreover, KongZhong’s revenue from mobile online games more than doubled in Q2 2009 on the previous quarter as its leading online game, Tian Jie, attracted new users — more than 2m have registered, with a quarter of them playing regularly, students in particular. More importantly, the company was able to monetize this increase in adoption by getting a higher proportion of users to make in-game transactions. Users start by playing the game for no charge, but once they reach a certain level, they must pay to acquire a particular item or move to the next level. This business model not only allows the user to see whether they enjoy playing the game prior to spending any money, but it also is virtually impossible to pirate. KongZhong expects additional revenue from mobile games with social elements, such as its recently launched Feng Shen — based on the Chinese novel First Myth — which generates revenue through both advertising and in-game transactions.

Other business models such as advergaming also address the issues of piracy and affordability. More and more people around the world are able to enjoy legal video gaming, while games developers gain better returns on their investments.

— Jan ten Sythoff, Analyst at large

Related resources:

Mobile Gaming in Emerging Markets: Five-Year Forecast and Impact Analysis
Research Report published July 2009
Mobile gaming is enjoying solid growth, from about 55m gamers in 2005 to about 183m in 2008. Besides technological improvement and business-level innovation — the iPhone App Store is revolutionizing the industry — mobile adoption also spurs growth. Emerging markets contribute heavily. This report analyzes mobile videogaming markets in emerging economies, examining mobile gaming-specific metrics, market enablers, adoption barriers, trends and opportunities. It forecasts market growth and looks at interesting business models and initiatives. Included are in-depth country profiles of eight emerging markets: Brazil, China, India, Mexico, Nigeria, Poland, Russia and South Africa. Watch video highlights from the report. Download this report's excerpt here.

Mobile Data Forecasts
Forecasts published quarterly
Our Mobile Data Forecast products provide complete pictures of demand trends for more than 80 countries worldwide. The Excel output includes five years of historical data and five years of market projections for metrics such as penetration, mobile subscriptions (by type of package, by operator or MVNO and by network technology), users of specific data services (SMS, music, etc.), MOU, ARPS (by operator, by subscription type, by service, by application) and revenue (by messaging and non-messaging applications). The Forecasts are based on extensive field research and use a consistent methodology, aiming to capture the total spending on mobile data services in each market. Download a free sampleof this forecast here.

Mobile Video Services: A Five-Year Global Market Forecast
Research Report published May 2009
Pyramid Research estimates that the global number of users paying for mobile video services directly delivered to their handsets will grow five-fold between 2008 and 2014 to surpass 534m at the end of the period. In this report, we analyze the adoption and revenue opportunities for mobile video services, which include paid video clips, music videos, TV episodes, TV programming and movies. We examine operators’ strategies through seven country case studies: Brazil, Chile, China, India, Italy, Japan and the US. Download this report's excerpt here.