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US digital games market update: September 2014

Total spending on digital games came in at $873 million in September, up 8.6% compared to the same month a year ago. After a slowdown during the summer months, consumer spending is picking up momentum as we close in on the holiday season. Most notably, social gaming revenues were up month-over-month, and mobile gaming is approaching $300 million in monthly spending in the United States. Activision’s dominance across digital platforms was palpable this month, as several of its key titles produced surprising results, driving digital console revenues to $82 million in September, and offsetting recent criticism.

Celebrity branding the next frontier for mobile games

After its success with Kim Kardashian: Hollywood, which has generated a cumulative $51 million in revenues since its launch in June, Glu Mobile announced it is expanding the title to Facebook. Hoping to maximize its appeal to a female gamer demographic, the company also extended its licensing agreement, including Ms. Kardashian West’s continued support in promoting the game via both social media channels and real-life appearances. The title’s success is expected to trigger a run on celebrity-based mobile and social games. So far, publishers like Zynga have been aggressively licensing slots games that feature well-known television series and films, like Sex and the City and Terminator. Instead of this blanketed approach, however, a targeted strategy and support of a single celebrity is proving highly effective. As the mobile games market begins to saturate, marketing costs have increased. Celebrities play an increasingly important role in terms of both driving marketing and monetization for mobile games, and we expect more celebrities to lend their name and social media prowess to mobile titles in the foreseeable future.

World of Warcraft user base grows ahead of November expansion

Combined with the official cancellation of the long-awaited Titan, which was expected to ascend to the MMO throne once World of Warcraft reached obscurity, Activision has been under pressure to release a next generation role-playing title. In anticipation of its fifth expansion, Warlords of Draenor, the publisher reported a 600,000 increase in its subscriber base, which is expected to reach 8.2 million by the end of the year. Meanwhile, the publisher is gearing up for the imminent release of Heroes of the Storm, challenging the current dominance of League of Legends (Riot Games/Tencent) and Dota2 (Valve) in the MOBA space.

SuperData Digital Sales

Digital console surges to $82 million following major releases

Two major releases dominated September’s digital console charts. Activision’s highly anticipated new sci-fi space shooter Destiny was initially met with enthusiasm by consumers. However, player sentiment soured in response to repetitive gameplay, casting doubt on the title’s ability to reach its lofty goal of becoming the company’s next billion dollar franchise. Meanwhile, rival Electronic Arts showed its strength in the sports category with the launch of FIFA 15, becoming the second best-selling title on digital console in September. Finally, after the dust settled following Microsoft’s decision to acquire Mojang, the developer’s cult-title Minecraft still claimed the number three spot on digital console, indicating that the change in management did not negatively affect its popularity.

Rovio layoffs signify maturing mobile games market

With an enviable 200 million active players, Angry Birds is still going strong. But the game has seen a 24% drop since its peak in 2012. Despite this, Rovio managed to keep year-over-year revenues roughly the same, with $192 million in 2012 and $197 million in 2013. We’ve seen similar trends before with companies like Zynga, where revenues initially stay at the same level even as its user base declines, because the non-payers generally are the first ones to cycle out and move on. Over the past two years, the mobile games market has also seen the emergence and dominance of several new mobile game companies, most notably Supercell and King. By comparison, Supercell manages to generate $892 million in 2013 with a total staff of 132, compared to Rovio’s $197 million with a headcount of 800. Suffice to say that Rovio, while at first the undisputed king of the mobile games market, can no longer claim this position.