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US digital games market update: October 2014

With a combined total of $957 million in sales in October, up 12 percent from the same month a year earlier, the digital games market is growing stronger. The adoption by next-gen console gamers of full-game downloads presents an important driver to the overall market, as digital console sales reached $96 million. A slew of new title releases stalled spending in the free-to-play segment, but both mobile and downloadable games on PC thrived, totaling $327 million and $212 million, respectively. Activision especially made its presence felt this month, as Destiny accumulated 9.5 million registered users, roughly one-fifth of which downloaded the game directly to their console hard drives.

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Zynga gets pummeled after alienating its poker fans

Now under new management, Zynga likely expected different results when its re-released Zynga Texas Hold ‘em Poker dropped from 8.1 million daily active users in September to 7.1 million in October.  Losses were especially heavy on mobile. The company managed to offset some of its losses by posting higher revenues at its quarterly earnings report, but this may prove to be only a temporary relief from prying eyes. Critics of the publisher have become increasingly vocal about the absence of a concrete release schedule following the $527 million acquisition of Natural Motion at the beginning of this year. While Zynga is clearly gearing up to service all types of audiences, combining social casino games with its well-known Ville-type games and recently entering both the racing and sports market, delaying a strong release may provide a big enough window for competitors to steal Zynga’s thunder. The overall social games market was up slightly month-over-month, reaching $168 million, but with a 2% decline compared to the same month last year, it  has certainly lost some of its shine.

Destiny sells 1 in 5 copies via digital download on console

As the interactive entertainment market prepares to end 2014 on a high note, bets made earlier in the year are already starting to pay off as publishers observe a growing percentage of sales via digital channels. With major publishers now fully behind digital distribution, this year’s big titles so far sold, on average, 12% of total units via digital downloads on consoles. Notably, in its first two months since launch, Activision’s Destiny sold roughly twenty percent of full game downloads on consoles, driven by the combination of a growing install base of next gen devices and aggressive pre-order incentives at retail. For the holiday season we conservatively forecast the share of direct-to-consoles downloads of full games to double, as consumers seek to avoid the inconvenience of having to wait for delivery or stand in line. That said, GameStop has so far proved to be well-positioned to capture a piece of this uptick in digital games revenue. We do, however, anticipate lower-than-expected game sales over the winter break for online retailers like Amazon.

Games industry seeks to better connect with mobile gamers

With the mobile games market reaching $328 million in monthly sales, up 24% from the same month last year, game developers are becoming increasingly cautious of the market’s volatility. As development and marketing costs continue to rise, a growing number of small and medium-sized development studios, often the source of innovative content, increasingly focus their attention on sustainability. According to a detailed study among 41 UK-based game studios, 34% of respondents recently changed their business model, hoping to increase the overall efficiency of their production processes, and emphasized the importance of strategic relationships in mitigating risk. Results of the study were first presented at GDC Next and are available for download here.

MOBA segment plays musical chairs and EA bows out

Following the announcement of EA’s discontinuation of Dawngate, its contender to the immensely popular MOBA category, it appears that League of Legends and DotA 2 have the market to themselves. Despite the growing success of SMITE (Hi-Rez Studios) in key markets, the title is a distant third, followed by slew of promising contenders that are currently still in beta like Arena of Fate (Crytek). EA’s exit from this market removes a credible potential competitor. All eyes are now on the tablet market where a band of former Riot developers are about to launch Vainglory on November 18th. Overall, the free-to-play MMO segment slowed, declining to $116 million, following a growth period that coincided with a flurry of tournaments.