Worldwide digital games market: July 2016

In July the digital games market reached $5.9 billion in total sales, up 10% compared to the same month last year. Strongest growers this month were the mobile games category (16%), digital console (11%), and free-to-play PC (11%). The summer season has so far proven much stronger than expected due to the recent release of several high-performing titles, including Overwatch, The Division, and of course Pokémon GO which had the most successful mobile launch in history, displacing Monster Strike and taking the top spot in its category. Last month social gaming, PC DLC, and pay-to-play MMOs all saw a decline.

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SuperData Top Games July

Valve finds rare success in directly monetizing eSports for DoTA2

The International, an annual Valve-sponsored DoTA2 tournament, took place in Seattle from August 8th to 13th. Already renowned for its enormous community-funded prize pools, the pot for 2016’s International reached $20.8 million, well ahead of 2015’s $18.4 million. Twitch viewership for the event was among the highest of the year, with finals day seeing a maximum of 650K concurrent viewers compared to an average of 400K.

The International is almost entirely funded by a 25% cut of DoTA2 Battle Pass sales. The Battle Pass gives access to a bundle of exclusive content and events, including fantasy sports-style betting. Valve has successfully engineered a feedback loop between the Battle Pass and The International – the success of one directly benefits the other. Although Battle Pass purchases tend to cannibalize sales of other in-game items, long-term revenue certainly benefits from an expanded player base. In the first half of 2016, DoTA2 revenue saw a remarkable 18% YoY increase. At present, Valve is the only company to successfully monetize eSports events with in-game purchases. Other publishers still struggle to channel eSports attention into revenue, but the International provides concrete evidence that eSports can improve a title’s bottom line.

The Double Edged Sword of Shared IP: Clash of Clans and Clash Royale cannibalization

No one questioned that Supercell had a winner when Clash Royale made its debut this March. However, the title’s early success had a hidden cost, it appears Clash Royale is cannibalizing Clash of Clans. Clash of Clans revenue initially tumbled 23% from March to April while Clash Royale experienced a similar drop in the same period. The downward trend has continued, with total revenue for the two titles falling 16% from May to June and 12% from June to July. Despite Clash Royale’s initial success, aggregate revenue for the Clash franchise has seen little growth overall.

In comparison, in October 2015, Machine Zone launched Mobile Strike, a Game of War: Fire Age clone with a modern warfare theme. Despite its humble launch, Mobile Strike grew rapidly achieving 3rd place in revenue ranking this July, right behind Pokémon Go and Asian juggernaut Monster Strike. However, Mobile Strike’s impressive rise came at little cost to Game of War. Both titles are enjoying significant growth, with total Game of War revenue for the first half of 2016 up 16% YoY.

Supercell played it safe by piggybacking off the success of the Clash of Clans franchise. From day one, Clash Royale could draw from a player base already familiar with its theme. However, Clash Royale ended up cannibalizing a significant number of Clash of Clans players without expanding Supercell’s larger user-base. In contrast, by re-skinning an old game with a brand new IP, Machine Zone risked Mobile Strike’s immediate success in exchange for long-term benefits. Launching a new mobile IP is inherently riskier than leaning on an old one, but is ultimately more sustainable when trying to establish a diverse mobile portfolio.

Pokémon Go is the most successful mobile launch in history

After Miitomo’s early success sputtered out, Nintendo (TYO:7974) returned to mobile this July to dominate rankings with Pokémon Go. With record levels of first month downloads and revenue, Pokémon Go is the most successful mobile game launch in history. The game shot to first place in both Grossing and Download rankings for every country it launched in, despite Niantic’s repeated failure to solve technical issues in a timely manner. Pokémon Go’s success is a direct refutation to critics of Nintendo’s seemingly misguided mobile strategy: using “gateway” mobile games to attract non-traditional players to consoles and handhelds. Many have noted that the handheld market is in sharp decline, with Sony’s PlayStation Vita and Nintendo’s 3DS significantly underperforming their predecessors. Nintendo’s Wii U performed even worse and is the company’s worst-selling console by far.

However, Nintendo’s mobile strategy ended up paying off exactly as intended. 3DS unit sales rose by over 50% YoY, an astonishing feat for underpowered hardware nearing the end of its lifespan. Furthermore, sales of 3DS games boomed. Combined sales of Pokémon Omega Red and Alpha Sapphire and Pokémon X and Y (2015 and 2013 releases) nearly doubled. Pokémon Go is the only factor that can explain jumps in sales of this magnitude. We are optimistic that mobile spin-offs for Fire Emblem and Animal Crossing will have a positive impact on Nintendo’s ecosystem.

A Starcraft Reboot: Good for Blizzard and bad for Starcraft II

Blizzard (ATVI) was rumored to be planning a Starcraft HD remake for some time, but Korean media outlet iNews24 is claiming official details will be announced at Blizzcon 2016 this November. This is somewhat surprising given the repercussions for Starcraft II. Due to tremendous nostalgia for the original series, an HD remake with an optimized interface is almost guaranteed to sell well. However, a revitalized Starcraft: Brood War community is also likely to cannibalize Starcraft II players and split the competitive Starcraft scene in two.

By the standards of any other premium PC game, Starcraft II has been a major success. The title has earned a total of $314 million worldwide over the past four years. Blizzard has successfully prolonged the title’s life-cycle by dividing major content releases into three bundles, one for each of Starcraft II’s playable races. After the release of the most recent bundle, Legacy of the Void, total revenue skyrocketed by over $40 million between October and November 2015.

However, Starcraft: Brood War enjoyed 12 years of global eSports dominance despite the fact that its historical prize-pools add up to a mere $6.7 million. In contrast, Blizzard and other eSports organizers have already paid out over $19.8 million in Starcraft II prize pools, but the title’s competitive scene never caught up to its predecessor’s. Starcraft II rarely breaks into the top 10 most streamed games on Twitch and often drifts out of the top 20. This is less a negative reflection of Starcraft II than it is an indicator of how many new competitive titles are fighting for viewers’ attention. It is possible that Blizzard hopes a Starcraft remake will rekindle interest in Starcraft II, but it is more likely that Blizzard sees little potential in continuing to push the title as an eSport. With limited opportunity for new content releases (an expansion pack has already been released for each of Starcraft II’s races) Blizzard has opted to release content it is confident players will buy, even if doing so means pulling the plug on Starcraft II’s eSports ambitions.

Top Grossing Mobile Games by Revenue, July 2016

1 Pokemon Go The Pokemon Company
2 Monster Strike Mixi
3 Mobile Strike Epic War
4 Clash of Clans Supercell
5 Clash Royale Supercell

Top Grossing Premium PC Games by Revenue, July 2016

1 Overwatch Activision Blizzard
2 Counter-Strike: Global Offensive Valve
3 Minecraft Microsoft
4 Guild Wars 2 NCSOFT
5 Doom Bethesda

Top Grossing Free-to-play MMO Games by Revenue, July 2016

1 League of Legends Tencent
2 Crossfire Neowiz Games
3 Dungeon Fighter Online Nexon
4 World of Tanks Wargaming
5 Dota 2 Valve

Top Grossing Pay-to-play MMO Games by Revenue, July 2016

1 World of Warcraft Activision Blizzard
2 Fantasy Westward Journey Online II NetEase
3 Lineage I NCSOFT
4 Star Wars: The Old Republic Electronic Arts
5 Tera Online En Masse

Top Grossing Social Games by Revenue, July 2016

1 Slotomania Caesars Entertainment
2 DoubleDown Casino IGT
3 Candy Crush Saga Activision Blizzard
4 FarmVille 2 Zynga
5 Jackpot Party Casino —Slots Slotomania

Top Grossing Console Games by Revenue, July 2016

1 Call of Duty: Black Ops III Activision
2 FIFA 16 Electronic Arts
3 Grand Theft Auto V Take-Two
4 Tom Clancy’s The Division Ubisoft
5 Overwatch Activision/Blizzard