Why Kabam is toning down its F2P monetisation

hello and welcome to pocket gaming business weekly news digest this is for the week ending the 30th of january 2015. i'm john jordan so kind of getting into the uh into the year proper we're starting to get some um not really the weeks before weren't proper news but i guess some more kind of kind of hard news and some figures so actually we're kind of entering the first uh kind of wave of financial uh reporting so for people uh who are like numbers like me that's kind of a both an exciting time and also a bit of a um kind of uh i guess i don't know what the word is a bit of a kind of a fraught time really because there's so many companies now who have mobile games as part of their kind of business we reckon there's about kind of 35 to 40 companies globally who are on very stock exchanges from the us to to paris to um to china to japan to korea who will be putting out figures about their performance

and equally you know in some of those cases they might there will be very um kind of atomic reasons why they're where their themselves have gone up and down they might have a big hit game or they might have had a bigger game a year ago so that will mean their sales will be up or their sales will be down year on year um very clearly is you kind of kind of if you crunch all the figures and that's kind of the problem you have to crunch all the figures to get the kind of like global data um you can you can start seeing some big level trends happening as you as you kind of go through them all um as part of kind of it always kind of goes in waves so you always get the americans first so we had apple this week they were announcing their financials it was the uh record the record financial for apple and even there was the record amount of profit for any company ever in the history of companies having profit so they had um i think it's 18 billion dollars of profit um that doesn't really matter the numbers really better um absolutely successful and i guess i guess the interesting thing was as has always been the case with apple um north american market is its biggest uh market for iphone that's where the majority of its revenue is coming from ipad actually dropped um in sales that has been happening for a while now because people don't um update their ipads as

frequently as they do their iphones but i'm saying north america is biggest um europe i guess unsurprisingly is in second place but um probably next quarter will be overtaken by china so for the first time um the first time the china's been in third place for a while for the states um for apple and um but it's growing so massively it's growing it's like 70 percent year on year whereas europe's only growing about 20 year on year so you're kind of having this um it's kind of uh we kind of remind you because china's just such a big country that china will be having a it will be the number one market for probably all handset manufacturers at a certain point in the future but it happened with apple this year uh this quarter um and then the first of the kind of games companies to announce is called its um financials is is ea so ea mobile's part of ea he kind of breaks out some of ea mobile's financials doesn't break out um profit on that on that business unit so it announces its um revenue um for different platforms so announce revenue for different consoles including mobile and then we'll announce it's profits for the entire company so you kind of get an idea about what's going on with ea and mobile but you don't really get an idea

compared to a company like glue say which is purely mobile so you can see it's profit and loss um with ea it was kind of um kind of a bit of a plateau quarter really so it was the um in terms of sales sales were um 121 million which was actually kind of a year on year it's up um but quarter on quarter which is kind of tends to be now we're now seeing games as a service um rather than a retail model we tend to look at kind of quarter on quarter changes rather near on your quarter changes and so actually it was kind of steady but it was effectively down about one percent compared to last quarter and that quarter was effectively down about one percent from the previous quarter so you kind of see with ea it's kind of it's sales ea mobile sales were kind of plateaued for the past um kind of nine months um which obviously isn't isn't a great thing most companies want to see themselves going up and with the with the a mobile it's kind of there are kind of good things coming out of it so it's it's obviously ea's known for its sports franchises so madden and

fifa and some other ones but they're the main ones and on mobile and as on it's across its entire kind of game uh portfolio the just the amount of people playing those games is going up the amount of time they're spending in those games is going up so there's a very strong kind of core fit for ea kind of mobile hits the big kind of hit it had in the quarter was the um was the uh sims build building game um that's done about 20 million downloads revenue wise um kind of we have to see where we are that without ea didn't really talk about revenues at all but they've not really had a massive hit like the simpsons um which is now um into it's kind of depending on whether you count the first launches as a launch that kind of happened because it launched and then they pulled it for six months but that was a really big game that generated um uh you know hundreds of millions of dollars to over a hundred million dollars maybe 200 million dollars now um not really had a big kind of hit that caught on quarter just generating money like that so um ea being ea very bullish they've been talking about the next the games are going to announce next quarter so we'll have to see but that's kind of a bit of a bellwether really i suppose

that um even though the the mobile market is growing very quickly some of these companies who you know 120 billion dollars you know is 120 million sorry is a reasonable sum of money but it's not seeing growth it's kind of seeing a bit of a plateau there um so we'll kind of start to see some of the other um u.s companies next week probably uh so we see kind of zinger and glue and then we go kind of move on to the the japanese and we'll kind of get a bit of you there um there was another company who's who um it's kind of interesting so kabam um pretty well known for completely free to play they just sold off a lot of their pc um business so they're pretty much now a mobile free-to-play um player they're based in the us um but most of their developments in china pretty good company now like 800 people um and everyone's assuming that they're going to ipo at some point so they're going to start selling their shares um they announced last year last year they started they announced kind of quite they were going to be quite bullish on on doing an ipo then as i guess to a degree the market kind of softened and king's ipo did not go well at all which followed zinger's ipa not

going very well the year before so games companies are not um that hot in terms of ipowing and then seeing growth of their shares so kebab has kind of taken a decision not to ipo at the moment but it's been very open and with its financial so it announced um 2013 it had sales of uh 360 million dollars didn't announce profit that said it was profitable um and then this year it announced sales of 400 million dollars for 2014. so that's kind of you know that's reasonable growth that's kind of the 10 ish over 10 growth um the only kind of problem for kaban was it had been so bullish that in in april um last year it had announced that it thought it sales for 2014 were going to be in the region of 550 to 600 million dollars so obviously it was a way off that you know you know potentially as much as a third off what it predicted so it couldn't really um they had to say why that had happened and it kind of said that his publishing business hadn't hadn't performed as well as it thought and it's going to move into a kind of a less is more situation that was going to release fewer games and have high quality games

it delayed some of its games so one of its hot games at the moment is the marvel conquest of champions which is a very good game um that got pushed um it's got it's got a fast and furious game coming out um that's been delayed as well and that's going to end up it's not a game that's based on the new movie um it's a fast and furious legacy so it's more like a like a like a um a game that kind of plays across all the fast and furious ip um but they're gonna kind of they've held that back to launch it with with the movie um so kind of a few things they they could they could they could point to but i guess the most interesting one was um they said explicitly they were they was kind of stuffing up their their consumer support teams for their free to play titles there had been some complaints about those um in the past we've seen that on our website um but the kind of key thing or key thing that i kind of noted and was surprised it was mentioned was they said they were going to ease some of their monetization um on some of their games so um there's something i've looked at and we've looked at pocket where we've kind of gameplay games to see how well they monetize and kind of

what kind of techniques they've used and typically kabam games while always of a very high quality um have had what we might call kind of um or we have called an aggressive monetization policy now that aggressive monetization is not a moral term we're not saying they're being nasty and trying to kind of kind of rip money off people but just compared to other games they've there's things they have done things they haven't done compared to what we might call average monetization games so one of the things we look at is is called reciprocity and that's very simple that's kind of when you start playing a game normally a game will give you some hard currency so the currency you would normally um earn in very small amounts or buy in big amounts with cash um it gives you some of that to kind of get you going in the game to understand to explain to you how the game economy works um and get you kind of going into the game store and probably you know buying something or using that those gems kebab games kind of um quite singularly haven't really done that it's maybe done a bit of it but say the current game that i've been playing um as well as the marvel game is the hunger um game game if that makes sense um and that you know

it's striking you start playing that game i'm playing playing up a lot and not only do you not um do not give you any um any hard currency it's called sparks so there's no reciprocity responses basically someone does something nice for you and then you feel nicer towards them that's the psychological term i read in the book apparently um but no i need to say not only do they not give you any but when you play the game you don't earn any either so basically you have this big zero sitting in the top right hand corner of your screen all the time which is a bit demoralizing but they just updated the game and presumably as part of this new kind of philosophy they have suddenly you have 10 sparks i've got 10 sparks that i didn't have beforehand now 10 boxes actually not very much so it's about 70 sparks for the dollar so they've given me um 14 cents effectively um obviously this is 14 cents across millions of people then effectively in-game currencies is is i mean it's not really they're not really giving millions of pounds away but to degree you can see kind of what they're doing with that um so um we'll kind of look to see um kind of how kabam kind of rolls out this kind of new idea but it's kind of interesting i think it shows a bit of maturing in the free to play industry where previously it was

very kind of short-term driven even for companies that weren't um publicly owned so obviously as we say ea has to show its quarters every quarter every three months has to say financially how well it's doing um you know private companies like ma'am haven't had to do that um so um but obviously they i think we kind of get into a market now where players understand there's lots of games they can play they prefer to play games that are obviously that they like but equally games that are just nicer to them and give them stuff a bit more stuff um and don't aren't really asking them for money all the time or kind of requiring you either do you can do this now if you pay or you can have to wait i think we're seeing you maturing on that and it's interesting with kabam who really know how to do free to play games have a lot of analytics skill and they've actively kind of said that they're kind of like dialing down monetization and kind of what they're looking to do that obviously is keep players in the game um by giving them more stuff getting them playing longer so that's an engagement re kind of retention tool for getting them playing longer in the hopes or the expectations that those guys will then be playing longer they'll be more attached to the game that they will end

up kind of paying more in the long term so kiban's not doing it to lose money it's doing it in the long term to make more money so the technical term is lifetime value so ltv you see this a lot in in in kind of articles people looking what's the ltv of your user what's so basically when you have a user what's their entire value once they start the game and when they end the game how much money are you getting so immediately everyone wants to see their lifetime value going up so that's kind of interesting thing i guess the biggest trend of the week but it's very one quick one to mention so the super bowl this sunday so obviously a big thing in north america not so big outside the world although it is shown on uk television now um and we are actually seeing so but this crazy situation which that we call extreme user acquisition extreme ua um where the super bowl advert break is always known as the most expensive ad break in i guess in the world or certainly in american tv um in terms of the money you spend for the seconds of tv advertising obviously the famous app on adverts over history and for the first time we're seeing mobile games who's going to be doing ads in the super bowl this year perhaps unsurprisingly um supercell who have tons of money and have one of the top

closing games in the world in in clash of clans are going to be um doing some um casual clans advertising in um in the in the super bowl but then kind of a smaller upstart called you call who have a game called heroes charge which is a much more hardcore kind of 2d squad rpg type game and they've kind of like kind of jumped into the market into into kind of tv huge acquisition really only in the past kind of a couple of months they did some big campaigns over over the christmas period um and they've they've got a 15 second advert which they're doing in the super bowl then they're running it onto american kind of tv channels as well so it's kind of interesting that companies are prepared to spend now tens of millions of dollars potentially to do this kind of big advertising we would have expected kind of coke and people like that to do so um um yeah we'll be looking forward to that on the super bowl