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#1:  China’s Mobile Gaming Market Decreased 24.9% in Q3

South China Morning Post reports that China’s mobile games market saw its third quarter (July - September) revenue decrease 24.9% year-over-year. The news website cites information from a report by Gamma Data (CNG), a Chinese research institute specializing in video games. Unfortunately, the report only provided data for the last two quarters of 2021 and the first two quarters of 2022. However, we aggregated data from older reports to get a complete picture of mobile games revenue growth in China:

The data above shows relatively stable revenue across 2021 and a pattern of strong Q1s (during the Lunar New Year). The plunge in revenue begins in the second quarter of 2022 and intensifies during the third. To establish whether the observed trends are exclusive to China or part of a global trend, we compared data.ai’s worldwide revenue data with China’s (broken out by quarter):

In short, we see that China’s growth during late 2021 and the beginning of 2022 was either equal to or slightly above the growth of the rest of the market. However, while the whole market experienced a shrink in revenue in the second and third quarters, China appears to have been more impacted by it. What are the reasons for this?

Tightening of Game Regulations

One of the most reported measures by the Chinese government was the restriction on playing time for underage players. A Niko Partners report shows that the new rules affected the activity of young players in mobile games. However, we believe that the impact of these new minor-specific regulations on the market was probably minimal (in the short-run), because young players drive a tiny percentage of total IAP revenues.

Another regulatory-driven element of the slowdown entails the rigid norms around game publishing. Since 2020, the Chinese government has been less lenient in granting games licenses to operate in the country; still, during recent years, developers could expect a monthly cadence of new titles being approved. Not anymore. The chart below shows the number of issues granted during 2021 and 2022:

The Chinese market experienced a period of at least eight months where no new games were approved. The end of the freeze in April 2022 also didn't display a bounce back to previous highs. Only a few notable titles were released in the first batches: one game from a new Lilith subsidiary and an unannounced game by miHoYo. Market leaders Tencent and NetEase only managed to get new titles approved in mid-September, and those games are not what you would expect. NetEase got approval for a new sports title, All-Star Street Ball Party, while Tencent was issued a license for a new educational game, Health Protection War. The new titles are far from the mid-core stars that lead the market. As a result of all of this, we’ve seen an acceleration of smaller gaming companies shutting down (who can’t afford to wait an uncertain amount of time for approvals), and the largest companies are increasing their global expansion plans (including launch new studios abroad, launching games abroad, and even seeking out new M&A and investments).

And, once again, new licenses were issued during October, so there is always a risk that a new freeze — or new restricting rules — could emerge again.

Economic Struggles

Regulations play a huge role in the Chinese gaming market, but, of course, China is still impacted by factors that the rest of the world also struggles with — such as decreased engagement as the world opens up post-COVID and Apple’s privacy pushes. That said, there’s more at play economically here that points toward larger macro struggles.

Even though China's economy is still growing, its growth is slowing. GDP growth year-on-year was almost null in Q2 2022, partly due to localized lockdowns. Unemployment within the country is also rising, especially among young people. The current economic situation might have impacted players' buying power and their propensity to spend money on leisure activities. This would slightly impact revenue on existing games.

Due to tightening gaming regulations, China's current economic situation, and standard mobile gaming headwinds right now, we have started to see game companies struggle. For example, in light of revenue headwinds, Tencent has already conducted layoffs and budget cuts.

The struggle experienced by game developers only adds fuel to the fire. As a result of layoffs, budget cuts, and license uncertainty, fewer games will be given the green light to be developed — and therefore fewer people in China will likely dedicate their careers to this industry. Budget cuts could also affect both the quality of the games produced, as well as the quality and quantity of user acquisition; it could also affect the effectiveness of in-game ad revenue if the entire ecosystem takes a step back. Overall, it still is likely that the government will eventually approve of more games and the industry will swing back to growth, but what this horrendous quarter should show is how unfriendly and risky operating in China’s gaming scene can be.

Game Launch Radar

#1: Shankstars

• Publisher: Topgolf
• State: Hard Launch on iOS (but still soft launch on Android)
• Territories: Worldwide
• Classification: Arcade Sport (Golf)

• Quick thoughts:

  • Topgolf, the developer of Shankstars, is also behind WGT Golf. Its primary app was the “top golf” app in the market until the surge of Golf Clash and its copy-cats occurred.
  • The app has been in soft launch since the end of 2020 and is the developer’s first launch since WGT Golf.
  • While WGT Golf was from the Realistic Sports subgenre, this new app, Shankstars, is more similar to Golf Clash and falls in the Arcade Sports subgenre.
  • The game allows users to play in two different modes: single-player and PVP, which is more similar to other arcade golf games. You can watch a video of the gameplay here.
  • Topgolf is behind in the arcade golf trend. It took the success of Golf Rival in 2020 for the company to realize the potential of the market, and since the launch of Ultimate Golf, the golf market has been dominated by three different golf arcade apps.

#2: Solitaire: Pet Story

• Publisher: Clipwire
• State: Hard Launch
• Territories: Worldwide
• Classification: Solitaire/Mahjong

• Quick thoughts:

  • Clipwire is a Canadian developer more known for its bingo app, Bingo Story, and in 2020 the studio was acquired by AppLovin.

  • Its new app, Solitaire: Pet Story, mashes up:

    • Classic Tripeaks Solitaire: already featured in all top-grossing solitaire apps in the market.
    • Customization: it takes inspiration from Project Makeover (another AppLovin app) and lets players customize rooms and characters (pets).
    • Narrative: it's not divided into episodes but into days, in line with most puzzle & decorate games.
    • You can watch a video of the gameplay here.
  • As Clipwire's number one app, Bingo Story, takes a massive hit revenue-wise in a very competitive space, it is sensible for the company to explore growth in other flourishing subgenres. In addition, the moderate success of Solitaire Home Design made solitaire & decorate a new trend among developers.
  • Clipwire already tried its luck with Solitaire Tripeaks before but experienced terrible results. Being a developer with no credible experience in the casual games space, a jump to a tabletop game with narrative and decorate meta seems like an odd choice. However, as part of the AppLovin group, there might be learnings that it can obtain from Matchington Mansion and Project Makeover.

Other Game Announcements

• Marvel Snap passes $2M revenue and 5.3M downloads in one week. Link
• Genshin Impact scaling beyond mobile is highlighted as a defining industry milestone in Niko Partners' Gametech report. Link
• Age of Empires Mobile global version is officially announced. Link
• June’s Journey hits 60M downloads and over $500M gross lifetime spend. Link
• Fortnite is collaborating with Ralph Lauren to release the iconic Polo Stadium collection set from 1992. Link
• Netmarble will discontinue development of mobile game BTS Dream: TinyTAN House. Link
• Trombone Hero is released, which is Trombone Champ’s inevitable mobile clone. Link

Company Announcements

• Supercell and Seriously veterans unveil new Wildlife-backed studio, Stellar Core. Link
• RuneScape developer Jagex reports record-breaking revenue for 2021, its seventh consecutive year of growth. Link
• Rovio is opening up a new studio in Barcelona. Link
• Rovio saw an 8.4% year-on-year increase in revenue in Q3. Link
• Product Madness rebrands as it opens two new studios. Link
• Reigns and Narcos lead Netflix’s November games slate. Link
• Modern Times Group reports steady growth through Q3 in recently released financials. Link
• Sega announces Singapore-based subsidiary as it seeks to expand in the Southeast Asia market. Link
• Stillfront Group saw Q3 revenue expand despite falling profits. Link

Ecosystem Announcements

• TikTok to launch playable games in new dedicated tab. Link
• India’s antitrust watchdog fines Google for $113M. Link
• The hypercasual genre leads September Southeast Asian mobile download chart. Link
• Swedish games companies contributed $5.8B to the global economy, national report reveals. Link
• Xsolla integrates Alipay support for game monetization across Asia. Link
• GXC announces new venture fund ‘for the future of gaming.’ Link
• Android accounts for over 70% of ad creatives in Q2 2022. Link

Content Worth Consuming

• What to consider when licensing an IP into video games (GamesIndustry.biz): “While the list of IP-based video games and collaborations is growing bigger every day, game developers should know that collaborating with a well-known franchise isn't a cheat code to success. There have been many botched attempts at IP-based video games throughout the years, as anyone who's played Superman 64, or waded their way through the mountain of IP-based platform clones that littered the 90s, will know.” Link
• Fundamentally Games' Oscar Clark on designing long-term games revenue (PocketGamer.biz): “”A recent Sensor Tower report revealed that 78% of revenues in games are coming from service-based experiences, and yet we still find a lot of confusion over how to approach design and monetization for keeping the interest of players in the long-term. This even applies to games we, at Fundamentally Games, have pitched to us that we feel have great potential to become living games.” In this article, Oscar Clark, CEO at Fundamentally Games and author of “Games As A Service,” will explore some of the design thinking behind longer-term sustainable revenue models. Along the way, he hopes to show that the model can be plausible for smaller teams without falling into the content treadmill and how to focus on player value.” Link
• Ep. 101: A Roadmap to Optimal Ad Placement (Mastering Retention): “Whether you are promoting your game or advertising in your game, optimal ads and ad placement is key. This week on Mastering Retention, Tom speaks with mobile ad monetization expert Yael Takomi (Mobile Gaming at Facebook) about setting realistic expectations for new users, segmented ad placement, the use of analytics in ad placement, and so much more!” Link
• Hyper-casual game development then and now: did three years make a difference? (Azur Games): “Hyper-casual development is no longer a sprint — the last time the “act quick, make a lot” strategy when a company pumps out simple prototypes with core mechanics worked well was in 2020. Now, the sprint has turned into a quite long obstacle race.” Link
• Marvel Snap global launch UA case study (Matej Lancaric): “Second Dinner is a lean organization. When global-launching a game, it’s important to have a full team on the UA, analytics, and creative side. If you don’t have it, you either work with publisher/partner or an agency/consultant. Let’s get to the actual UA operation.” Link
• Episode 36: Celebrity Collaborations in Mobile Games with HypGames (GameRefinary podcast): “In this episode of the Mobile GameDev Playbook, Mike Taramykin, the founder of HypGames, and Chief Game Analyst Teemu Palomäki from GameRefinery, a Liftoff company, join our host Jon Jordan to discuss the celebrity partnerships in mobile games.”