In this post, I have focused on the recent acquisitions in Korea that highlight both the growing importance of the South Korean mobile gaming market and the concentration of game development talent in the country.
I hope that this serves as a useful survey of the mobile gaming landscape in Korea - the country with the one of the most prominent developers in the world and the largest and stable network (=backbone) in the market.
Previously, foreign investors have underestimated the potential of the mobile games market. This is mostly due to the late introduction to smartphones and government regulation in Korea.
The South Korean government insisted on reviewing all games made available in localized app stores, meaning gamers were forced to register foreign app store accounts. So until mid-2011, mobile gaming in South Korea was a niche activity, despite Korea's reputation as a gaming powerhouse.
But since the reversal in governmental oversight in 2011, mobile gaming has surged in South Korea.
Mobile gaming revenues are expected to grow by about 41% (year-over-year) in 2013 while settling into year-over-year growth of between 12 and 18% in a “maturity stage” from 2015 to 2017.
Korea also boasts the world's fastest ramp-up of LTE service.
Recent Investments In Korea
- A little less than a year ago, GREE acquired South Korea-based Paprika Labs.
- At the time, Paprika Labs’ flagship game, Hero City, boasted 1.5 million monthly active users on Facebook and was the fastest-growing game on the social network.
- In December 2012,Disney acquired South Korea’s Studio Ex – before it had launched any games — as a strategic expansion into the Asian mobile gaming market.
- Recently, a Mumbai-based company, Reliance Big Entertainment scooped mobile game development and publishing company 'Funnel Japan' and secured a majority 51% share of mobile game development studio 'Bluesom' in Korea. This acquisition move is to increase its presence in the South Korean and Japanese mobile gaming markets.
So what does this mean for you?
In a great article by Tim Merel, he outlines the list of things you need to ask yourself before you "invest, plan and operate to take advantage of the brave new world". It goes as follows:
- Users: are your games aiming at thousands, millions or hundreds of millions of users?
- ARPU: do you measure ARPU in cents or dollars?
- Costs: do you think of game development and user acquisition costs in thousands or millions, and do you have the right cost/revenue model for your markets?
- Operating profit: can your business be flexed to deliver super-profits?
- Growth rates: could your business deliver 20%-100%+ annual revenue growth?
- Business model: what revenue sources are most important for your games — unit sales, subscriptions, virtual goods (currency/items), ads?
- Geography: can your games operate across geographies and cultures, or are they domestically specific?
- Platforms: are your games platform specific, or can they operate across sectors?
- Value to Volume transition: what can you achieve in Value markets as they transform towards Volume, and how does that compare to what you can deliver in existing Volume markets?
- Scalability: are you building a genuine business platform with scale advantages, or a series of hits?
- Exit: can you become a “must-buy” for one of the major players in either Value or Volume markets, and what does that look like?