Kabam explains its pivot into triple-A mobile and China (interview)

Above: Kent Wakeford of Kabam at GamesBeat Summit.

Sherr: Let’s look at the character that began all of this – Angry Birds, which I guess is now the Pets.com of the mobile-game industry. They practically invented mobile-game marketing and branding and selling plush toys. What do you think of that sudden fall and how it applies to the model we’re developing?

Wakeford: What Rovio did with Angry Birds is phenomenal. They had huge brand recognition. But it’s a similar issue to what we’re facing now, with so many rapid shifts in our business. Rovio came out with a paid game in 2009. That game was phenomenal. It’s been installed more than 2 billion times. It’s second in brand recognition only to Disney characters. But it didn’t adapt.

They owned the paid download space when paid games were the dominant part of the market, 2009 and 2010. But between 2011 and 2013, the market shifted and free-to-play became the dominant business model. The ability to run a game as a service, to think about consistent design and live operations and performance marketing, these were all skills that grew and flourish within companies, whether it’s Kabam or others. If you look at what Rovio ended up doing, though, in 2011 they launched another paid game. In 2012, another paid game. In 2013 it was Star Wars. They didn’t launch a free-to-play game until the end of 2013. They kept doing what they were doing before instead of innovating.

If you look at Disney’s Tsum Tsum, that’s a phenomenal game and it could have been theirs. It should have been theirs. But it’s this concept of not adapting to the market and the industry as it changes.

Sherr: The collapse, from the outside, seemed sudden. How can we tell that things are going wrong?

Wakeford: What’s interesting about our industry is that we can know what’s going on by the hour. You can pick up your phone and see the charts, see who’s moving up and down. App Annie is a tremendous resource. You can look at the data and see whether a game is going to be successful based on the revenue per install. People are able to predict, today, what’s going to happen in six months.

Sherr: One big thing you’ve been doing is aiming your business toward Asia. We’ve seen Asian companies try to bring their games to the West and not succeed, as well as the other way around. There are a couple of examples that disprove the rule, but generally speaking, it’s a hard thing to do. Why do you think that is, and how do you break through?

Wakeford: The first thing about Asia is that we have to recognize it’s the dominant market. Any company that isn’t strategically thinking about Asia isn’t thinking strategically. App Annie came out three weeks ago reporting that installs in China now exceed the number of installs in the U.S. We saw the report from Digi-Capital showing that the value of an iOS install is eight times greater than an install in China. So maybe we can ignore it for a moment? But the next report comes out showing that the Android market, including China, is now bigger in terms of revenue than iOS. Just spread out over more people.

If there were still any doubters – if we still believe the world is flat – Newzoo came out showing that revenue from the mobile game space in China next year will surpass the U.S. Next year China will generate $7.7 billion in mobile revenue. The U.S. will generate $7.4 billion. The year after that, in 2017, China will be up to $9.3 billion and the U.S. $8.2 billion. China continues to grow faster than the U.S. market. That gap will continue to expand. If any of us are thinking about greenlighting a game with a production schedule maybe 18 months from now, once we’re done the market in China will be more than a billion dollars greater than North America.

Sherr: How do you not have the kind of troubles that Puzzle & Dragons did, going from the top in Japan to not the top here? How do you make those jumps?

Wakeford: We’ve been spending a lot of time in China. People talk about China being hard, and I want to emphasize that not only is China hard, it’s harder than people even guess. The market is growing faster than anywhere else. We’re seeing games that are now doing $40 to $50 million a month in revenue – including Boom Beach, which has been a great success. But it’s hard. We see a great deal of fragmentation. We all know about the 200 Android stores. Carrier billing plays a much more prominent role. There are tech issues are firewalls and file size and devices we’ve never heard of.

Sherr: Do you think it’s more the technical problems than the design issues?

Wakeford: The technical issues and the fragmentation are easier to overcome than the cultural issues. Culture is the hardest part. To be successful, you have to tap into the culture and build a game that resonates with consumers there. So far there have been very few western game companies that have done that. Supercell has gotten close. Call of Duty is trying.

Boom Beach is a good example. 25 percent of their revenue comes from China. The other interesting example is EA. EA truly culturalized Plants Vs. Zombies 2. Completely new SKU. The gameplay, system design, balance, economy, UI, UX—The result was that Plants Vs. Zombies generated more than 33 percent of its revenue in Asia. It’s generating more revenue in Asia than in North America. If you really try, there’s a great deal of potential success to unlock.

Above: Kent Wakeford, the chief operating officer of Kabam, at GamesBeat Summit.

Image Credit: Michael O'Donnell/VentureBeat

Sherr: And the difference is taking Americans and having them make the game for China, versus having people in China make it?

Wakeford: There are different approaches. There are publishing partners. We’ve reoriented our entire Beijing office to focus on culturalized games for China. These are people in China who know gaming in China. We’re having them build product for a Chinese audience. The roots of our company are Chinese-American. We have cultural ties to China. We’re refocusing everything to try and open the way there.

Sherr: Is there anything else you’d like to bring up?

Wakeford: We’re looking at two tectonic shifts in the business. One is the consolidation of market share at the top and what that means from a marketing perspective, game quality, game budgets, production schedules. The other shift is Asia. It’s the dominant market. We all need to be aware of it. The companies who are able to open up that market will see significant growth at a faster rate than the rest.