The DeanBeat: The $2B mobile game and other bold predictions for 2015

The time has come again to make some wildly inaccurate but reasonably informed predictions about the future of games. Each year, I go through this exercise to show not only what might unfold in the next year, but also to spell out how difficult and unpredictable it is to run a gaming business. I have an awfully hard time getting things right. But I write so much about the business, and I hear so many predictions, I figure it’s always a good exercise and only fair to make my own guesses. It’s also a good way to look at the past year and take a reality check on the state of gaming.

Last year, I predicted that Sony and Microsoft would be in a dead heat in the console war. But on a global basis, Sony has sold an estimated 16.6 million PlayStation 4s sold to date, or 48.7 percent of the new console market share, while Microsoft is at 9.4 million, or 27.8 percent of the total. These figures come from VGChartz and should be taken with a grain of salt, since VGChartz aggregates sources and then takes a guess at worldwide market share. But assuming they’re in the ballpark, I was off on my Sony prediction, as the company clearly pulled ahead.

[aditude-amp id="flyingcarpet" targeting='{"env":"staging","page_type":"article","post_id":1631396,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,games,mobile,","session":"A"}']

I also predicted that Nintendo would dump the Wii U. But Nintendo shipped some good games in 2014, and the Wii U is hanging in there with an estimated 8 million units sold to date and a 23.5 percent market share. If Nintendo can continue to produce some of the most highly rated and bug-free games out there, it may very well continue to see more growth.

One of my predictions, which was based on a talk made by Unity Technologies CEO John Riccitiello, was a good one. We figured that user acquisition costs were rising out of control and that brand names would start to make their mark in mobile game revenues. That prediction is gathering steam as we see lots of mobile games debut with licenses from movie, TV, or toy-related brands.

For fun and embarrassment, here are my predictions for 2014, 2013 and 2012. Please vote for your favorite prediction in the poll at the bottom.

1. The $2 billion mobile game will arrive

Games such as King’s Candy Crush Saga have generated more than $1 billion in revenues to date. Supercell was able to get to $892 million in revenue last year on revenues from just three mobile games: Clash of Clans, Hay Day, and Boom Beach. I have to believe that this trend will continue, and somebody will generate $2 billion in revenues from a single game. That may sound like a lot of hype, but mobile gaming keeps gaining momentum.

Market researcher Newzoo is predicting that mobile games will overtake console revenues in 2015. Others, like venture capitalist Rick Thompson of Signia Venture Partners, are saying that mobile is becoming a winner-take-all market. Mobile gaming is growing at a rapid rate in emerging markets such as the Middle East and India, and gaming is spreading around the globe. Gamers are becoming more comfortable with business models such as free-to-play games with in-app purchases. And the quality of mobile games is rising with titles like Vainglory.

This opportunity is why we are seeing so many deals happen in games, such as Microsoft’s $2.5 billion acquisition of Minecraft publisher Mojang. The $2 billion game may be one of the companies that already dominates the top-grossing ranks of the app stores, or it may come from out of the blue. But with console titles like Grand Theft Auto V easily eclipsing these numbers, it seems inevitable that mobile games — which has access to many more users than the consoles — will also hit the milestone of $2 billion in revenue in a single year.

2. The bubble won’t burst in games, but the air will deflate in some sectors

[aditude-amp id="medium1" targeting='{"env":"staging","page_type":"article","post_id":1631396,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,games,mobile,","session":"A"}']

Games follow the laws of gravity. We’ve seen an unprecedented global expansion across consoles, PC online games, mobile gaming, and social games. I think that will continue, and I believe that fears of a bubble bursting are unfounded. So long as there isn’t a major negative economic event, the game expansion should continue. And that means that market valuations will continue to rise. It’s worth noting that Electronic Arts, once the gang that couldn’t shoot straight, is now executing well and has a market value of $14.9 billion, almost double a year ago and higher than Activision Blizzard’s market value of $14.6 billion. That’s quite a positive run, and EA isn’t alone. King is also executing well as it comes up with alternatives to Candy Crush Saga.

And while the broad market expansion should continue, I think some sectors will stall. We’ve already seen pullback in some areas. Social casino games are growing at a much slower rate than in the previous couple of years. The top five companies in the sector now hold nearly half the market share, and the ranks aren’t changing that much any more. The sector saw the creation of more than 100 startups in the past few years, and some of those are starting to shut down. They’re struggling to get new rounds of funding, or they’re just selling out for smaller valuations. This is what happens when investors get too excited about a sector, as they did in 2012, and then the air goes out of it.

On the other hand, I don’t think we’ll see all sectors deflate. There are still some hot spots such as mobile gaming in China and virtual reality that will keep the bubble going, at least for another year.

3. Sony will start to pull further ahead in console games

[aditude-amp id="medium2" targeting='{"env":"staging","page_type":"article","post_id":1631396,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,games,mobile,","session":"A"}']

As much as I’d like to see Microsoft and Nintendo come back with a glittering line-up that evens out the market share, I don’t think that is going to happen. The third-party game publishers are likely to be more willing to give exclusives to Sony, thanks to its No. 1 market share in the PlayStation 4 generation. And that advantage will become a self-fulfilling prophecy, begetting even more exclusives, such as the upcoming Street Fighter V, which will not appear on the rival Microsoft or Nintendo consoles.

Sony has some of the most interesting exclusives coming in the new year. I’m looking forward to exclusive PS4 titles like The Order: 1886, Until Dawn, Uncharted 4: A Thief’s End, and Bloodborne. At the recent PlayStation Experience event, Sony showed off more than 800 titles, many of them small titles coming from indie game makers. Microsoft and Nintendo have their exclusives, but the only real threat to Sony’s dominance is the weakness of the parent company and something crazy coming out of the blue — like North Korea.

4. New systems such as virtual reality will finally debut

It’s a no-brainer that Facebook will ship a virtual reality platform in 2015, as it has to get some mileage out of its $2 billion acquisition of Oculus VR. Virtual reality systems are going to get into the hands of users next year, and it’s about time. We’ve heard talk about this trend for a few years, and I think it’s about time something really happens.

[aditude-amp id="medium3" targeting='{"env":"staging","page_type":"article","post_id":1631396,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,games,mobile,","session":"A"}']

But I also think we’ll see other new systems in 2015. Valve just might pull the trigger on an improved controller for its Steam Machines, and that could open a new front against Microsoft’s monopolistic hold on the Windows PC gaming market. Alibaba is also rumored to be working on its own high-end game console. With so many ideas in play, I believe that we’ll see some of these come to fruition and actually launch in 2015.

VR goggle systems still need secondary accessories, such as hand-input systems. and companies such as Facebook-Oculus and Sixense are working on these systems. If they complete this work, I think we’ll see real VR games and apps start to materialize. Many game developers, like Temple Run VR maker Imangi Studios, can’t wait to release their virtual reality titles. The next-generation consoles are established in the market. But there’s plenty of opportunity for someone to launch a sneak attack or a second front in the wider gaming war.

5. A major game will be ruined by bugs

Bugs are hard to stamp out. They prove so elusive that they’ve ruined the consumer experience in a lot of games produced by mid-sized studios. But in 2014, we saw a lot of bugs in some major games. Assassin’s Creed: Unity was built by Ubisoft’s typical army of more than 500 game developers across multiple studios, but the title launched with some very bad bugs such as a low frame rate. Microsoft also had major foibles with the launch of Halo: The Master Chief Collection.

[aditude-amp id="medium4" targeting='{"env":"staging","page_type":"article","post_id":1631396,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,games,mobile,","session":"A"}']

Based on the track record for 2014, I can only assume that the same sort of chaos striking major games in 2015. I’m not one to gloat about this. VentureBeat had its own issues staying available around the clock for readers in 2014. This is hard work. But we have to be realistic about bug fixing, which is a problem no matter how big a team is. I don’t see how the situation gets any better in 2015.

6. Smaller is better

I’ve been astounded to see the success of Supercell, which could generate $1.4 billion in revenues in 2014 with three games. By comparison, Electronic Arts has more than 800 mobile games in the market, but its estimated 2014 mobile game revenues will be decidedly smaller than that.

[aditude-amp id="medium5" targeting='{"env":"staging","page_type":"article","post_id":1631396,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,games,mobile,","session":"A"}']

Ilkka Paananen, chief executive of Supercell in Helsinki, says that the company tries to keep itself small in spite of its success. The temptation to spread its bets and make big team investments must be enormous. But Supercell hasn’t expanded much since last year. It has around 150 employees, including 110 in Helsinki. A team of just 15 people works on updates for Clash of Clans, the most successful mobile game on the planet. Each new game is built by a team of five or six people, and the process for dealing with complaints from a base of tens of millions of users is automated, thanks to customer service technology from Helpshift.

This makes me think that it is possible for small teams to create blockbusters, particularly in mobile. Some companies will bet on huge teams working on a single title for a number of years. But the odds aren’t that much better for those kinds of teams compared to the tiny teams at Supercell. We’ve seen small teams win so many times, and I think this trend will continue in 2015. There’s just one catch, as Rumble Entertainment CEO Greg Richardson mentioned to me in a recent interview. If you’re a small company or a big one, your goal is the same. You have to swing for the fences and produce something outstanding.

7. Gamers will come to terms with stereotypes and realities

People who criticized the stereotypes of hardcore games in 2014 were branded “social justice warriors” and excoriated by the members of the #GamerGate movement (a giant fight on the Internet about feminist game critics and more). But as I noted in a column earlier this year, I believe that games that buck stereotypes and give prominent roles to female characters are turning out to be better gaming experiences than the hardcore games that stick to the traditional male tropes.

Critics like Anita Sarkeesian and the #GamerGate controversy have drawn attention to some of the problems that have held games back from being universally appealing. If game developers use this year’s lessons to examine their own creative process and the choices they make, I think we’ll get better games. And I think that gamers will accept this broader diversity of characters, subject matter, and target audiences as the market of gamers expands.

I admit this may be wishful thinking on my part, but this is a future I would like to see unfold. I am hoping that both gamers and game developers will behave, and that we’ll see more creativity, not less, be the result.

8. Hackers will take down more major online games and services

This prediction is an easy one, like the one about major bugs. Given the history we’ve seen in 2014 — with hackers taking down online gaming services offered by Sony, Microsoft, Twitch, and Electronic Arts — why would we expect this trend wouldn’t continue in 2015?

Companies with the biggest resources for dealing with cyber threats such as distributed denial of service attacks (DDoS) have been victims of these attacks, where hackers send a swarm of nonsense traffic to deluge a game service. The companies try to deal with these attacks, but service disruption is the norm. If the big guys are still getting hacked, I suspect the smaller companies with fewer resources will be easy targets as well in the future. If you’re not ready for this problem to get worse, then you haven’t been planning properly.

9. China’s momentum will continue to grow

There are still a lot of big Chinese game companies out there that few people outside of China have heard about. I am surprised to come across such companies, like SkyMobi, on a regular basis. SkyMobi has more than 600 employees, and it is part of a mobile gaming ecosystem in China that is growing its revenues at a rate of 93 percent a year. As I discovered this year at the ChinaJoy gaming event in Shanghai, where more than 250,000 people gathered in a single week, China’s game market is unique — and it’s oddly sexualized.

If you’ve focused all of your attention on console games, the rise of China is easy to miss. But this year, Microsoft launched its Xbox One game console in China, and Sony is launching its PlayStation 4 in early January. Both companies have seen the sleeping giant awaken, and they don’t want to miss out. This means that China’s market is going to be the world’s largest gaming market, and Chinese companies are going to become some of the largest game companies on the planet. Giants such as Tencent already dominate in both China and on the global stage. We’re only going to see more of that in 2015.

10. The e-sports companies dominate games

When Amazon bought gameplay livestreaming startup Twitch for $970 million earlier this year, it was a coming of age for e-sports. Twitch lets players broadcast their own game sessions or become spectators watching great players. And titles like League of Legends were built with e-sports in mind. League of Legends is an aging game, but it commands more than 20 percent of the market share for online gameplay just about every month. The reason has a lot to do with the fact that the game is a huge hit in the e-sports community. This means that League of Legends has consistently more users than World of Warcraft, one of the old stalwart PC online subscription games. And League of Legends now has a ton of challengers, all of them created to command the attention of e-sports fans. It’s easy to predict that this part of gaming will only get bigger.

What do you think of these predictions? Please vote for your favorite, or leave comment with your own prediction.

Which is your favorite prediction about games for 2015?