The global market is shrinking, where will the game go overseas in 2023?

Text | FunFactory

2022 is quite a bumpy year for the Chinese game market. A series of problems such as version tightening, layoffs, and user cuts in entertainment expenses have brought a lot of challenges to the game industry. According to data recently released by the Game Working Committee of the China Phonological Association, the actual sales revenue of China's game market in 2022 will be 265.884 billion yuan, a year-on-year decrease of 30.629 billion yuan, a decrease of 10.33%.

At the same time, 2022 is also the year that the global gaming industry is put in the spotlight. In this year, not only did the European Parliament pass the first resolution on the development of the video game industry, but then European countries have also launched a series of support policies, and the Middle Eastern countries led by Saudi Arabia have also set their sights on games and e-sports, not only actively investing in overseas game companies, but also beginning to introduce overseas game companies for the local area, which is bound to vigorously support the development of the game industry in the future. In the post-epidemic era, the game industry seems to have become one of the focus of many countries to boost their economies.

In the past two years, domestic game companies have made a lot of moves to go overseas, not only penetrating into more overseas regions, but also some of them have successively built or acquired local teams to increase investment in overseas markets. So, what exactly has changed in the past two years? What is the likely development trend of games going overseas in 2023? Recently, the amusement park has communicated with a number of senior practitioners in the game industry, hoping to summarize some changes in the market segments, categories and other aspects of game overseas in the past two years, and sort out some new trends that may appear in the game industry in the future.

The global mobile game market is moving towards the stock stage, shifting to compete for users in Southeast Asia and deeply cultivate the North American market

Three years of the epidemic have triggered a sharp decline in the number of game developers and game projects around the world. Data shows that compared with 2021, the number of global mobile game developers in the first half of 2022 decreased by 1/5, and more than 3,000 games were withdrawn from the market, most of which were waist and tail projects.

The global mobile game market has also seen some slowdowns. According to Newzoo, the global mobile game market revenue reached US$92.2 billion (about 643.5 billion yuan) in 2022, down 6.4% year-on-year. According to other data, the average duration of games in 2022 decreased by 8% year-on-year, and only 24% of mobile games with DAU growth in Top200 games increased year-on-year. At present, the global mobile game market has entered the stock stage.

At present, North America, Japan and South Korea, Europe, and Southeast Asia are several important regions for Chinese games to go overseas.

The North American market is the most mature market in the world, with the strongest monetization potential, the highest click willingness to click in-game ads, and easier localization than small language regions. Chen Shuyi, co-founder of Discuz! and founder and CEO of Egret Era, told Amusement Factory that although the North American market is very mature and there are many game giants, because advertising monetization and in-app purchases can generate large enough returns, it is suitable for small and medium-sized enterprises as the first stop for games to go overseas and cultivate in it.

Compared with the North American market, the ARPPU of the Japanese and South Korean markets is higher, and it has the highest number of heavy online game users in addition to the Chinese market, but it also requires strong refined operation capabilities, marketing costs are also higher, and revenue mainly relies on in-house purchases, rather than advertising monetization, and users' acceptance of new brands is very slow, which may not be suitable for the layout of new brands.

The European market, which is between the North American market and the Japanese and Korean markets, has performed well for both heavy and casual games, and the revenue performance of medium games is the best in all markets. Among them, Germany, the United Kingdom and France became the three countries with the highest revenue and mobile game users in the European mobile game market in 2021, which are worthy of attention for domestic game companies going overseas in Europe.

The Southeast Asian market is very similar to the Chinese market a few years ago in terms of population and stage potential, so it has become a must for many large manufacturers. It is worth noting that the markets with user dividends in the global market are Indonesia, the Philippines and Malaysia. In Indonesia, for example, the average acquisition price of casual games rose from $0.1 in early 2021 to $0.35 in November 2022, but the cost is still cheap.

Chen Shuyi believes that the core proposition of the game going overseas is actually the competition for Southeast Asian users and the deep cultivation of the North American market.

Hyper-casual gaming is in decline, and opportunities for SMEs are in hybrid gameplay and hybrid monetization

OpenMultimedia data shows that among the various segments of the head game market, hyper-casual and casual games (simulation, puzzle, action) are still the user harvesters of the game market, accounting for nearly 70% of the world's user volume, but hyper-casual games have a serious loss of users in the first half of 2022.

At the same time, the overall download volume of casual games has also encountered a bottleneck. Google data shows that compared with 2020, the download volume, new users and active users of casual games in 2021 have bottlenecks, in addition to hyper-casual, parkour and education, almost all casual game categories are facing download bottlenecks, which reflects that developers and publishers of casual games have been difficult to get users from the dividends of the market, and the market tends to the stock stage, or even the shrinkage stage.

Two years ago, gaming products went to the extremes of heavy categories such as SLG, MMO, and cards and light categories such as hyper-casual. Today, some products fuse these two extremes together, such as some doomsday-themed SLG products that integrate match-3 casual gameplay; "Pocket Raiders" will give users a casual gameplay experience in the early stage of the game, and SLG gameplay will gradually expand later.

The integration of heavy gameplay and light gameplay actually reflects that changes in the general environment make the opportunity to acquire new users less and the cost higher, but existing users need to continue to obtain incentives for gameplay innovation. Chen Shuyi said that considering that the old game is limited by the basic plate and cannot quickly iterate the gameplay, the new game can often bite off a piece of the market. "Many categories that people feel have been done badly and can't move, and many small and medium-sized teams may make some unexpected innovations."

Dai Di, head of Google's mobile application new customer business in Greater China, told Amusement Factory that many small and medium-sized game companies want to do some new categories, want to make R bigger but can't do SLG, RPG, want to make DAU big but can't do MOBA, FPS, TPS, so he also believes that for small and medium-sized game companies, the biggest space this year lies in mixed play and hybrid monetization.

Previously, casual games focused on IAA (advertising monetization) and heavy games focused on IAP (in-app purchase monetization) was the consensus in the game industry, but as the overall scale growth of game revenue encountered bottlenecks, the payment model of the two types of games in the past two or three years has gradually moved closer to hybrid monetization.

However, different categories have different degrees of compatibility for the hybrid monetization model, and the categories with the highest fit for hybrid monetization are match-3, tycoon, anagram, etc., of which match-3 mixing has entered the stage of deep competition, and there are limited products that can run out or pull back costs in the market. Dai Di said that the sub-category tycoons of simulation management have the advantages of stable income growth, stable distribution of age and gender growth rate, and the top 3 products absorb only 40% of active users, so that the selection of sub-gameplay and theme has a lot of space, which is more suitable for the layout of small and medium-sized enterprises.

At present, common tycoon themes include farms/estates, restaurants, transportation, theme parks, shops/supermarkets, hospitals, these themes are relatively mature, there are many competitors, and they are not suitable for new games. Dai Di believes that small and medium-sized enterprises can develop tycoon mobile game products with the help of themes such as sea survival, fishing, construction sites, campuses, dinosaur theme parks, hunting/wilderness, and camping that have been verified on PC and host side.

What other factors can small and medium-sized teams refer to to find a suitable direction for project establishment?

Whether it is the R&D team or the distribution team, every time when determining the direction of the project that suits you, you will be confused about how to choose the track and choose the subdivision gameplay.

Deng Xianyao, investment director of Wawafish Network Technology, mentioned to the amusement park a concept called "quantitative stance method", which contains three indicators: growth rate, odds and win rate. Among them, "growth rate" requires the game team to observe whether the track they intend to choose has a large enough market space; "Odds" requires the game team to judge whether the subdivision to be done has a high enough input and output, and what is the ratio of cost to benefit ceiling; The "win rate" requires the game team to have a strong enough ability to win.

The game team will only have a higher probability of success if it is in a high-growth track, with high-odds gameplay and a good win rate, and projects that meet the three elements of high growth rate, high odds and high win rate are also the focus of investors. Deng Xianyao believes that a good market is with revenue growth and download growth; High odds, high rate of return, is worth investing time and energy in R&D and distribution, is a project that investors will spend more money and resources to cooperate; The high win rate is reflected in the game team's planning ability, numerical ability, art ability, commercialization ability, etc., which determine whether a team can finally succeed.

The growth of each market in 2022 will not immediately change drastically in the following year, in fact, it can also provide some reference for games to go overseas in 2023, and small and medium-sized teams can develop and release more popular local categories for some countries and regions to improve their own win rate.

Deng Xianyao pointed out that the ceiling of a project is not the total market size of the track where the project is located, but the market size that can be reached and served, which depends on how much market share a team can occupy, only less than 1% of R&D can eat 80% of the serviceable scale, 5% of the R&D can eat 15% of the serviceable scale, 15% of the R&D can eat 1% of the serviceable scale, and the remaining 80% of the R&D must fight in less than 1% of the serviceable scale, and you must have a clearer understanding of yourself.

A new medium to replace mobile phones has yet to emerge, and AI technology will bring new breakthroughs to the gaming industry

The development of the game industry so far is inseparable from the continuous innovation of related technologies.

For example, Unity has more than 300,000 developers, who have contributed various plug-ins, third-party tools, art materials, packaged systems and components to the platform, which can greatly save development workload; Unreal Engine 5 makes it even more intuitive to improve game quality and maximize player immersion.

On the other hand, the current development of the game industry is also facing a lack of breakthroughs at the media level. In the early days, the development of the game industry ranged from stand-alone games, computer games to terminal games and page games, and the emergence of smart phones provided soil for the rapid rise of mobile games, and later H5 games, mini games and other install-free game types. Chen Shuyi believes that the market seems to be touching the ceiling of development again, but there is no new medium to replace mobile phones, and can only continue to dig deep into the content.

In 2022, the explosion of AIGC, ChatGPT also allows people to see the stage of artificial intelligence from simple assistants to collaborative partners. Chen Shuyi believes that in the future, AI technology will have some new breakthroughs in the automatic generation of original art design, animation production, 3D models and scenes, planning preparation, game dubbing, open plot, NPC simulation interaction, operational data analysis, intelligent advertising, intelligent customer service, etc., which may bring completely different breakthroughs to game production and game experience.