Mobile gaming spins eye-watering revenues — can these ASX players hit the jackpot?
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Here’s some numbers for investors on mobile gaming:
It’s a big market with big (potential) returns, and the cohort of ASX players — tournament platforms and game developers — is still a small one.
Arguably, it’s a space where Australian investors have a relative lack of familiarity compared to well-known tech sectors such as SaaS and BNPL.
That said, some stocks caught alight in the second half of last year to finish 2020 with multi-bagger status.
However, some heat came out of the market over the past month as investors assess the viability of those business models:
To get a view from the company side, Stockhead caught up this week with Gerry Sakkas, CEO of new ASX entrant PlaySide Studios (ASX:PLY) which listed in December.
So as investors turn their eye to the sector, what key metrics and thematics should they be looking for?
“I think one of the main things with gaming is, say if you’re comparing it to other tech sectors on the ASX, gaming has been around for decades,” Sakkas said.
“You’ll see articles saying gaming is going to be the next big thing — well, it’s already been the big thing. Even across esports, all of these industries have been making more money than movies and music for years.”
“So what people should be looking at is how big these games coming out can get. Sure, for a company like PlaySide, download numbers matter. The number of titles we’re releasing matters. But then it’s all about the potential of a really big (game) title.”
The numbers at the top of this article are indicative of the money that big mobile gaming titles can spin.
But Sakkas says there’s still “way more room” for growth.
“The thing about the games industry is that one big game coming out doesn’t cannibalise everybody else,” he says.
“For example, titles like Fortnite or Minecraft got more people playing mobile games. It brings more people to market who then want to play the next big title that comes out.”
“In that sense big games benefit everyone. And I still think we’re yet to see the peak of that market where one huge game title dominates everything.”
With PlaySide’s product suite, the company has a number of titles that are built for PC desktop gaming.
However, “we don’t start developing a product now without at least thinking what it might look like on mobile”, Sakkas said.
“So for something like (PlaySide game title) World of Pets, we built it knowing from the beginning that we’d be taking it to mobile one day.”
“What that means is you need to be careful with you how you build out the graphics, the user interface and how it works — menu buttons and things like that — so that it’s easily transition-able to a mobile device.”
As an example of a recent crossover success story, Sakkas flagged the 2020 release of Genshin Impact by Chinese game developer miHoYo.
In the first week of its September launch, the game registered 17 million downloads and generated around $60m in mobile gaming revenue.
“They launched across every device on day one and booked some big sales,” he said.
“That’s one of the only products I’ve seen so far to launch across every device on the first day.”
While Genshin took advantage of its position within China, Sakkas said PlaySide takes a partnership approach to the Asian market.
“We usually partner up there because it’s so different. The look of game, sometimes even the gameplay needs to change for it to work in that market. So we’ll usually work with a large Asian publisher, either for China or Japan,” he said.
As a general rule for PlaySide’s mobile game suite, the US market takes top priority.
“If you can make something work in the US that will nearly always trickle down to Australia and the UK anyway. For Animal Warfare which was one of our top 2020 titles, more than 70 per cent of all downloads are in the US.”
More broadly, Sakkas said the mobile gaming market will continue to benefit from two other tailwinds.
“Firstly, it’s giving people an opportunity to play (PC) titles when they otherwise can’t, which expands the market,” he said.
“And secondly, you can do more with the game as phones get more powerful. The current smartphone can do pretty much what a PlayStation 4 can do. So it’s not very different.”
“Some products might not make sense for mobile – e.g. a big console game like Grand Theft Auto,” Sakkas said.
“But when you’re entering the market with a game that’s free to download, it makes perfect sense to design it on mobile as well as console at the same time.”
“In that sense, my vision for the future of gaming is that everything eventually will be one multi-linked platform.”