One of largest distinctions between creative industries and traditional ones, such as manufacturing, is how difficult it is to predict their return on investment, says Lu Jiaxian, the founder of mobile gaming company Mu77.
“Companies engaged in traditional industries such as manufacturing could get a clear view about their investment returns,” says Mr. Lu. “All you had to do was add up your cost for components, labor, and the amount of profit you were aiming for.”
“The same principle wouldn’t work in creative industry where investment and return are less correlated,” he says. “A low-budget animation film like Monkey King: Hero is Back could achieve huge commercial success, while blockbuster titles like Throne of Elves could end in gloomy box office revenues.”
For Mu77, partnering with indie games could be a way to counter the unpredictability of the creative industry and maintain a high success rate in China’s increasingly competitive mobile gaming market.
The commercial success of mobile games with licensed IPs is evident around the world. However, it is difficult for startups to compete with heavy-pocketed gaming giants for quality IP resources. Indie games, which have a smaller but more loyal and niche audience and an established reputation could be a good place to start.
“Firstly, we will obtain the original codes and images from the indie game developers,” says Mr. Lu. “After drilling down into the design logic, we then develop a mobile version of the game by adding features that better suit the habits of mobile gamers for player engagement.”
More importantly, Mu77 integrates monetization features and launches marketing campaigns for the game to attract players outside of the hardcore indie game community.
In August last year, the company launched a successful pixel art game called Gold Digger, which recorded 20 million RMB (about $3 million USD) of revenue within the first month after its release. Mr. Lu says that their second game Card Monsters, a trading card game, will roll out in one or two months later this year.
“It’s common practice for gaming companies to open their games for testing when 70 to 80 percent of the product is finished,” says Mr. Lu.” With access to a group of loyal game players, we start the testing as early as 30 percent. It gives us time to integrate feedbacks from users along the way to perfect our games.”
Unpredictable return is one of the reasons why China’s mobile gaming investment craze is cooling down. “It’s true that gaming companies may have difficulty maintaining sustainable year-over-year growth, but by setting the focus to a three to five year time frame, we can find some trends governing the company’s growth.”
“The film industry is also facing this problem, but a mature financial industrial chain has helped to lower the risks for investors,” says Mr. Lu. “So there’s still a long way for us to go.”
“I believe the gaming industry will continue to boom because computer game and mobile games are still the most accessible form of entertainment for the masses,” he adds.
Four Trends Shaping Gaming Industry
As a veteran game designer that has worked in the gaming industry for more than a decade, Mr. Lu shared four changes that are shaping China’s gaming industry:
1. “Consumption Upgrade” in Gaming
“Consumption upgrade”, a concept widely used in traditional industries, also applies to the gaming industry. China’s gaming industry, especially the mobile gaming sector, has risen rapidly over the past few years thanks to a growing base of mobile users. It’s easy for developers to gain users in a growing market, but as the market evolves, users are getting a better sense of their own preferences, such as card-collecting games.
“At this time, companies that want to stand out from the crowd should come up with higher quality games that target a specific audience rather than mainstream users,” Mr. Lu pointed out.
“When we first released Gold Digger, it was crystal clear for us that over 80 percent of mainstream users weren’t ready to accept this kind of pixel art game, but it doesn’t matter because our game goes after a small group of pixel game fans.”
China’s mobile market is entering a development bottleneck. But when looking at the global market, there’s still plenty of emerging markets in India, Indonesia, and Brazil. At the same time, users in developed countries such as Japan and the U.S. are also a major contributor to global mobile game revenues. It’s time to build a global ecosystem.
“I’m not saying that companies only focused on domestic market wouldn’t stand a chance, but it will be a tough path to take,” says Mr. Lu.
Furthermore, lots of Chinese internet companies have taken the lead in overseas expansion. “Their success in foreign markets have forged the path for globalization with lower costs for user acquisition,” he says.
3. Big Data
“In a booming market, there’s little need for refined operations to target at different user groups, but now it’s a game changer in the market,” says Mr. Lu.
Supported by big data, companies will be able to construct data models that can predict user behavior and make corresponding marketing measures to change their behavioral curves.
4. New Technologies
The adoption of new technologies like VR and AR is going to bring a new spike in the global gaming business. “There’s no need for me to further dwell on this point because the success of Pokémon Go has been so obvious,” says Mr. Lu.
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