Mobile gaming industry heading to top of league

Developers score with fast-growing, large potential audience that's predicted to overtake US market

The mobile games industry in China is expected to be worth more than $3 billion this year, according to SuperData Research Inc. That could mean China will overtake the United States as the world's largest market in the sector.

Chief Executive Officer Joost van Dreunen said it's no surprise that China and the US are the two biggest players in the mobile games market.

"What is surprising is the rate at which China has caught up with especially large Western mobile game markets," van Dreunen said. "This is exciting for publishers because its growth is reminiscent of that of the US a few years ago, but it has a much larger potential audience."

SuperData released its May 2014 Mobile Games Brief for the US and China earlier this month, which predicts the worldwide global games market will exceed $20 billion by year-end.

SuperData's estimates for the US and China came in at $3.2 billion and $3 billion, respectively, but the rankings could change due to trends in the world's two largest economies.

"Mobile games [in China] are showing tremendous growth," said a May 5 post on SuperData's blog. "By comparison, the US mobile game market is showing signs of saturation. Overall spending continues to grow but does so at a lower rate than its Chinese counterpart."

Van Dreunen said the gaming industry in the US is "experiencing a transition" from a retail-based game market to a digitally focused environment, and a key component of building a "successful global business" in the gaming market is making sure the products fit the needs of consumers.

"Publishers must tailor their games to suit local markets," he said. "This process of localization has become increasingly important in the games industry, and directly affects a game's ability to persuade players to spend money. What works well in the US may not work well in China, and vice versa."

Founded in 2009, SuperData covers free-to-play and digital games. By collaborating with publishers and game developers, SuperData analyzes market changes, establishes revenue estimates and identifies key developments for popular online games.

Asian games research firm Niko Partners recently released a report estimating that the Chinese personal computer-based online gaming market would double by 2018.

"Investors are embracing the mobile games space in China, but there is still a lot of life left in PC online games, and now the exciting market of consoles, too," said Lisa Cosmas Hanson, managing partner at Niko.

On April 29 in Shanghai, Microsoft Corp announced plans to roll out its Xbox One flagship gaming consoles in China later this year.

Van Dreunen said Xbox One in China would have to compete with the existing standard bearer-PC/mobile gaming.

"With the exception of Japan, most Asian markets do not have a significant physical retail game market," said van Dreunen. "Furthermore, the free-to-play monetization model originates in Asia, which means that Chinese gamers are more accustomed to it. There does exist an affluent top layer in Chinese society that, no doubt, will want to have access to console gaming."

"However, the incumbent model of PC/mobile gaming in China, and the existence of a large installed base of pirated consoles, tells us that it will take some time," he said.

The videogame industry in China generated revenue of $13 billion last year, a 38 percent jump year-on-year, according to a January report from BBC News.