A Case Study of the China Mobile Game Industry
The current China mobile game industry has demonstrated characteristics of an oligopoly market. Having seen a huge surge in revenue of mobile games in the past years, many game companies are trying to get in this profitable realm. As the industry became mature, the market structure was stabilized. According to the Q3 industry report released by iiMedia Research (2016), the third quarter’s total revenue of the China mobile game industry is 19.23 billion RMB, among which 51.5% were generated by Tencent and 20.8% belonged to Netease. These two giants together were accounted for 72.3% of the market share. None of the rest of the competitors in the industry held more than 5% of the market share solely.
The capital and resources are mainly concentrated in the hands of Tencent and Netease, which poses high entry barriers for new entrants. Many people argue that the China mobile game market is showing the Matthew effect, that the strong get stronger and the weak get weaker. However, by applying the long tail theory, we can still be optimistic that opportunities for new entrants and small companies are out there. Given the fact that mainstream products (e.g. MMORPG, Cards, MOBA Games) are dominated by the big two, possible solutions for small companies include focusing on the niche markets. For instance, exploring the anime culture (二次元), sports related and female targeting games. Small businesses will need to differentiate themselves with high-quality games and reach their targeting users more efficiently by utilizing social media, word-of-mouth, App Store’s recommendation and so on.
As for the big companies like Tencent, it has engaged in various forms of strategic alliances to enhance its competitiveness. In June 2016, Tencent acquired 84.3% of a Finnish game maker Supercell for $8.6 billion. Supercell is reputable for developing the world’s top grossing mobile games including Clash of Clans and Clash Royale. This was the biggest overseas acquisition in Tencent’s history, but not the first one. Tencent made a successful move of acquiring Riot in 2015, the game developer of League of Legends (LOL). Now, LOL has become one of the most popular PC eSports game in China. Tencent has also created a mobile game King of Glory by imitating the design of LOL, which remains a huge hit ever since its release and now it ranked the top 1 on Apple App Store’s best-selling list (China).
The success of Tencent mobile games follows the principle of Metcalfe’s effect (Network effect). Tencent has integrated the game production with its distribution stage. Mobile games developed or franchised by Tencent will be released on its two major social media platforms, QQ and WeChat. As shown on the financial report of Tencent (2016), QQ has monthly active users (MAU) of 877 million and WeChat has MAU of 846 million. Distribution through these two channels means exposure to the enormous user base, which brings in large traffic to the games. Additionally, because almost every mobile game has social features, more people playing it, more enjoyable the gamers will feel. The increase of a game’s popularity creates a sense of belonging and fulfillment for gamers, which in return attracted new gamers and improved their loyalty, and vice versa. Thus, with the powerful distribution channels across WeChat and QQ, Tencent is confident to monetize its own games.
References:
iiMedia Research, 2016, The Q3 Report of China Mobile Game Industry. Retrieved from http://www.iimedia.cn/47122.html.
Tencent, 2016, 2016 Interim Report. Retrieved from https://www.tencent.com/en-us/articles/1700291473387603.pdf
- - by Shiran Jiang, 1155084678
- - by Shiran Jiang, 1155084678
Thanks for your succinct analysis of the mobile game industry in China! Your work has certainly broadened my horizon on the industry. It is interesting to know that mobiles games from Tenant are also released on social media platforms in China. Compared to foreign countries where the main channel of distribution remains largely on app stores, it seems like China's gaming industry is making a better use of social media for marketing. Suggestions for smaller companies to explore the niches such as the anime culture, sports related and female targeting games are also quite sensible. After all, in my opinion, competition and more business ventures should be encouraged for improvements under the current oligopoly market structure.
ReplyDeleteStudent number: 1155087519 (Jessica, Wong Cheuk Yi)
This essay is very well-written and professional, with clear structure and statistics. One thing I would like to share is that Netease is doing well in the niche marketing by attracting anime fanatics and female players. 50% of Onmyoji（阴阳师）players are female, and many are also anime lovers, probably because the entire game adopt Janpanes anime style and invites famous Japanese voice actors to dub for the characters. Onmyoji also performs well in marking through social media by interacting with players and encouraging fandom creating.
ReplyDeleteDeveloping MMORPG requires huge amount of capital and strong technology support, which makes it difficult for small companies to enter. So the new entrants can focus on smaller or single-player games with unique style. Monument Valley (纪念碑谷) may be a good example for this.
Ella, Zhang Zhixin
Student Number: 1155081883