Report: Monetizing Video Games in Asia

A report released by market research company Niko Partners broke down the different ways in which publishers and game titles earn revenue. The report shows how gamers in Asia behave when it comes to spending money and which titles and categories they are willing to spend in. This is the third part of a series of reports released by the company where it continues to explore the Asian video games market. 

Free-to-Play Titles Account for Majority of Revenue Made by Games

In 2019, Free-to-Play (F2P) games accounted for 80% of all digital games revenue. While console games drove just 10% of that revenue, popular titles such as Fortnite, Apex Legends, and Call of Duty: Warzone are helping expand F2P’s appeal on the platform. On the mobile platform, F2P games had a 98.5% share in total revenue generated by mobile games. 

Premium pricing models, which refers to a one-time payment to access the game are rising in popularity across Asia. However, console-friendly markets such as Japan fared much better in this category as gamers here are used to the concept of higher prices. Console game sales in Japan grossed $3.85B USD, while China, whose population is 10 times larger, registered only $156M in console game sales. Regional pricing based on the average incomes is one of the most crucial factors driving sales of premium titles. 

With an increase in revenue through F2P and premium titles, subscription-based pricing models are on the decline. In China, subscription game revenue is predicted to drop from $1.05B in 2019 to $600M  by 2024. 

Breaking Down the F2P Model 

The F2P model has been divided into several sub-categories based on the method used to monetize. Different methods have had different degrees of success. 

Pay-to-Win: A model where paying allows you a competitive advantage when compared to non-paying players. In countries like China, Japan, South Korea, and India 24% of mobile gamers were willing to shell out money in games of this category. 

Gacha: The gacha model, based on Japanese gachapon vending machines that dispense capsuled toys, appeals to collectors who want to complete character or item sets by purchasing “rolls” (e.g., pulling a lever or spinning a wheel). Nearly all of the top 200 grossing games in Japan have some form of gacha mechanics, but it’s less effective in casual games where players are more averse to aggressive monetization. Each country in Asia also has various laws on reward items and gacha mechanics that developers need to understand and comply with.

Battle Pass: Battle passes, used in both F2P and premium games, require players to pay a fixed cost for a set period of time to earn extra benefits, boosts, and rewards. Typically, battle passes cost anywhere between $5 to $15 for a month or season, during which time gamers are guaranteed an ad-free experience where they can compete and progress to acquire new content.

More than 50 of the top 200 grossing mobile games in China use a battle pass or in-game subscription. Games such as PUBG MOBILE saw a global spending increase of 365% for the first week since the introduction of the Royale Pass compared to the prior three weeks. In May 2020, PUBG MOBILE was the top-grossing title worldwide, driving more than $226M in total revenue.

In-Game Ads: This category of monetization is used more in hyper-casual titles which are mostly single player. Since ad revenue across Asia is lower than Europe or North America, this category of monetization brings in the least amount of revenue for publishers. However, in regions like India and Southeast Asia where the average gamer spends much lesser money than other regions but a much higher time playing the game, this model has seen significant success. 

Different Regions, Different Approaches

In Asia, gamers in each country with their own unique culture, economy, and infrastructure exhibit different behaviors. 

China: In China, the majority of gamers (93% or 637M) are on the mobile platform. The F2P model really seems to work in the country with 90% of revenue from games coming from titles that use this model. The lack of access to internet cafes due to COVID-19 restrictions has led to an increase in gamers on the mobile and a decrease on the PC. A survey done by Niko suggests that 57% of gamers who were frequenting these cafes don’t plan on returning once they reopen. 

Chinese gamers also prefer spending money on limited availability items when compared to other regions. The report states “Invictus Gaming added new World Champion skins and items to League of Legends after its team victory at the 2018 World Championship and increased the size of its PC player base by 9%.”

Japan: Japan has the most valuable demographic of mobile gamers in Asia. Mobile gamers in the country generated nearly 10 times more annual revenue than any other region in Asia. Revenue per mobile game download in Japan was also the highest throughout Asia at $12.84 compared to a regional average of $1.53. 

Southeast Asia — A Sandbox for F2P Experimentation: F2P games lead most Southeast Asian countries in total downloads and annual revenue. Countries such as Malaysia, Thailand, Indonesia, and Vietnam, which are similar in terms of socioeconomics typically use similar models and strategies. Gamers in these regions have a  preference for a wide variety of genres, including esports games, MOBAs, MMORPGs, and strategy titles. Approximately 61% ($307M) of the total revenue for Mobile Legends (the region’s most popular mobile MOBAs) in 2019 was through Indonesia and Malaysia.  

India: India is a  prime example of a mobile-first country. Indian gamers quickly adapted to core genres and advanced monetization models, but always on F2P titles. The country has a large player base but low overall spend. These factors make hybrid models the best bet for boosting average revenue per user by tapping into Indian gamers’ clear desire to play and turning attention and engagement into long-term growth.

Shounak Sengupta is a staff writer for AFK Gaming.

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