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Empty flask game - internationalization strategy

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An analyze of the mobile game market in Latin America

An analyze of the mobile game market in Latin America


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  • 1. Empty Flask Games A report by Adrien Briatta, Benoit Halloo and Edouard Malach. 1
  • 2. I. General Presentation 1. Empty Flask Games presentation a. History Empty Flask Games is an independent game developing company created in December 2011. Its major activity is to develop games for mobile devices, based on mobile operating systems iOS and Android. The company’s headquarter is in Raleigh Duhram, and its creator, Pierre Roux, is the owner and the only employee of the firm. For now, the company has created two different games, Infinite Warrior and Starship Battle. Mr. Roux had a long time career in the field of video games. He has been a Game Designer in some of the most important companies in the sector such as Cryo, Ubisoft, Quantic Dreams, Cristal Dynamics, Namco Bandai and Electronic Arts. He came back to Namco Bandai as an Executive Producer, left to be Art Director in Vicious Cycle Software Inc. and then became Product Developer in Zoo Games Inc. After being a Consultant in game design at Joystick Labs and Producer at Microprose, he created his own Game Developing Company, Empty Flask Games. b. The Games At this time, Empty Flask Games released two games. Those two games have been developed through a very popular tool, Unity 3D, which is known to be the easiest tool to create mobile games. This tool has the particularity to allow the interchangeability of graphics, a good solution to create different games at a lower cost by reusing the same game structure. For his two games, Mr. Roux used this method and it considerably reduced the time and money spent on his second game. The first game Empty Flask Game released, , Infinite Warrior, has been developed in six months. It is an endless scrolling game in which the aim is to beat as many enemies as possible to score maximum points. The game design is one of the most important aspects of the game as Mr. Roux, worked previously as a game designer. Beginning the mobile game, Mr. Roux had to learn everything about scripting, and with the help of third part coders and experts, he managed to release Infinite Warrior. It was supposed to provide a base for future games. Indeed, using Unity 3D as a developing tool, it is quite simple to create another game just by changing some elements of the first project. However, because of the long development time, and the diverse expenses linked to it, Infinite Warrior is still not a profitable game. First released on iOS for Apple device, an Android version is in preparation. 2
  • 3. After a shorter period of development (about two months), Empty Flask Games managed to release its second game, Starship Battle, an arcade scoring space game in which the player has to defend the galaxy against an infinite force of relentless aliens. Unlike Infinite Warrior, this game is already profitable due to its shorter time of development, and thanks to the technical base already present. The game has been released both on App Store and Google Play. c. Issues encountered The company had to face several issues. Indeed, the global launch of Infinite Warrior faced a lot of illegal downloads, especially in China, where the game has been cracked, altered and modify (in order to make all its content, the game and the in app purchase, entirely free). This shows a lack security in the script of the game which is not a surprise, taking in account that Mr. Roux realized a large part of the script himself. Then, another issue has been the compatibility to Android devices. Infinite Warrior was a heavy software whereas Google Play Store had set up a limit to its compatible product (the game is about 200 Mo when Android limitation was 50Mo). With this limit, Empty Flask Game was not able to release its first game on Android devices. But if this problem has been corrected (since April 2012, the size limit has been upped to 4 Go), Android users still seems to sulk its games. According to Mr. Roux, this could be due to higher expectations from Android users, which may be pickier than iOS users. One of the most important issues the company has been facing is its problem to understand the stores visibility system. Indeed, it seems that both Apple and Android do not provide the information needed to clearly understand how to make ones game evolves in their raking system. This is a major issue because a well ranked game would appear in the Top 100 or Top 50 app list and would be downloaded many more times. As we previously saw, Infinite Warrior and Starship Battle have been developed thanks to the same tool: Unity 3D. Learning how to use this software is not a highly complicated process. Mostly used by small developing companies and amateurs, Unity is one of the most used and so documented tools to create games. The fact that his creators, Unity Technologies, have made a smaller version downloadable for free on their website contributed to the development of its huge online community. The access to this community and to its documentation is an added value Empty Flask Game managed to exploit perfectly. However, it is for us one of the issues that prevent the company to increase its profits. Indeed, using this tool does not provide a clear comparative advantage regarding its very wide competition. The possibilities this tool can offer a developer are not as multiple as other (more expensive) tools’. The last issue we identified is the lack of code knowledge. Because the games do not create enough profits, Empty Flask Games is not able to hire a full time coder in order to complexity its game mechanics, to secure its in app purchasing system, etc… 3
  • 4. 2. Market of mobile games presentation a. History and evolution The mobile phone industry began to modernize towards the end of the 20th century, and by becoming more and more sophisticated, phone manufacturer were able to implement games in their product. One of the most known is Snake, present on Nokias phone since 1997. If the graphics of these games were quite simple and minimalistic, the arrival of the camera phone drastically changed the way mobile games were developed. The storage and graphic capabilities of these phones were better and the game’s quality increase permanently to reach the HD quality Snake, one of the first mobile we can have today thank to new screen technologies such as games Apple’s Retina Display. The actors of this market have been numerous during its expansion phase (from the 90s to 2007). The developers very numerous and most of them were only extensions of the major phone creators. With the complexness of devices increasing and the progression of the market some historical game editors and developers started to be interested into this expending new market. At this time, companies such as Gameloft were created, mainly in order to convert PC and Consoles license of games into mobile ones. With the arrival of the next generation of devices, embodied by the first Apple’s iPhone, the gaming potential increased as nobody could have imagined. It changed completely the market by introducing a “wide-open” market for third part developers. The total global revenue from mobile games was estimated at $2.6 billion in 2005 by Informa Telecoms and Media. Total revenue in 2008 was $5.8 billion. Today, the AppStore gathers more than 900 000 apps, and its major competitors, Google Play and Amazon, gathers respectively more than 500 000 and 75 000 app each. As we can see, the market has grown and has become more and more important. This growth has deeply changed the market of the video game in general. Indeed it has been coupled with a drastic change in the basic structure of the game development process. The digitalization of game selling caused a change of the share of revenue between the developer and distribution channel. In the traditional retail value chain model, the share of the revenue that comes back to the developer is about 8-15% and the rest is distributed between the publisher, distributor, and retailer. Meanwhile in the digital distribution value chain model the revenue that a developer receives is approximately 70%, while the intermediary/distribution channel receives 30% of the received revenue. We can easily understand why the developers started to be interested in the mobile gaming market. 4
  • 5. Graph I.2.a The share of revenue between Traditional Business Model versus Digital Distribution model. (Neogames, 2011) b. Actual Trend Today, the mobile video game market is one of the most important in the world and its future is shining as the mobile devices which are created are becoming more and more powerful. The new iPhone 5S is 40 times more powerful than the first one, thanks to its A7 processor and it’s the first mobile device working in 64 bits. This is all the most impressive that we can consider that the iPhone 5S performance characteristics are almost equal to the Xbox 360 or PS3 ones. With such devices, we can easily imagine how wide the panel of possibilities of the developer is going to be in the next few years. It allows big productions, such as Infinite Blade 3 to have incredible graphics with a perfect fluidity. However, the mobile game industry is not only based on such big productions. The multiplication of small, simple, and quick games is one of the major changes of the last few years in the whole gaming market. Nobody can deny this drastic change. For example, Rovio’s Angry Birds has been downloaded 1.7 Billion times since its release in 2007. As a comparison, Call of Duty Black Ops II, the console game which has been sold the most, sold around 25 million copies. This increase in the mobile gaming market came with the rise of the Freemium economic model, in which a game is initially free but requires a lot of in-app purchase in order to get the full content. This new type of small, instantly playable and fun games came with new consumer habits. Mobile games played as well at home as in travel according to Nokia’s study of mobile gamers new habits. Mobile games became the most preferred way to pass time during small travel in subway, bus, train, etc… before reading or working. This allows developers and editors to target a whole new part of possible consumers, the average Joe. 5
  • 6. Graph I.2.b Global Games Market 2012 – 2016 from Newzoo : 2013 Global Games Market Report According to the Graph I.2.b above, the mobile market growth predictions are really optimistic, indeed, the 10.6% market in 2012 tends to grow to 16.02% in 2016. With the tablet market, it is the biggest increase of the market. Will mobile replace consoles and PC gaming? According to Bloomberg in an article release on the 16 of September, the future of gaming is not threatened by mobile video games, which have not the same part. Talking about super production such as Assassins Creed by Ubisoft or GTA by Rockstar Games, the article claims that: “these immersive experiences are made possible by the combination of intelligent writing with outstanding visuals, sounds, and gameplay. Small touchscreens simply can't compare.” The two gaming worlds seem to be made to evolve next to each other without affecting each other at any time. c. The Importance of Social Gaming Social games are games with a very gentle learning curve, easy-to-understand gameplay, and lives on a social network, taking advantage of one’s friendships in meaningful ways within the game. The game lives even if the user has closed it. Then emergence of that kind of game really began in 2003 with the launch of Second Life (developed by Linden Lab) and enabled player to interact between themselves through avatars. It has been a major step in the development of the gaming industry as the game was one of the first one to experience the “Freemium” economic model (the game is free but there are a lot of ingame purchases). The power of Second Life : Virtual Worlds, Avatars, Free 3D Chats 6
  • 7. this kind of games relies in their ability to catch the player who wants to compete with his friends. Once the player is playing, he is willing to keep playing, to catch up on his friends, to share with them a gaming experience. The development of social networks standardized social games and we saw the appearance of multiple very simple but also very addictive games such as Farmville or Candy Crush. The beauty of these is that they do not require long gaming time but the more time the user plays, to faster he will progress. The concept is so addictive that statistics show that the 13 – 20 year old male part of users, which is traditionally the most likely to spend time on gaming is overwhelmed by new kind of customers. Graph I.2.c.1 Graph I.2.c.2 Analysts have studied this kind of behavior very carefully, trying to understand the reason of the appearance of this new market, and have been able to determine how one game can spread this fast and this widely. Word of mouth has always been a powerful marketing tool, and Mobile Gaming is not an exception. According to the user-acquisition experts at Applifier, it is how most of people discover new mobile games and buy them. In our case, player are not only a perfect to advertize freely, they become “sharers”. Sharers are the most likely to pay for micro transactions inside a social game. Applifier estimate that more than 20% of mobile games player are Sharers, “[These are] highly valuable users as they actively 7
  • 8. share from games and are more likely to download more games, play more often and for longer, and are more likely to covert to paying users.” They also seem to rate social games twice as high as mainstream users and they are 50% more likely to play and pay with friends for a long time. They represent the reasons of Social Gaming spread and success. d. The user engagement by type of games One the particularity of a mobile game is its short life time. With almost a million applications in the Apple’s AppStore, it’s not difficult to understand why. People change of game and won’t try to completely finish a release without complete addiction. The Case Study about Rovio’s Angry Birds is a good example of how addictive a mobile game can be. However, a study led by Flurry, a research company specialized in the mobile gaming industry, shows that the engagement of the player depends partially on the type of the game. They took different types of games to see how they retain player over 90 days. Graph I.2.d 8
  • 9. Flurry has divided its matrix in four different types:     Quadrant 1: the games retain the player well and keep him regularly active Quadrant 2: a shorter lifecycle but a high using frequency Quadrant 3: a short lifetime and poor frequency of use per week Quadrant 4: a good lifetime but not played very often. These results need to be properly understood. The games in quadrant 1 are Social turn-based games, slots and casual simulation titles (like the familiar farming or zoo games), and are offering the player a good progression potential. They also keep him playing multiple times a week with a system of “appointment”. The player has to attend in order to progress faster. Farmville, The Simpsons’ Springfield, The Smurfs’ Village are among many this kind of games. They have a big social gaming parameter which helps increasing their life expectancy. In the second quadrant, we can find the strategy games, which have a shorter lifecycle because users explore the content very quickly. With these types of games, developers usually tend to use monetization through player vs. player mechanics. While the 90-day retention is not as strong as in Quadrant 1, these types of targeting a more selective king of audience, which may be more restrained, but also more lucrative. In the third quadrant, we can find the card games; this new trend started in Japan and began lately to become more common in Western countries. Mobage’s Rage of Bahamut is one of these games. However, the mechanics of those games are very complicated, and are developed for a card games used audience. The fourth quadrant includes the eternal and traditional casino, poker and solitaire games. They still have a pretty big audience and usually, people do not delete them. However, Flurry mentions the fact that this category is also the most difficult to monetize. e. The different types of business model for a mobile game Every year, mobile users are spending more and more money on their games. According to NewZoo, a market research company, the mobile game industry knew an increase of 32% between 2011 and 2012, generating colossal amount of money. They estimate that in 2012, over 9 billion dollars have been spent on mobile video games. In order to make people buy their applications, developing companies have set up numerous different types of business model. i. The ad model First, the traditional ad model of financing. Allowing advertisers to publish a banner on one’s application can grant him a small amount of money every time a user click on the ad. However, the advertising model that dominates Internet does not fit well on the several inches screen of the iPhone, or even iPad. Indeed, the small banner becomes part of the scenery, and does not impact the player experience. It may even become a source of frustration for the gamer who will see his gaming time partially ruined by a pop up or 9
  • 10. a banner, which could slow his game or even close it, if by mistake he accidentally clicks on the advertisement. This may be the reason for a user to quit playing a game. ii. The Pay To Play model The first and classic way to monetize its game is to make it payable to play. This is a direct purchase through the Store platform in exchange of real money. The statistics show that it is not always a good solution for new licenses. In many cases, the price is what will dissuade the smart phone user to buy an application or a game. If he already knows the license, because he played and enjoyed the previous versions of the game, he will be more tempted to directly buy the new one. It has been the case for the Infinite Blade license. iii. The in-app purchase model What are the alternatives to this model? According to the Analyst Studio Distimo, which is specialized in the mobile application market, in-app revenue is bringing the largest amount of money. 76% of the total App Store revenue comes from this type of micro transaction in the US, and almost 90% in Asia. The concept is quite simple. In the majority of the games using this type of model, the game is free, and the progression inside of it is made by collecting virtual money which can be used in the virtual store to buy different features. In addiction of this virtual money, the developers usually implement a secondary type of money, which can be own only by paying real money through micro transactions. It allows the user to buy exclusive features allowing him to progress much faster in the game. The principle is clever because the user does not directly see the real money he is spending, he only sees the virtual one decrease, and when he becomes “virtually poor”, he just have to recharge his virtual account with real money. iv. Freemium model The Freemium model is very popular in many games and some service oriented applications. The idea is to offer a limited feature version of the application, a game with only 3 out of 5 levels of difficulty and give for free in the AppStore. Then, when the player is done (often very quickly) with the “light” version of the game, he will have to pay to unblock the rest of the levels. One of the best selling strategies has been to allow the player to unblock these levels without paying anything but by putting an incredibly high price for it. The player will then try for a while to unlock all the features himself, but at a certain point, he will give up and just pay for the unlocking. This model has been sometimes criticized for this vicious way to trap the user. For example, the freemium game My Little Pony: Friendship is Magic, released by Ubisoft, was offering this type of progression. If the player wanted to have access to all the features, he would have to pay around 50$, but if he wanted to unlock it by himself, he would have to play every day for almost ten years… It is also important to respect feasibility in this type of achievements. 10
  • 11. II. Cases Study: Angry Birds, the “perfect” success story Angry Birds is a game release in 2009 on Apple’s iOS. The company at its origins, Rovio, in a Finnish company founded in 2003 and specialized in the creation of games, animation, books and toys. Before Angry Birds, the company did some games on portable device such as Darkest Fear, Bounce Touch but the success of these releases was not notable. Their first game on iOS, Angry Birds is a 2D game, using physics to achieve different goals (basically, killing pigs with birds). The project was to create a game suitable for all, with touch screen controls, and using the new technology of the iPhone. The small core team that created the game was composed by five people: a producer, a game artist, a programmer, a game designer and a sound designer. Using a free iterative process, the development of the game took almost six months. The key factor for the creators was humor. The game had to look like a cartoon, being funny at all times with quirky characters, and wacky sounds. It has to be continuously fun to play and watch. The scenario, as basic as it is, remains very catchy. It had also to be easy to understand, enjoyable at the first approach. The tutorial part of the game in thus very concise, but comes with every beginning of chapter, in order to add a new game element which prevent the game to be repetitive and boring. To enhance the player experience and to increase the play time, Rovio added a hardcore achievement list that the experienced player could fill. In this way, the player who want to finish the game at 100% will have practice a lot and to try every level numerous times, increasing the depth and the replay value of Angry Birds. For the last levels, which are quite difficult, completing the achievement is that hard that the player will feel really satisfied, proud of its gaming skills, and will be willing to try the next level. One of the key elements to explain the success of Rovio’s Angry Birds is the update they keep making on this game. When the experience of the player seems to be over, because he manage to complete all the objectives or if he just have finish the story, the developers released an update of the game, adding content such as new levels, new story, new challenges. These update can be seen before their release, even if they are not yet playable. This is a good way to be sure that the player will not delete the game just after having completed the main story. The updates and their content were very consumer oriented. Rovio was collecting information from the users’ comments list and was taking their remark in 11
  • 12. account. They event made some contest in which fans could design their own level and hope to see it in the next update. Today, Angry Bird remains the most downloaded game on the Apple’s AppStore and on the Android Google Play with an approximated number of 1.7 billion downloads. But Rovio had no will to stop the success of Angry Birds license at this point. They released numerous versions of Angry Birds: Seasons, Halloween, Rio, Space, StarWars, StarWars 2. They have been making toys and shows about the Angry Birds Universe. Finally, how could we understand this incredible, immediate and long term success? The consultants in app development Buzinga provide this question an answer: Angry Birds combines all the key factor of success of a video game. Indeed, in their “4 Rules for Developing Addictive Games” guide, they clearly explain that the success of a game is relying on four points:  Every game should tell a story, even if it is very simple, it is the basis of the connection between a game and its player. The player must make the story progress by reaching the different levels.  The game must be very easy to use. This does not only concern the gameplay but also the fluency, the choice of colors, and the absence of bugs.  The player should be able to test his skills but adding some rewards, achievements to the game. This will increase the life time of the game.  The game must be tested before its released by other players. The idea is to have a fresh eye on the project, in order to correct and suppress any of the player’s difficulties. This part of the development con take more than half of the total development time. As we can see, Angry Birds is an example of the “perfect” game, according to Buzinga. 12
  • 13. III. Market study: The Latin American countries 1. Introduction Before going into a precise analysis of the mobile game market in Latin America countries (LATAM), it seems crucial to study the overall LATAM market. Indeed not only this will be useful to understand our topic – how to attract mobile gamers – but also to point out opportunities which can lead to think about future diversification. Latin America is composed of 21 countries representing in 2012 more than 580 million people. The vast majority of the population is speaking Spanish. Nevertheless Portuguese is spoken in Brazil – the leading and fast growing country in South America. More important for our study, 250 million people have access to the Internet in 2012, which represents an average adoption rate of 42.6%. According to Internet World Stats, this rate is expecting to grow to 53.4% in 2016. The top countries, in order of penetration rates and size, are the following: Graph III.1.1 The base of Internet users is growing fast thanks to the expansion of infrastructures in LATAM. Governments are investing a lot in communication infrastructures in order to connect their whole countries to the rest of the World. As the World is now highly connected it is critical for a country and its population to be connected to this huge network. Thanks to the development of new technologies, there are several ways to access to the Internet: having its personal computers at home, going into a cybercafé, using its smartphone, using a tablet… Nowadays, there are 200 million smartphones in LATAM and the number keeps growing. In 2012, in Argentina, one smartphone is sold every 10 second. These figures are very interesting for us because it shows how big the market is and how important the opportunities are. 13
  • 14. Concerning smartphones and tablets, the following graph shows the distribution of the brands in the biggest markets in LATAM. Graph III.1.2 Android and Nokia are well implemented in every countries. Nevertheless it is very important to point out one thing: Apple is not present in Brazil. There is a simple explanation. Tariffs in Brazil are so high that the iPhone is too expensive for Brazilian people: the iPhone 4 is sold $400 more than in the US ($970). Even if Apple has tried to make some moves like cutting the price by 25% or opening a Brazilian Appstore and trying to settle a factory (Foxconn) to avoid import taxes, it was not enough to catch the Brazilian market. Moreover,, 80% of mobile users are selecting prepaid plan, which means that they pay a certain amount in advance. Thus, Apple cannot count on mobile operators to subsidize the iPhone. Finally this high tax rate is correlated with the piracy rate. In Brazil, the price of games has led consumers to massively download them illegally. In LATAM, the Video games market is larger than both music and films industries. According to the Graph III.1.3, several devices can be used to play to those games but the most important are computers, consoles and mobiles phones/tablets (wireless games). At the end of 2013 mobile and online games will increased their growth by 15%. Graph III.1.3 When we looked at the Brazilian Appstore, Games is the category in which the consumers are the most interested. It is a very important and growing market. 14
  • 15. 2. How developers are making money? Graph III.2.1 The graph III.2.1 clearly shows that only 28% of the gamers have spent money buying games or in in-app purchase. It is clear that the Free-to-play model is very important for LATAM gamers. Nevertheless there is a new developing trend with the success of “freemium” games. The application is free but the customers can pay for customization and to have access to exclusive levels. We can analyze deeper this market by looking at the differences between the Operating Systems. Indeed not only just a few customers are willing to pay for games but there are also differences between Android and iOS: iPhone owners are more willing to pay for gaming. The mobile game market is also very complex: iOS users are way fewer than Android users but they are more willing to spend money. A new company will have to clearly focus a single segment. Moreover, online payments are extremely difficult in Latin America as the credit card is not well spread yet (even if the trend is going in the good direction). Nevertheless, there are differences between countries in Latin America: Graph III.2.2 Thus, even if the number of credit card owners keeps low globally, Brazil is clearly the country to target in Latin America (see Graph III.2.2) for a company which has a business model based on online payments (via mobile phones). However consumers who have access to the credit card have a higher purchasing power which is good for mobile game companies. Moreover, they spend almost the same amount as the European and American gamers. The Brazilian social gaming company Mentez has reached an agreement which enable gamers to buy virtual goods at cyber cafés. Thus the company is catching the gamers who do not have access to credit cards. 15
  • 16. If only 28% of users are spending money that means that companies are earning money thanks to other ways. Thus the other source of revenue for gaming company is the implementation of advertisements in game. There are several tools available on the market depending on the device. Concerning the iOS, iAd is an advertisement platform developed by Apple which enables advertisers to implement in-App ads (texts, audio, and video). Usually, the app publishers earn money based on three options: the Cost per Click (CPC), the Cost per Mille (Cost per 1 thousand views) and the Cost Per Impression. Thanks to iAd, Apple pays the publishers on both CPC and CPM options at the same time. Around 60% of the revenues are for the publisher. Graph III.2.3 As the mobile game market is expanding fast, advertisers have understood that the Cost Per Mille is the best way to reward developers. Highly downloaded apps will generate more and more views for their advertisements. Thus they are more willing to pay using the CPM option. Researches about behaviors of mobile gamers have highlighted the fact that gamers are willing to have more advertisements if they do not interfere with the game play. It is even more appreciated if those advertisements are well integrated in the universe of the game and thus make the game even more realistic. If they are well integrated those ads will have more impact on the consumers as they are more engaged in the game. Moreover, the explosion of social gaming has made advertisements more important. Indeed, advertisements often offer a new application/game only if the consumer has clicked on them. Social games enable the advertisements to become rapidly viral and thus generate more revenues for the advertisers and the developers. 3. The type of games which attract the most consumers Social networks are extremely well implemented in Latin America (see Graph III.3). The penetration rate of Facebook and Twitter are very high. People are willing to express their opinions and to share the content that they liked online. Thus online advertising is often used by companies. It is an easy way for a company to attract new customers and to share with them. It is very common that those companies offer special items or sales for these customers. Moreover, social media are really involving for a user. Thus, a company can create a huge network with customers with a high fidelity rate. 16
  • 17. Graph III.3 Social Media in Latin America Unsurprisingly, with such a use of social media, social games are the most played mobile game in Latin America. We have already presented all the characteristics and advantages of social gaming in a dedicated paragraph but it is very important to points out that these characteristics and advantages apply perfectly to the LATAM market. Latin Americans are eager to share and to compete with their friends and their networks. 4. The case of Brazil As Brazil is the fifth most populous country in the world and the first in Latin America with 200 million inhabitants, it is clearly for us the market to target. According to Superdata, the revenues of the digital games are expecting to increase from $1.4bn to $2.4bn in 2015. As we have said previously the penetration rate of Internet is very high – around 50% vs. 32% in the rest of World. This market represents a huge opportunity for mobile game developers. Moreover, 4 out of 10 mobile phones are smartphones in Brazil. Smartphone penetration is at 26% in 2013, which represents potentially 52 million customers. The penetration rate was at 13% in 2012. These figures clearly show how important this market is for game developers. According to Usmediaconsulting, in 2012, 73% Brazilians smartphone owners are accessing the Internet every day and 73% of them do not leave home without them. All of this demonstrates that Brazilians have extremely well adopted smartphones and know how to use them. In 2013 Mobile gaming is the biggest segment of the videogame market. 42.4% of the revenues of the market are coming from mobile games. It is the most lucrative segment. It is not surprising. Indeed Brazil taxes heavily imported goods such as non-digital games and consoles. 6 months old games are sold $140 in Brazil instead of $70 in the United States. As most of the biggest game developers are not from Brazil, Brazilians have to find cheaper way to play. 17
  • 18. Graph III.4 Revenue per type of games (%) According to the graph III.3, 65 million Brazilians are using Facebook, which represents a penetration rate of 39%. It is also not surprising that social games are the 2nd source of revenues of the gaming industry (20.3%). Thus, the high use of internet via smartphones has led social games on mobile to be the most popular type of games played on mobile phones before strategy games, solitaire or management games. Concerning the business models - how companies are making money -, most of the revenues of the gaming market are coming from free-to-play games (the game is free bu players can buy in game bonuses and extra contents). Free-to-play game revenues have boomed by 30% in 2013. On the other hand, pay-to-play games have suffered from a decrease of their revenues by 28%. SWOT ANALYSIS of the Brazilian market Strength - A high Internet penetration rate Weaknesses - The only LATAM country speaking Portuguese - A high social media penetration rate - High price of mobile devices, particularly for the iPhone - High purchasing power of iPhone users - Credit cards are not commonly used Opportunities Threats - A fast growing countries: people getting - A lot new developers are entering this more purchasing power market = competition - Huge growing market - Anti violent game laws - Government investing a lot in Internet infrastructures This analysis enables to understand what the key success factors of the Brazilian market are. 18
  • 19. IV. Recommendations for Empty Flask Game 1. Language barrier. In order to enter efficiently the Latin American market, we think that the first thing to do is to remove the language barrier. According to Jose A. Gomez, the Creative Director of GASP Games, that we have contacted in order to have more information about the market, language is one of the added value that allow Latin American gaming companies to make their applications and games more downloaded than others in their own countries. Indeed, the British Council released a study that show that Latin American countries are the region where English is the least spoken (before African countries). How can someone, who does not speak English, could apprehend the different rules of a game? Therefore, it seems that the language is the main component for an efficient integration in the South American market. In order to facilitate the translation and to save the cost of hiring a professional translator, we propose you to use the new Google offer called App Translation Service: “To help developers reach users in other languages; we launched the App Translation Service, which allows developers to purchase professional app translations through the Google Play Developer Console”. The cost remain substantial, around 75$ for a small application, 150$ for a bigger one. The number of countries you will decide to target will determine the final price. As Brazil is the most important country of the region in term of market potential, it seems essential for us to do the translation in Portuguese. As in the rest of Latin American countries people speak Spanish, a translation in this language seems also to be a necessity. 19
  • 20. 2. Enhancing the Social Gaming experience. Considering the progress and the popularity made by the different social networks over the past ten years, the first thing a developer has to take into account when he releases a new mobile game is to link it to several of these social networks. Those social networks will help you to increase the visibility of the game and the brand: Social network can be used as a free advertisement for your game and for your brand. Indeed, there are many ways to link the gameplay with social media actions and to encourage players to share their experience of the game with others or even to make the promotion of it, in order to gain inner games prizes. Candy Crush Saga is the perfect example. Indeed the player needs to send an in game request to 3 of its friends on Facebook in order to be able to play the next 25 levels. If he does not do so, he will be lock at its current level and will have to pay $0.99 to have the next 25 levels. We have listed few of those mechanisms that can be incorporated within mobile games and can make the gameplay more attractive for the customers and the game more visible and popular: Examples of game Mechanisms Effects introducing those actions Public Player Statistics Information regarding players’ games are publicly available and shareable. Private gaming spaces and visits of those spaces Parts of the game space that only a single player can manipulate directly and can authorize other players to access to his own personal space. Invites The use of inviting new players to a game as game actions. Players can compete with each other’s and share their scores. It creates a visibility for the game on social media and indicates to gamers who play to your game, creating an incentive to keep playing or to try it. It enables players to create a sense of property to its own personal space. This possibility to maintain a personal space will embolden competition between players, creating a community of gamers and encourage customers to keep playing and improve performances. Increase the pride and prize of involvement of the player. It mainly concerns strategic games, simulation games o RPG. Encourage gamers’ inner purchase and social diffusion.  Mafia Wars  Icy Tower  Puerto Rico  LifeSocialGame  Farm ville  Mafia Wars  FarmVille  LifeSocialGame 20
  • 21. Mechanisms Examples of game introducing those actions Effects Permit to create a gaming community. The more active is Collaborative Actions the community the more online free advertisement it will make Compound actions that for the game. require several players to It also increases the lifetime of perform actions. the game for customers, as social events keep the attractiveness of the game up.  FarmVille  Pandemic  LifeSocialGame 3. Adopt the Freemium Business model. As already define in section 2.d.iv, the freemium business model in mobile gaming consists in releasing 2 versions of a same game: One very short but free, and another complete but with a paying content. a. Adaptable to inner-purchase content. The freemium Business model can improve its attractiveness and profitability by using the inner-purchasing model. As the free version of the game will give the opportunity to the customer to make his mind about the quality of the game, the freemium model will sort out the client groups which are ready to pay to experience the content. It is this mechanism which makes the inner-purchase more profitable and successful in a freemium business model. Click on the video to play the interview of Doodle Jump’s creator talking about the advantages of Freemium model. Of course, the “premium” status of the customer makes the inner-purchasable content more difficult to implement, as the player already entitle to the full capacity of the game. Thus, it is necessary to clearly define and separate the outcome of the innerpurchase content and of the “premium” status. 21
  • 22. Indeed, for the “Premium” status we advise to bring to the customer one or more of those components:     Unlock access to add-on packages Additional level of difficulty Additional map or missions The possibility to acquire new characters, items or skills during the game, via looting. What the Inner-purchase content should be focused on:    Any articles which can improve the statistics or performances of the player. Unlock special designs to customize the character or the private space of the player. Fee to participate to special events inside the game (Tournament, etc…) A clear separation of both models outcomes applied to a socially linked game and with customer’s private content, will improve the visibility, the game lifetime and its profitability. This gain of profitability can be estimated via some mathematical calculations. b. Profitability Perfectly adapted to the online market of software, the Freemium model has several advantages compared to other business models. It also causes a variable lost a customer share, which will only play the free version. To make sure that the model is more profitable than others, you need to make an estimation of the revenue of this model. This model will be impacted by the Quality of the game. The key success factors are to create a deep and attractive universe and prizes, and to demarcate efficiently the two versions of the game (The free version should show just enough of the game and advertise efficiently the complete content). 22
  • 23. Income per customers = % of Premium status * Price of the Premium price Moreover,, the cost of services is often different between Premium and not Premium customers. Cost of services per user = % of Free content delivered * Cost of services per user with free version + % Premium content sold * Cost of services per user for Premium version. Additionally to these cost of services, we need to add the cost of new customer’s acquisition to get the final Marginal cost: Marginal cost = Cost of services per user + Cost of new customers acquisition Finally, to determine the operating profit, we have to add fixed cost, linked to the cost of development of the game. The more important those costs are, the more important must be the number of users. Operating profits= Users income + Revenue of inner-market – Fixed costs – Marginal costs. Breakeven point = Fixed costs / (Users income – Marginal costs) c. Advertisement in Free-to-play version. Games following the Freemium model can also altered and transformed into a profitable version even if players don’t have to pay for downloading it. Indeed, market studies about free-to-play games showed that there are different ways to implement advertisements in order to make a game profitable. As advertisement can be considered as a source of revenues for the developer, it can also be apprehended as a mechanism to attract customers towards payable version. Thus, it is possible to implement advertisements in game, such as a pop-up before a gaming action in order to frustrate the gamer and make him want to buy the “Premium” status to eliminate advertisements. Indeed, a lot of the attractiveness of the full and payable version of a Freemium game comes from the frustration of the gamer, thereby in game advertisements fulfill two objectives: Make money from a free to play game and push the customer toward the payable version. It is also possible to link advertisement and inner-market. In many games, players can win virtual money to buy items and upgrades, by participating to marketing researches (surveys), downloading specific applications, or just looking at an 23
  • 24. advertisement. Thus, it enables the developers to earn money from advertisements throughout its inner-market or the virtual money. They can increase even more their profits by launching promotional actions. d. Online critics and referencing website. A new survey found that four out of five consumers have reversed purchases decisions based on negative reviews found on the net. The study comes from the market analysis firm Cone Inc.’s 2011 Cone Online Influence Trend Tracker. This study clearly showed how important good critics from online experts are for customers purchasing choice. Indeed, as many customers consult online opinions from experts, we recommend you to send a free version of your game to numerous famous testers as (Jeuxvideos.com, Gamekult, pcmag.com, Happiday application, etc…) 4. Recommendation on the type of game the device for LATAM. To resume the situation on the LATAM market for mobile games, we recommend you to follow this list of key success factors for a good integration to the market:  Releasing a social game, linked to social network (Facebook, twitter, etc…)  In the case of Brazil, an implementation of the game on Android devices is necessary. For the other LATAM countries, both devices are equally used.  It also seems important to have a translation in Spanish and Portuguese to attract more customers, Latin America being the region where the practice of English is not well developed Conclusion This report is a fraction of what the existing possibilities that have been tested in the mobile gaming history are. We based our researches on the knowledge we already had on this topic and we think that we have been able to create a good general overview of the actual state of the market in order to give good and clear recommendations. We truly hope it will be able to provide you good information that may help you develop Empty Flask Game. Even if we understood that this sector is one of the most difficult to succeed in because of the hard competition, it is still exponentially developing and we have good hope that you will be able to find a place in it for your company. It has been a pleasure to work with you and we hope we will stay in contact as the three of us have serious career plans involving the gaming industry. 24
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