China for the Win! What Publishers Need to Know to Succeed in this Emerging M...
Daniel-and-Maya-BCG-Case-Study-2
1. Recommended Actions for PlayX
Recommendations 5y Plan
Exit the video-game
retail distribution business
1
Near Term –
• Wind down retail by closing least profitable stores
Mid Term –
• Close stores with declining revenues
2
Pivot business model towards an
investment and advisory focus
Near Term –
• Source Indie development talent through Game Jams
• Attract Indie developers to “support hub” with the aim of
assisting them in creating early-stage mobile-game start-ups
Mid Term –
• Assess potential of games through focus group testing and
provide seed investment to those with the strongest
potential
• Partner with a digital marketing expert to provide
marketing support for invested games
PlayX should look to restructure their business model by adopting an ‘investor and advisory’ approach. In the near term
PlayX should focus on investing in Indie mobile developers to capture the high growth opportunity in the segment as well
as provide a support network for developers to overcome challenges in the mobile gaming market, such as funding
barriers and obtaining marketing support.
2. What the Gaming Market Looks Like:
Which Segment within Software?
(Share by Segment)5
Note: (1) Includes Mobile, Console, PC, Tablet - Statista (2) Euromonitor, (3) 10-15 CAGR, (4) 15-20 CAGR, (5) Newzoo, (6) 15-19 CAGR
Hardware or Software?
(Global Video-Game Revenues $bn)2
24 21 27
45
79
121
2010 2015 2020
69 99 148Total
Digital is Disrupting Distribution…
(Video Game Sales UK 2015)1
“The wide availability of high-speed Internet has changed
much of our daily lives, and that includes how we play
games. Globally, physical distribution of video games
decreased by 13.1% annually from 2009-12, while digital
distribution grew at 12.6% annually.”
- Accenture Gaming Disruption Report
…PlayX Should Exit Retail
Software Offers Stronger Growth
Opportunity
The Figures Imply Opportunities in Mobile,
Console and PC
34% 29%
30%
26%
24%
34%
12% 12%
2015 2019
33% 67%
Retail -2% YoY Digital 17% YoY
Every leading game area has a digital distribution
leader with a tight grip on the market:
Select Digital
Dist. Leaders:
Game Area
0% 100%
0%
100%
Software
Hardware
Historical
Growth3
Forecast
Growth4
-3% 6%
12% 9%
Considerations
Not PlayX’s strength
Relatively hit driven
Mobile
PC
Console
Handheld
2%
3%
16%
7%
Growth6
Software
Segment
Leaders
3. ü Simpler development than PC
ü $145 avg. spend per player1
x High development costs (Avg.
development cost per game 18-28m2
)
x Growth forecast limited
Practical Considerations of Software Development
ü Highest forecast growth
ü Forecast largest market share
ü Potential for large user base
ü Low software development cost
x Saturated market due to low barriers
to entry
ü Historically PlayX achieved
success in this segment
x Small portion of whole game
market
ü Attracts competitive gamers – who
spend more
ü PlayX’s area of historical strength
ü 50$ avg. spend per player1
x Big risks - High development cost with
hit and miss success (GTA cost
$100m)
x Limited growth forecasts
x Unproven return on investment
x Hot money pouring in
x Smallest Portion of Market
x Not enough users to justify high dev.
costs
Sense Checking the Segments
Figures and Rationale Point to Strong Mobile Opportunity…
…So Where is the Space for PlayX?
Indie Developers are Underserved in Support,
Funding and Marketing
PlayX has the Capacity to Plug this Gap…
Note: (1) Deloitte, (2) M2 Research, (3) WSJ
• As of July 2016 China, the world’s largest mobile-gaming
market, introduced legislation for every mobile game to be
approved by the state. The estimated approval costs of this for
an Indie developer ranges between $2000-5000 thereby acting
as a potential barrier to entry for developers.
• 500 new games added to mobile stores every day1
• Top 10 games took 33% of 2014 global mobile game revenue3
“The large investment required for a mobile game to stand out from
the crowd is likely to keep the market stratified in 2016. We expect
about 80 per cent of mobile games revenue in the top 1,000 titles
to be earned by the top 20 publishers in each region: that leaves
the remaining 20 percent of mobile games revenue to be shared
among many tens of thousands of developers.”
- Deloitte 2016 TMT Predictions
4. Taking an Investment Approach to Penetrating the Indie Mobile Market
How to identify
investment
opportunities?
What are the
risks and how
can PlayX
mitigate?
Tap into “Game
Jam” Talent
• Game Jams attract an untapped pool of talented
developers who compete to produce videogames
within a limited time frame
• PlayX can leverage on this talent by hosting their own
events
What will
attract Indie
developers?
Access to a
Development
Hub
• PlayX will build a hub to support talented developers by
focusing on 3 key barriers faced by indie developers:
seed investment, viral-marketing support and the
provision of a subsidized development space
Saturated
Market
• Diversify – Mobile projects which raise funds on
Indiegogo and Kickstarter illustrate that mobile games
are cheap to develop so PlayX can invest in multiple
projects hence mitigating risk on their returns.
• Focus Groups – Adopt Amazon Video’s “Preview”
approach. Use data from audience testing supported
by opinions from select “best customers”.
‘Hype-
dependent’
• Marketing – Look to partner with expert in the digital-
marketing space such as ClimbOnline
Strategic
Questions
Answers Considerations
What do PlayX’s Costs and Returns Look Like?
(Example P&L Curve)
Note: (1) Deloitte, (2) WSJ
Time
Pounds (£)
PlayX’s equity investment
pays off when “seeded
company” games make
money
Game
Jam
Hub
Focus
Groups
Seed
Viral
Market’g Success