The gaming industry sees major revenue in going mobile

Take-Two Interactive, publisher of big franchise video games like Grand Theft Auto and NBA 2K, announced its plans this week to buy Zynga, a mobile game developer known for Words With Friends, and to take you back a bit, FarmVille. The deal is reportedly worth about $12.7 billion and demonstrates the future of gaming is more than PlayStations and Xboxes, or even powerful gaming PCs.

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Jay Peters, who is covering the story at The Verge, said given the size and the money to be made in the mobile gaming industry, this acquisition makes sense. The following is an edited transcript of his conversation with Marketplace’s Kimberly Adams.

Jay Peters: Mobile gaming, it’s just really growing a lot right now. A gaming analytics firm called Newzoo, they saw that the mobile gaming space grew 7.3% year over year last year, and that the revenues were $93.2 billion.

Kimberly Adams: Wow.

Peters: Compare that to console gaming, which only accounted for 28% of the market, PC gaming, which only accounted for 20% of the market, and both of those were on that decline just a little bit. And you can see why Take-Two is trying to step up its efforts here.

Adams: You know, it’s interesting, console gaming and even PC gaming tends to get all the attention, but mobile gaming is a bigger market.

Peters: There’s just a vastly larger number of people walking around with very powerful cellphones in their pockets that can play a lot of these games. They’re easy to access from the app stores, they’re almost always free to download, free to play. Whereas the console and PC gaming space, while maybe they offer higher fidelity gaming experiences, they require really expensive boxes, and they’ve been really hard to come by with the supply chain shortage, and so I think that’s why we’re seeing the mobile gaming space continuing to grow.

Adams: How do most of these games make their money?

Peters: So the majority make their money through offering a handful of digital items or in-game currency that costs real-world money to pay for. Another model that folks might be familiar with is Fortnite, which has made its name selling skins of all sorts of entertainment properties, right? You can play as Tom Holland’s Spider-Man in Fortnite, and your opponent can be somebody from Street Fighter. And there’s very similar sorts of models, in many, many, many mobile games. And there’s so many opportunities for maybe you or I to just buy a $1 thing or $3 thing here, and you scale it up to the many, many, many millions of people that are potentially playing these games, and that’s where the money comes in.

Adams: Take-Two owns big console and PC game franchises like Grand Theft Auto and NBA 2K. Will this acquisition mean we’ll start to see mobile versions of some of these big-name games?

Peters: That seems to be exactly what Take-Two is going for. They talked a lot about that as part of an investor presentation that they gave shortly after the acquisition was announced. One game right now that Take-Two has is Grand Theft Auto Online, which makes a lot of money in microtransactions, but that’s only available on consoles or PC. And so you can imagine them bringing some sort of Grand Theft Auto free-to-play version of the game that’s made with Zynga’s expertise in the mobile games market, and doing that for as many of their franchises as they can, there could be a lot of big, popular mobile games based on Take-Two franchises. Take-Two expects its mobile revenues to account for more than 50% of its total revenues by the end of fiscal year 2023, so you can see that Take-Two really expects this to have a meaningful impact on its bottom line.

Adams: And do you think that having some of these bigger franchises in mobile games is going to drive more people to that market, even though the market’s huge already?

Peters: I think so. I mean, the games that Take-Two is making as a result of the Zynga acquisition isn’t the first time that Take-Two has entered the mobile games market. It has a lot of mobile games there already. But I’m sure Take-Two is seeing the popularity of games like Pokemon Go, there’s a very popular Call of Duty mobile. And I’m sure Take-Two is seeing an opportunity for them to bring their biggest franchises, and offer free-to-play mobile versions of those, and hopefully take advantage of the brand popularity those franchises already have, and maybe expose the franchises to new people as well.

Adams: And are you expecting more mergers and acquisitions coming down the pipeline in this space?

Peters: It seems likely. Over the past few years, there have been a number of big game developers jumping into the mobile space with big acquisitions. Activision Blizzard bought King, which is the maker of Candy Crush, Electronic Arts spent billions to buy two mobile studios last year. It seems very likely that there will be more big, splashy acquisitions like this as the mobile gaming market continues to heat up.

Adams: What’s your favorite mobile game to play right now?

Peters: I actually am a huge fan of Apple’s Apple Arcade service, which is almost an entirely different market than we’ve been talking about right now. What Apple Arcade offers is you pay $5 a month and it offers a suite of games you can just download and play with no ads. And a great one that I recommend is this one called Tiny Wings, where you’re just a little bird that goes through little jumps, and it has very calming, relaxing music. I find it a great way to unwind after a busy day of work sometimes.

Related Links: More insight from Kimberly Adams

Some of those numbers Peters was citing about the size of the mobile gaming industry are also in a piece from VentureBeat, which includes more numbers from gaming and esports data firm Newzoo.

Another interesting number from that company’s research: Game livestreaming, watching other people play games, is also growing at a pretty fast clip. It’s on track to reach more than 920 million viewers by 2024.