BWild |
December 27, 2012
Kapitall analysis highlights the growth of mobile gaming over the years
Mobile gaming may soon become the dominating force in the game industry. Kapitall, an online investment platform, has been tracking the decline of traditional console gaming and the sale of physical gaming products. As sales continue to drop, they are being replaced by sales made through digital platforms, such a Steam and Gamestop. Game developers that focus solely on mobile gaming, such as Glue Mobile and Zynga, are also seeing significant gains as traditional platforms begin to wane.
Retails sales dropping off for consoles and games
According to Kapitall, retail game sales have dropped by 25% year-to-date, while console sales have plummeted by 30% year over year. A volatile economic climate is to blame to some degree, but so too is the retail price of most video games, which can range from $30 to $60, depending on the publisher of the game. Mobile gaming is faring much better, largely due to the fact that most mobile games are very inexpensive, with many being completely free.
Mobile gaming accounts for only a fraction of the entire market
Despite the strong advent of mobile gaming, however, mobile games account for only a fraction of the overall market. Digital downloads of games developed for consoles and PCs are strong and continue to gain momentum as more consumers show favor for online shopping over traditional forms of commerce. For these people, online shopping is simply more convenient and does not actually mean they are spending less on games, only that they do not have to pick them up from a physical store.
Gamers still willing to shell out money for console and PC games
Kapitall notes that gamers are not likely to abandon consoles in favor of mobile gaming. Mobile games typically offer a very shallow, linear experience that is designed around repetition rather than in-depth gameplay. As such, titles from companies like Electronic Arts, THQ, and Ubisoft are likely to continue selling well, even if those sales are not actually physical.
E-commerce business losing traction with investors
Black Friday has passed and that has left many retailers preparing for the remainder of the holiday season. While Christmas still looms, Black Friday was the most important day for the retail industry. Now that that day has passed, retailers can enjoy some mild relief before gearing up to engage consumers again in December. Mobile commerce helped make this year’s Black Friday a major success, and the growing popularity surrounding the concept has lead to many start-up e-commerce businesses being formed. Investors have seen the potential of these start-ups and some are suggesting that they are overvalued.
Mobile commerce continues to spark new businesses
Over the past 18 months, mobile commerce has sparked the founding of several e-commerce platforms that had promised to provide innovative service to consumers and niche markets. Many of these platforms received a proverbial tidal wave of investments that helped them reach their target audience. Unfortunately, most of these platforms failed to meet the expectations of investors, thus yielding modest returns at best. The lackluster performance of some platforms has not stopped the formation of new e-commerce businesses, however. Finding investments may soon become difficult for these start-ups.
Failed e-commerce ventures create unease among investors
Though the e-commerce sector shows promising growth, investors have seen a string of failed online retail ventures from groups like Facebook, Zynga, and Groupon. Smaller companies that promised major returns were unable to deliver, thus making many investors leery of e-commerce ventures and those that revolve around mobile commerce. Former eBay executive Dana Stalder, who is now a partner at Matrix Partners, an investment firm focused on software and communications companies, suggests that there is “inflated valuations” concerning e-commerce ventures.
Capital-intensive business may find lack of support
Stalder notes that most e-commerce businesses are complex and require significant capital to operate. Inventory and shipping costs make it difficult for new businesses to reach a large audience. Even with financial backing, these businesses can easily spend more than they make, thus making them less lucrative for investors. Many of these companies have created an uneasy investment climate for the online retail industry, which could make it exceedingly difficult for new e-commerce start-ups to find the backing that they need.
