According to App Annie,
Japan became the biggest app market in the world last October, surpassing the
United States and continuing to grow at a far faster clip. Many app vendors
started reacting to Japan’s new prominence already in 2013 and the year 2014 is
likely to be defined by how Japan continues to integrate to Western markets. If
current trends hold, by Christmas of 2014, Japanese app revenue may top US app
revenue by 30-40%. It is already impossible to become the top vendor in the
world without strong Japanese iOS and/or Google GOOG -0.29% Play market
performance. At the moment, Apple AAPL -0.01% and Google are
fighting a pitched battle in Japan, with roughly similar chunks of the overall
app market.
Only two Western vendors
have truly cracked the Japanese market – and both took fairly extreme measures
to conquer the country. The Finnish Supercell began a cross-promotion
collaboration with Japan’s app titan Gung-Ho in June 2013 and sold a 51% stake
of itself to Softbank and GungHo in the
autumn. The Swedish-British King kicked off a startlingly aggressive television
promotion of its flagship “Candy Crush Saga” game before Christmas. Some
industry observers peg the price tag of the campaign in the $3-5 M range. These
measures were highly effective – recently, Supercell and King combined had three
Top 10 iPad apps and two Top 10 iPhone apps in Japanese revenue charts.
A mere year
ago, this level of success by Western vendors would have been inconceivable in
a country that has traditionally been hostile towards Western games. US app
vendors have not been able to crack the Japanese market yet, with Electronic
Arts and Zynga looking notably sluggish in responding to the emergence of
world’s new market leader. The share prices of Japanese app vendors have
responded to the explosion of the domestic market revenue by soaring in the
past two years. Even after dropping by half since May 2013 highs, GungHo still
retains $7 Billion market cap. GungHo has managed to turn “Puzzle &
Dragons” into a decent hit in the US market where it bobs between 3 and 60 in iPhone
revenue chart. But true, blockbuster success in the West continues elude GungHo
– which is why its recent tie-up with Supercell added more than $1 B to its
market cap overnight.
The success of
GungHo-Supercell promotion collaboration last summer triggered a race among
Japanese vendors to forge Western alliances. We are likely to see many similar
cross-border alliances in coming months. Last summer, the share price of KLab
tripled after it announced a deal to bring oneMicrosoft MSFT +0.79% game franchise to
Japanese market, only to drop by half in the autumn. Japanese app vendors are
now demonstrating extreme volatility as investors attempt to gauge their
potential success in crossing over to Western markets; these mood swings yield
100% rises and 50% declines in share prices in a matter of days or weeks.
One interesting
current example of how Japanese vendors are trying to go global is CROOZ and
its new ACR DRIFT game. The app is based on Auto Club Revolution, a PC
title by a British racing car specialist Eutechnyx. Eutechnyx turned ACR
into a substantial hit in Russia and China; it has reached 600’000 registered
users globally and is on track to hit 1 M over the next year, according to
Eutechnyx CEO, Darren Jobling. The PC game has achieved a respectable lifetime
ARPU of $32 by offering highly detailed classic car models and emphasizing
community features.
ACR – a key
test of Japan-EU game collaboration
CROOZ is best known for its
intricate, hard-core card battle games that have thrived in Japan. With ACR
DRIFT, the vendor is making a big leap by licensing a game in an entirely new
genre in a bid to crack European, North American and Asian markets. CROOZ has
global distribution rights of ACR DRIFT outside Russia and China. “Our Japanese
team is building the mobile version from scratch,” notes Yukiharu Tomita, EVP
of Global BusinessDevelopment at CROOZ. The
company has designed a more compact version of the game that offers
shorter playing sessions and other tweaks.Early signs look promising – ACR
DRIFT became Number One racing game in the Australian iPad chart soon after its
test run in the country started. What’s interesting here is that a
Japanese studio is revamping a Western game for Western markets. The ambition
of Japanese vendors now extends beyond merely trying to tweak their own games
for export.
What we are
likely to see in 2014 is an expanding palette of cross-border experimentation:
West/Japan marketing partnerships, Western games localized in Japan, Japanese
games tweaked for Western markets, Western franchises repurposed by Japanese
vendors for global markets, etc. The early moves by GungHo, Supercell, King,
KLab, Eutechnyx and CROOZ are likely just an epilogue. Which approach works the
best is one of the most important questions in the app industry – and the ability
of vendors like Zynga and Electronic Arts to pick the right strategy could
determine whether they can become leading global mobile software firms.
“Line is a good example of
a company that has done well beyond Japan without much effort,” says Rick
Martin, editor in chief at The Bridge, Japan-based
bilingual site focused on technology news. “They seem to have a reactionary
strategy, first recognizing traction in a certain country (especially around
Asia) and then putting some marketing behind it to drive it further.”
At the moment,
only King, Supercell and GungHo have delivered decent success on all corners of
the Japan-US-EU app market triangle. Serkan Toto, a leading Tokyo mobile game
industry consultant, has a dark view of the prospects of Japanese game app
vendors: “In the mobile gaming space, essentially not one Japanese mobile game
company delivered on its promise to replicate and expand its success in the
local markets elsewhere. This includes giants like GREE or DeNA, which failed
to establish their gaming platforms outside Japan, even though they spent
hundreds of millions of dollars in M&A in the process.”
Time will tell
whether the new wave of app alliances can change the dynamics.
No comments:
Post a Comment