To make it short : Yes, the tablet market is growing in Europe. According to market research institute Canalys, shipments are up 180% yoy to 4.7 million in EMEA. Nonetheless, the growth has been much slower than in the US and Asia Pacific. The research points difficult economic conditions in Europe (according to Gartner, PC shipments declined too), and the lack of content compared to the US (less localised services, such as Netflix & Hulu, and less local(ised) content on Apple, Google and Amazon).

I’ve made a quick chart to summarise the shipments :

Examining public data from IDC and Gartner that I have seen so far seem to place the total EMEA tablet shipments to date at the end of Q1 2012 to about 30 million, which should amount to an installed base of around 25 million. That seems to be confirmed by this report from Futuresource Consulting, which pins the installed base for tablets to 18 million in Europe at the end of 2011 (a bit less than half the US number at 37 million.)

Regarding individual countries’ installed bases, I was able to find the following data :

A bit more info about the tablet market in Europe, Amazon’s Kindle Fire is not available on the Old Continent yet. According to Comscore, the OS breakdown is as follows :

Regarding demographics, tablet owners in Europe are mostly male (62%), in greater proportion than smartphone owners. 42% are aged 25-44.

In terms of income range, most of the tablet owners have revenues comprised between 20 and 40k€ yearly, which shows that the devices are not reserved for the high incomes, although they remained a bit more skewed towards high incomes than the smartphones:

In terms of cross-platform ownership, Spain is ahead, followed by France, UK and Italy :

In chronological order, here are the slides from my presentation during the Social and Online Game summit of the GDC:

I ran out of time and couldn’t cover the case studies in the end, so even if you attended you should find a few extra details in here.

Diane lectured on Business Models: current trends and perspective for the future. She didn’t run out of time, and some of the slides don’t speak for themselves very well, but you may still find the presentation useful:

You are also very welcomed come by my lecture during the Social and Online Games Summit where I will talk about the “Keys to the European Market” – this is a 25mn lecture, I will need to go straight to the point and won’t have much time for question afterwards but you are more than welcome to grab me after the session.

Diane also has lecture at the Game Connection America held in parallel where she will discuss “Business models in games – trends and prediction“.

We are all very much looking forward to being there and inhaling a large dose of  inspiration about the industry’s future.

Also, a friend on Facebook noticed that I didn’t even talk about console games in the trends, which is true.  My answer would be that it’s still very difficult from an operational and business point of view to run 100% online games on the current gen of consoles, and that the console business this year is likely to be suffering in at least some parts of Europe as the retailers struggle, so there isn’t much money and effort invested there. There’s a good article today on Gamesindustry.biz about that.

Platforms

● Mobile and tablets : It’s a very easy prediction to make, and not very risky. We think iOS will remain a potent platform thanks to high ARPUs, and the explosion of Android-powered devices is finally constituting a huge addressable market in terms of volume, even if you consider the fact that the Kindle Fire doesn’t help much for the growth of that platform for games (limited hardware and more important, very tied to the Amazon ecosystem). Overall, the market for Android games in the short term is very dependent on Asian markets, which may be a challenge for Western developers. Some surveys tend to show a slowdown of apps developed for the platform as a result, which might make it an even more interesting market for those companies who know how to profit there.  The total value estimates of mobile gaming for 2012 varies a lot, due to the uncertainty of estimating that growth, but most analysts put it between $3B and $11B .  The PC segment will be gradually supplanted by smartphones and tablets. That should bode very well for connected games on these platforms. The average monthly playing time is around 15 hours for iOS and 9 for Android gamers, but  companies like Spacetime Studios, with its Legends series (Pocket Legends, Space Legends, etc) are already at 25 hours. We are still far away from the average PC MMO player in terms of time spent (70/80 hours/months), but it is going up fast.

In terms of revenue, free apps with micro-payments are quickly becoming the standard there. ARPUs tend to be better than social games due to higher ARPPUs (ARPPUs above $10 are increasingly common), the average revenue per transaction being just under $15. Better news still, tablet games command even higher ARPUs, and even if the market is still small with an estimated worldwide installed base of 81M in 2011, it’s expected to grow to just under 400M in 2015.

● On those mobile platforms, we still hear a lot about HTML5 supplanting native apps. This might be increasingly true for the more casual end of the market (as companies like Zynga and Spil have started heading there), but as the higher value segment games become more complex, the “big client” apps (more than 50 Mb) will also progress. This is for instance where Glu Mobile is headed if you read their last investor relations document.

● Does it means that PC online games will die? Certainly not, but they are likely to focus on specific consumer segments : hardcore users on traditional PC genres (as was shown this year with the success of the MOBA genre, led by League of Legends, and action/shooter games such as World of Tanks or Combat Arms),  browser-based games targeted at office gaming, maybe kids and teens who don’t own portable devices. The “middle core” is likely to be squeezed out, along with the categories where the competition is making success more difficult such as RPGs(see genres).

● Social gaming seems relatively constrained on Facebook, as acquisition costs keep rising. According to recent figures from Atul Bagga, a ThinkEquity Analyst, Zynga’s cost per acquisition increased fivefold in 2 years, from $0.3 in 2010 to $1.5 now. It gives more weight to the big publishers there as they can rely on cross-promotion better than others, and also pushes everyone to focus on better retention and monetization. That is probably good news for companies such as Kabam and Kixeye. Retention remains a problem and sequels don’t work there, so we can also expect better endgames. Also, more social gaming companies in 2012 should try to push distribution to other platforms than Facebook where their margins won’t be so squeezed, whereas on their own platforms (like Zynga Direct), competitor SNS or via embed on every possible platform (a strategy that so far was pretty successful for Goodgame Studios, for instance).

● We also hear a lot about connected TVs, but it seems to us that it won’t be such a big trend for 2012. Samsung announced it sold 2 million devices in June last year, and it is looking to sell 25 million in 2012. However, this will depend on the replacement rate for the household television market, and we would bet on it to be very tied to the overall economic situation, and at least in Europe it should stay gloomy. It is also likely that the big players on this space will be those already present on the mobile space, but they will have to solve other challenges such as gameplay input.

● Cloud gaming seems still promising on paper but we also doubt it will become really huge in 2012. OnLive is apparently in the range of 2.5 million subscribers and is likely to have its international growth limited to some markets due to infrastructure issues. Gaikai has reached 10 million MAU but will probably be limited in its growth due to their business model : even if they do reach 100m MAU as they target in 2012, it will still remain very limited to limited-time demos of mostly product-based games.

● We still believe that more industry players will try to implement some forms of cross platform features and gameplay during 2012, particularly in the interactions between web/social/mobile . However, few companies are well positioned so far for doing so, as the successful tactics are very specific to each platform.

 
Business models and business topics

● By now we can already consider that the “free to play with micro-payments” business model has largely won, with the exception of a few cases where actively limiting ARPPU makes sense , mainly in games for kids (where the parents might object). Even in that case, alternate solutions such as wallets or spending limits might work better. Does that mean that subscriptions will die completely? Once again, probably not, as they may as well mutate. In many micro-payment free to play games, there is a “subscription-like” option where bundles of services or special are offered at fixed price points. Also, in the few remaining subscription-only games, there are a couple of extra services that are generally paid in addition to the subscription fee (although generally they are very one-time in nature, as opposed to consumable-based cash shop item majority.). The main problem with subscriptions are the cap on revenues and the barrier to entry. If those are removed, subscriptions can become attractive again.

● Player acquisition is set to continue being a major headache. On the web, iQU published recently stats that showed a 152% increase in CPL in UK, US, FR and DE territories. On mobile, the cost to acquire a loyal users for an app (opens it 3 times or more) was $1.81 in December 2011. On social, as stated above, it has increased 500% in 2 years for some actors. As this seriously eats into industry margins, it will probably lead to the demise of the less efficient players (expect some more concentration in 2012, particularly in the most mature segments such as client-based and browser-based MMOs), the rise of big traffic purveyors (eg increased partnerships with old-media and web portals), and increase the incentives for companies to capture underserved segments, for instance demographic (eg male 30+ is coveted by companies such as Supercell and Cliffhanger Production), geographic (Eastern Europe, Turkey, Indonesia, Brazil…). At Browser Games Forum in November last year, it was asked when publishers will start directly paying players to try their games (like the poker industry does). I don’t think this will directly happen in 2012, as CPAs are not that high to be a sufficient motivation for players, but maybe we’ll see some meta-rewards companies getting there. For platforms with very limited acquisition options (like mobile), we should see more dirty tactics (or cleaner ones in terms of incentivisation) to game the system on the one hand, and more reliance on other mechanisms such as virality, curation, branding, etc. to escape the system on the other hand. Mobile could also benefit from IRL discovery mechanisms : outdoor advertising, “tupperware parties” etc.

● The resulting focus on retention and monetization will lead to a better command of analytics by all actors, and probably to the development of better reacquisition channels and CRM. The past year has seen a lot of CRM tactics employed by the social games industry, mainly through email. The mobile segment is so far bad at retention : churn for all apps was estimated at 62% in the first month by Flurry. Once again, tactics such as community management, events, CRM, tournaments, branding will develop over time to boost retention rates. Tools and UI to help manage existing apps should also improve. In terms of gameplay, that should bring better endgames and more attention to long-term gameplay (whereas the recent free to play move focused a lot on the initial experience only).

● Is that the beginning of the return of third-party publishers? So far, it seems that it’s still difficult to operate online games from another developer. Recent PC successful companies like Riot Games or Wargaming chose to operate the games themselves in all territories. Most browser-based successes such as Farmerama  have also been developed internally. So far, third party games published by the likes of Jagex and Innogames have not materialised the same success as their forbearers. In the case of existing publishers with different entities, the trend has been to decentralise completely the activities and let the studio run all the operations (as Bluebyte did for Ubisoft, or EAsy and Playfish are doing at EA.). In social games, there has been a lot of announcements for third party publishing (Playdom/SpryFox, RockYou third party deals, 6waves/Lolapps) but there hasn’t been stories of hugely successful 3rd party products (also, probably because it’s still easier to buy the company or clone the game.). For mobile, things are slightly different as there aren’t so many truly online and connected mobile games. And for mobile and social games it still makes more sense for a publisher to quickly buy the developer than to publish them as third party. We’ll see, but I wouldn’t bet on a return of publishers so far. What I’m ready to bet on, is an increased reliance on third party tools and services for online games companies.

● Speaking of those, we should see yet more concentration on services where the differentiation is low and the margins are getting thinner, mainly traffic acquisition and payments. Both industries should see concentration (or further concentration in the case of payments) and differentiation strategies.

Genres of games

● Old-school PC MMOs should stagnate or decline, as there aren’t so many pharaonic huge client based games in the pipeline and retention rates should drop for the most recent ones due to the lack of innovation. Most of those not released yet are coming from Asia and are also likely to run into 3rd party publishing issues.

● More action : it’s another trend we see continuing: the traditional point’n'click MMO gameplay is replaced by alternatives coming from different game genres – from action-RPG to fighting game to FPS . In a parallel course, most traditional genres are starting to include MMO elements. This is also true for mobile games, similarly to Spacetime Studios’ Legends series they should become more real-time, while incorporating asynchronous elements.

● More crossover  declinations of successful genres : eg Infernum’s Minecraft/FPS combination, MOBA/RTS mashups like Tindalos’ Stellar Impact, etc. Most of the innovation will come from indie studios. The downside is that those gameplay mechanics will be copied quickly if they prove successful.

Please don’t hesitate to discuss and give your opinion in the comments!

Here is Part Two of our retrospective for 2011 and what we have been doing for the past year.

Every year, we take the opportunity during holiday down time to reflect on what we have done in the previous 12 months, and to plan a little bit for the coming year. We’re just about to undertake our formal 2012 planning now, so I thought I’d share some of our findings about 2011.

We do a range of different kinds of work, so it can sometimes be a challenge to explain, but maybe splitting the summary into two parts will help to reduce confusion! In this post, I will talk about the consulting and the market intelligence work we did last year (as they often go hand in hand). In a future post, I will talk about our media relations activity.

So, looking back on what we did for clients under the consulting umbrella, there was a lot of variety:

Consulting missions like these are often accompanied by market intelligence requests which allow us to provide evidence for our recommendations and provide clients with a global perspective. We’re currently trying to make our market intelligence work more accessible — this is an important objective for us for 2012. In the meantime, here’s a taster of  the 2011 reports we delivered to clients:

• State of the browser games market in Europe

• State of the kids and teens online game market in Europe

• State of online FPS games in Europe

• Kids and teens online games publishing best practices

• State of online strategy games in Europe

• State of client-based MMO games in France

And of course, there’s our report on European Office Locations for Online Games Companies. After being repeatedly asked for this kind of information last year, we finally saw the light and bundled it into a commercial report, now for sale on our website.

That’s about all for our consulting in 2011, and we’re excited about this year of interesting research and diverse missions — it’s already well underway! If you would like to know more about how we work, please feel free to get in touch.

2011 was another really good year for us, if a bit of an emotional roller coaster with both Martin and Julien leaving for greener pastures (not sure that Julien is finding Sweden greener than Ireland, but you get the idea!). We’ve also recently welcomed several new members of the PR team that we’ve been remiss in not mentioning before now. This will be fixed Soon™, at which time you’ll learn more about (in order of appearance) Nora, Katja and Gemma. But that’s another post.

We’ve got a lot coming up in 2012. More clients (probably), more market research (definitely), more things to share with all of you. And we hope, more new encounters, more surprising games, and more fun for everyone.

All of this to say that we also wish you all loads of wonderful things for this coming new year!

Visual designed for ICO by Beatoa – as were the previous years’ designs