Mobile gaming has seen huge growth in users and revenues. How can free-to-play games and in-app purchases help streaming video providers grow their audience and fight churn?
Mobile gaming is huge: There were 80 billion new mobile game downloads in 2020, up 18% year over year.1 Deloitte’s recent Connectivity and Mobile Trends survey for 2021 found that 64% of US respondents (referred to as “regular mobile gamers” here) play games on their mobiles at least once a month, although most of them play at least once a week.2
However, in spite of all these downloads, our survey found that 67% of regular mobile gamers spend less than US$10 per month to buy new mobile games. But that doesn’t mean they’re not spending. To unlock new levels, capabilities, and personalisation, mobile gamers make in-app purchases. Among our regular mobile gamers, 48% are making in-app purchases to enhance the functionality and experience of their games. Of that, 60% are spending more than US$10 per month; the average is closer to US$20 a month.3
The freemium model is a notable business strategy. Mobile games offer their titles to smartphone users for very cheap or free. This lowers the barrier to entry considerably, expanding the audience and letting games show value without requiring an up-front cost from the user. When people start using the game, they soon realise the “need” to spend to enhance the game experience. What are they buying? Virtual currency, enhancements to the game, personalisation and capabilities such as gear and tools—in that order.4 Mobile games—and more games in general—are becoming services that keep adding new experiences, often with social interactions and personalisation, monetising it all along the way.
The maturing streaming video market is demanding differentiation and putting pressure on pathways to retention and profitability. Generating strong revenues per user is tricky, especially when luring and keeping subscribers may require lower prices or using more ad-supported models. By exploring freemium pricing, microtransactions and lightweight mobile games, streaming video services could expand audiences and increase engagement through more diverse experiences.
Deloitte’s Technology, Media & Telecommunications (TMT) industry practice brings together one of the world’s largest group of specialists respected for helping shape many of the world’s most recognised TMT brands—and helping those brands thrive in a digital world.