“Unlocking Success: The Crucial Role of IP in Mobile Gaming’s Future”

A slim veneer of mobile games’ IP

Now let’s address the topic of IP in mobile gaming. Creators of mobile games encounter escalating production and user acquisition expenses along with a deficit in financing. The instinctive reaction is to intensify creative borrowing while skimping on storytelling and character development to roll out the game promptly––and subsequently observe the results. After all, Dream Games achieved success with only minimal meta. Players appear to prioritize game pace and the vibrancy of visuals over the distinctiveness of art. Innovating something new entails risk, and why alter something that performs so effectively? Right?

That is contingent on your viewpoint. In retrospect, reviewing the narratives of the companies that ascended to the top of the rankings over the past decade, the formula for success seems to incorporate a substantial amount of creativity combined with robust data analysis, complemented by imitation. With adequate skill and a stroke of luck, developers managed to ascend the charts and remain there for a while, benefiting from being early adopters.

However, the outlook does not appear as straightforward going forward. If you aspire to be the next Playrix or Dream Games, it is increasingly challenging to surpass them in their domain. The market is saturated, and efforts to create even faster games, more boosters, and larger detonations when combining two TNTs are unlikely to yield a high return on investment. Conversely, if you are already at the pinnacle of the market, your innovations will be replicated by each new entrant with even lower development expenses, steadily encroaching on your market share. Ultimately, a new Dream will emerge with something novel, and you will have to pass the torch to your successor. Echoing the title of some classic pulp nonfiction, “What got you here won’t get you there.” To reach the summit, innovation is essential, but to maintain a position at the summit, a moat is required. And that is what is currently absent.

Establishing the moat

Morningstar presents five potential sources of a moat: switching costs, network effect, cost advantage, efficient scale, and intangible assets. Switching costs imply that players remain loyal to the game because they have already completed numerous renovations and levels, making them reluctant to restart. The network effect can bind players through co-promotions. Cost advantage applies if the company can develop a game in a low-cost region and execute more efficient marketing campaigns, thereby reducing eCPI. Finally, a well-organized management structure, a smoothly functioning back-office, and vast amounts of real user data undoubtedly support market leaders. Nevertheless, upon closer examination, the moat composed of these four elements resembles more of a diminishing puddle.

Transitioning from one castle to another (or from a mansion to a castle) does not seem to present a challenge for players, especially when the locales are loosely linked by merely a general idea of renovation without a strong narrative foundation. The network effect is very limited, and few entities outside of Roblox or Epic can confidently assert successful efforts at crafting a closed ecosystem. Weaker currencies in emerging economies, government subsidies, and AI co-pilots will assist newcomers in delivering more affordable games to the market swiftly. That same AI, utilized as a substitute for real user data, will streamline bridging the analytics divide. The primary source of a moat will increasingly be the pool of talent with distinctive expertise that, unfortunately, will continue to flow to competitors or initiate their own games, despite escalating salaries and questionable legal enforceability of non-competes. This above scenario increasingly resembles a race to the bottom, inducing dread in any CFO: a perfectly competitive market. To avert this, developers must resort to the final crucial source of a moat: intangible assets, also known as IP.