For developers, big opportunities lie in hardcore tablet gaming

Investors are stumbling over themselves in a rush to get a piece of the mobile gaming pie. In just the last few weeks, China’s ChangYou announced plans to invest $600 million in independent mobile game developers over the next few years, fellow countrymen Tencent took a 28 percent stake in Korea’s CJ Games for $500 million, and “Candy Crush Saga” developer King Digital Entertainment raised roughly $500 million in an IPO that valuated the company at a cool $7 billion. Oh, and SoftBank sunk an undisclosed amount into the New York-based developer Turbo just a few months after it spent $1.5 billion for a stake in Clash of Clans developer Supercell.

That funding frenzy may explain why Industrial Toys didn’t get a lot of attention for closing a Series A round that drew a relatively modest $5 million from Accel Partners. A Pasadena, Calif.-based startup, Industrial Toys was founded by the co-creator of Halo (along with two partners) and hopes to attract hardcore gamers by bringing a console-like experience to tablets. The company has spent more than two years developing Midnight Star, a first-person shooter built specifically for tablets.

Bigger screens + sophisticated controls = more immersive games

Mobile gaming has become a very lucrative industry, of course, but the ultra-competitive market is still fraught with peril for developers. A glut of casual, pick-up-and-play titles has led most game makers to offer their wares for free to entice users to download them. Monetizing those games, then, calls for brutal business models like in-app purchases or advertising. Very few publishers have been able to produce multiple hit titles and franchises to consistently generate money over time, and the unforeseeable success of a rudimentary game like Flappy Bird – which was created in just a few days — illustrates that the market is still largely a crapshoot.

Tablets could provide a more stable foundation for developers, though, because they can deliver a much better gaming experience than mobile phones can. Tablets have bigger, better screens than phones, of course, and the expanded real estate makes touch navigation easier and more accurate. And while touch screens are adequate for many casual games, an ever-increasing number of tablet game controllers are coming to market thanks in part to Apple’s support for third-party peripherals in iOS 7. Those controllers will help developers bring high-quality, sophisticated games to tablets, enabling traditional console and PC gamers to play anywhere.

Creating those kinds of games will obviously require much more investment than, say, Flappy Bird. But the hardcore gaming audience is huge, as evidenced by the success of Microsoft’s Xbox and other console-based brands. And they’re happy to pay for a quality, immersive gaming experience.

We’re not there quite yet

It’s probably a stretch to say the console market is in crisis, as TechCrunch proclaimed a few weeks ago, it certainly has flattened as mobile gaming surges. For developers, though, mobile gaming is a horrible market where a handful of publishers strike it rich while the vast majority is lucky just to break even. But publishers who invest the resources to create a great gaming experience on tablets should consider embracing the old console business model of charging a premium for their titles rather than tinkering with the advertising or freemium models. Gamers may not be ready for that quite yet – the market for third-party tablet gaming peripherals is still in its early days, and it’s worth noting that Midnight Star will be a free-to-play game, supported by in-app purchases – but the opportunity may be just around the corner.

Relevant Analyst
Colin Gibbs

Colin Gibbs

Mobile Curator Gigaom Network

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