Mobile game revenues finally hit their stride

Revenue from mobile games in the United States will nearly double this year to $1.53 billion, according to a new report from SNL Kagan. U.S. mobile game publishers generated $792.7 million in 2010 and the current year marks the fastest annual growth rate since at least 2005 when the firm began tracking the space.
Low-overhead app development and strong top-line revenue growth have put finally put mobile gaming revnues on track for that upward hockey stick on a graph that investors love to see.
“As with most entertainment businesses, mobile gaming is a feast-or-famine, hits-based industry, and a single smash … can quickly catapult a company to the top,” lead analyst John Fletcher wrote in the report titled “Economics of Mobile Games.”
Fletcher and his colleagues note that the cost to develop and port a mobile game has gone down dramatically in the past few years. Whereas it used to be common for a mobile game to cost upwards of $1 million to develop and port thousands of times, games like “Angry Birds” cost less than $200,000 to initially develop and that title and its sister properties have generated $88 million since in less than two years.
There is a lot of disruption in mobile gaming as well. While the early mobile games were primarily driven by the giants in the console gaming and PC space, newcomers are gaining quickly on the incumbents. “Of the top 15 publishers by revenue, six are newcomers this year,” the reports authors wrote, adding that “competition is growing and barriers to entry are low.”
Finally, SNL Kagan also noted that the “limited pool of talented app developers combined with the high demand for apps has created a bubble in mobile game mergers and acquisitions.”
With mobile game revenues expected to top $1.53 billion this year, the platform will account for about 7.7% of the total U.S. game market of about $20 billion, according to the firm. While the annual growth rate on a percentage basis may not continue in kind, mobile games are projected to generate at least $4.35 billion for U.S. publishers in 2014, marking a nearly 82% jump from revenues in 2010.