Amy Entin

Building Entertainment and Media Industry Digital Strategy

Midterm Assignment

August 2, 2020

1. Based on the case, the mobile gaming industry is attractive but full of pitfalls. While the

potential for the market is huge ($36.9 billion for mobile phone and tablet games in 2016 and

growing), there is a general attitude against paying for games in some places - in India, for

example, “people assigned a very low value to software and felt that games needed to be free”

(p.4). This, combined with a global trend towards the free-to-play model, makes it very difficult

to monetize mobile games. While the overall market is huge, with 1.97 billion players globally,

the rate of monetization varies widely by market. For example, India has the second largest

market in terms of number of players at 201.1 million gamers, but the average revenue per user

is only $2.32, for a total revenue of $466.3 million. In comparison, Japan has only 68.5 million

gamers, but clearly a higher willingness to pay, with an impressive $89.99 average revenue per

user; this brings them to a higher total revenue than India, at $6153.9 million despite only about

a quarter of the gamers (Exhibit 5). This means that the target country of the game makes a

significant difference in the attractiveness of the market. In addition, there is vast competition

due to the global nature of the business - in the fourth quarter of 2017, there were 647,488

games on the Google Play Store, with continuous growth over all the quarters shown (Exhibit

2). The barriers to entry are low, particularly for basic games, but differentiation and

monetization are very difficult and games require major investment in marketing and

advertising (p.7). In the free-to-play model, the power is with the customers, who have a wealth

of free games to switch to if they don’t feel that a given games is worth paying for. This sets up

an additional challenge for gaming companies in building loyalty and customer engagement,

critical to profits. Moreover, with competition rising, the investment needed to acquire quality
 human resources rises as well. On the flip side, the wide audience and potential of the market

means that the investment/VC companies are aware of quality games and interested in potential

new ones if they can show a path to success. The potential makes the industry an attractive one,

though would-be entrants must be aware of the differences between sub-markets.

2. The first major strategic decision that Rolecule made was to enter the mobile gaming market

created by the App Store with a sports game, Touch Squash. Despite Rohit’s mistaken1

assumption that sports games were the most popular (p4), the decision to choose an easy sport

that could be single or multi-player was a good choice for a starter game given his lack of

experience, and choosing a unique sport to avoid competition with major players in the market

was a good strategic move, which bore fruit with 12,000 downloads when it hit the market and a

sponsorship from a recognized company in the squash industry, lending them legitimacy as well

as additional revenue. The next decision, Super Badminton, was a good one for similar reasons

(recognizable sport, multiplayer potential, unique), following the same route to success as

Touch Squash while building more experience in animation and sophisticated graphics. The

next logical step was to use their experience to enter a more popular sport, which is what

Rolocule did. Flick Tennis is also the first time Rolocule develop a game meant to be easy to

pick up for non-gamers (casual instead of mid-core); the theory that an easier game would be

more widely adopted by a broader potential market proved correct and brought them their

biggest success yet. At that point, their roadmap was disrupted by the market shift towards free

games (until that point, all their games had cost money to download). Rolocule tried to create a

free version of their most popular game - tennis - but lacked the knowledge to monetize it.

Despite the right intention (staying on-trend), they made a mistake in adding to the number of

developers (trying to put the game out quickly) without doing anything to acquire knowledge on

monetization schemes (perhaps by hiring someone with some experience in the model). Rohit

1
https://mobilefreetoplay.com/the-top-mobile-game-genres-of-2018-top-grossing-charts/
 eventually realized that this move was the wrong one, and shut down the project without

releasing the game. Rolecule’s next attempt at a hit came through motion games via AppleTV.

Sticking with the theme that had worked for them to that point, they developed Motion Tennis.

The decision to reach out to Apple and market together was an excellent strategic decision; the

brand of Apple helped them get media attention they wouldn’t have gotten on their own, and the

buzz raised consumer anticipation (p9). As a result, the game was a success, with around 10,000

downloads. The hype and investments led Rolocule to continue their motion-based games, but

their next attempt was too ambitious. They stepped out of their genre and into music,

developing Dance Party. They failed to take into account how expensive royalties would be, and

as a result could only offer a limited playlist, which was disappointing to consumers. Rolocule

should have explored more before branching out into a genre they were unfamiliar with,

particularly for their first time releasing a free-to-play game. In addition, Apple TV did not take

off as expected, severely limiting Dance Party’s potential audience. While the lackluster

performance of Apple TV would have been had for Rolocule to predict, they learned from

Dance Party, making their next motion games playable on tablet and smartphones too. Despite

complex animation and media attention, however, these games failed to capture consumer

attention the way regular mobile games did, perhaps because many people play while watching

TV, in bed, while commuting, or other places2 where a game requiring physical motion would

be inconvenient.

2
https://medium.com/tapjoy/tapjoy-research-when-do-people-play-mobile-games-8c622c7429f
3.

Pros Cons

Acquisition  Financial stability  Less creative freedom/ownership

 Creative and technical of the product
Offer support from a team  Offered less than half the last
 Economies of scale in valuation
marketing and development  Feels like “giving up”
costs  Likely won’t be able to purse the
 Consolidating means less goal of making a game
competition especially for India

B2B  A market that is very likely  Less creative freedom - making

to grow in the coming years a product to spec
(Gamification)  Project-based revenue is  Learning curve - gamification of
more reliable/involves less content that might not be easily
luck than releasing a game to suited to it is not in Rolocule’s
consumers - less challenge expertise
in monetization
 Rohit retains ownership of
his company
 Leverages Rolocule’s core
competency (sophisticated
graphics) to reach an
alternative revenue stream -
diversification
 Potential to fund the B2C
projects if Rolocule chooses
to continue them

B2C  Creative freedom  The revenue stream has dried up

 Rohit retains control of his and new investments have not
(Current Track) company been forthcoming
 Increasing competition and
expectations of free content
make it difficult to monetize
consumer games; Rolocule still
has not made a successful
mobile game in the free-to-play
model
4. WeChat is disrupting the current model of the mobile application (“app constellations” where

individual apps each fulfill a niche function) by becoming a platform with many mini-apps

(“official accounts”), functionally its own mobile operating system complete with an app store.

WeChat has each of the main four main tenants of moat building working in its favor. The first

is government advocacy/regulation. Operating in China, many of the traditional social media

and other platforms that make up the app constellations in the west are unavailable, and it is

difficult for foreign players to enter the market; this lowers some of the pressures of competition

that exist in other parts of the globe.

The next tenant is proprietary technology. Tencent understood the need to create a messaging

platform that was truly intended for mobile rather than adapting existing desktop functions.

Instead of adapting QQ, Tencent’s existing messaging app, they created a separate team aiming

to create something completely new from scratch. They created a platform that was more than a

messaging app, with seamless payment options, technology for businesses to target the ideal

customer, and new ways for the customer to interact with various parts of their lives, from

favorite celebrities to preschools.

The technology then lent itself to the creation of a network effect. On the part of Tencent, they

encouraged the building of the network of users by offering discounts on new services and

convincing businesses to accept their payment options; the more businesses were active on the

app, the more users began to use it, and with more users, more businesses were eager to get on

board. In addition, WeChat made itself friendly to those wanting to open official accounts, with

a simple process and a short waiting period; in addition, it offered its CRM and marketing

automation tools for free to those accounts. This user-friendliness and enormous potential for

personalization and targeting was unique to WeChat and highly attractive for businesses, and its
effectiveness again in turn brought in more users.

Finally, the enormous network effect that they have generated has brought them a strong

customer captivity. As far as the customer is concerned, everything that they need or want is

already integrated in this single app. With seamless payment options, personalization, and a

high degree of interaction with the offline world, all the potential needs of the consumer are

being anticipated and addressed. With so many businesses, celebrities and friends using the app,

a user wishing to switch to a different platform (or set of platforms, an app constellation) is

likely to find that they can’t use it to pay in every single place like they could with WeChat, that

their favorite celebrity doesn’t have an account on that new social media, or that the app for

hailing a taxi isn’t integrated with their preferred payment method. In each instance, the user

turns back to WeChat. The early and aggressive creation of the network effect creates a

captivity that is next to impossible for new entrants to work against without a significant

industry disruption.