Everyone's a winner: Hong Kong's massive mobile gaming market

Hongkongers are obsessed with gaming. But rather than PC, Xbox, PlayStation, or the Switch, this city’s dominant gaming platform is smartphones. Simon Yuen talks to several mobile gaming industry developers and experts to examine the challenges and opportunities in the industry ahead.

Level up

According to the “Games Market Report” by games and eSports analytics provider Newzoo Global, it’s estimated that in 2019 the global games market will generate revenues of US$152.1 billion, constituting a 9.6% year-on-year increase.

Mobile gaming, which includes smartphones and tablets, remains the largest segment this year. It is set to produce revenues of US$68.5 billion, 45% of the global games market. Out of that, 80% of all mobile game revenues – equivalent to US$54.9 billion – will come from smartphone games. The remaining part of the revenue is from tablet gaming.

The global market is thriving, and Hong Kong is no exception. PwC’s report “eSports – new horizons for Hong Kong and the world” showed that in 2019, annual revenues in the Hong Kong gaming industry will reach about US$900 million. And that figure will rise to US$1 billion (HK$7.8 billion) by 2021.

Hongkongers are indeed massive gamers. In fact, according to the PayPal 2018 Global Gaming report, an overwhelming 90% of Hong Kong people said they played video games at least once a week; 65% of Hong Kong people said smartphones and tablets were their most-used gaming devices, while 21% and 14% preferred console or computer (PCs and Macs) respectively.

The prevalence of mobile games opens up opportunities to game developers. As mobile games are not usually as complicated in their design as traditional PC or console games, the threshold of producing a mobile game is lower. This has resulted in dozens of small teams of developers jumping into the market.

“There is huge potential for the mobile gaming industry,” says William Lau, founder of Anti Gravity Game Studios.

“A small developing team is enough to produce a simple mobile game. Though many mobile games are free, the pay-to-play model enables developers to better the gaming process to make money.”

However, competition between mobile game developers is getting fierce, as there are literally tens of thousands of mobile games in the market.

“Competition forces us to innovate. Many years ago, Angry Birds achieved huge success, but gamers are not satisfied with the same gaming experience now. We are propelled by the ever-increasing demand to come up with more ideas and raise our products’ standards,” Lau explains.

The rapid development of mobile gaming also impacts other industries and services, including live-streaming, offline events, and exhibitions, diversifying gamers’ experiences. The 5G network era on the horizon could further benefit the entire mobile gaming industry.

“High speed and low latency are crucial to enhancing the gamer experience, such as gameplay, and the quality of the game screen. Gamers could use their mobile phones to play complicated PC games in the future,” says Hendrick Sin, co-founder and vice-chairman of CMGE Group.

Hard mode

Yet, though the work is less demanding than in traditional gaming, and opportunity is rife, Hong Kong-based developers are suffering from a severe lack of talent. Currently, developers are finding it hard to recruit local talent – such as programmers and art designers – with more than five years of experience.

“The industry in Hong Kong has just started burgeoning. Seasoned talent is literally scarce,” Lau says.

Lau says the regional neighbourhood is offering stiff competition on the staffing front.

“Taiwan has been producing PC games over the years, and Chinese talent can develop world-class products already. More importantly, developers in China are capable of producing games appealing to not only domestic gamers, but also foreign players.”

In addition to a talent shortage, the cost of developing mobile games is also a major concern for developers.

“Hong Kong gamers are open to different types of mobile games, and they are really willing to splash the cash in gaming. However, the cost of producing games is way too high, along with the lack of talent, leading to the fact that Hong Kong is lagging behind China in terms of innovation and the number of mobile games,” Sin says.

Hongkongers’ willingness to explore new games means they are not satisfied with mediocre products. Quality games produced by well-established developers are appealing to gamers, so both renowned and boutique developers need to innovate to succeed.

“It’s a winner-take-all industry. Less than 5% of developers can make a lot of money, and more than 90% cannot even break even,” says Silver Yu, CEO of Skytree Digital.

However, this doesn’t mean Hong Kong developers can’t or don’t produce quality mobile games. Lau says that developers simply have to be realistic; that they don’t need to produce “top-tier” mobile games.

“Some small games are popular as well. Local developers are capable of producing games that take the top spot of the rankings,” says Philip Lau, co-founder of Anti Gravity Game Studios.

Localisation is a must to achieve success. For example, when they browse Apple’s App Store and Google’s Play Store for games, Hong Kong gamers prefer to choose strategy games and titles with an element of fairness in the gameplay.

Yu agrees that Hong Kong-based mobile game developers are capable of producing popular games.

“Innovation is the key to success. We launched Hachi Hachi in 2015, (which was) the first mobile music game in the world to enable gamers to battle with friends online. Developers need to make an effort on gameplay to enhance gamers’ experiences and capture their hearts,” he says.

Gold coins

Funding in the industry is also shifting as the pay-to-play model gives way to in-game ads as one of the primary sources of income for game developers. But incorporating ads into titles is no easy task – as many players have grown weary and resistant to watching ads during gameplay.

“Existing in-game advertising models simply fail to prioritise the needs of gamers,” says Nithinan Boonyawattanapisut, chief executive and co-founder of marketing automation platform HotNow.

Mobile game ads can be divided into several types. Banner ads, interstitial videos, and product placements are the norm, as are “splash ads”; full-screen interstitial ads that are displayed immediately after the application has launched. However, all these ad types impede or distract from gameplay to some extent.

Boonyawattanapisut says banner and splash ads tend to interrupt gameplay, breaking the ambience of the game and ultimately creating a negative impression of the advertising sponsors and participating brands.

As for interstitial videos, gamers are often prompted to watch a 10 to 30-second ad to obtain some perks, such as an extra life. These videos are usually regarded as a necessary evil for game developers to monetise their free mobile games. However, this model may also leave a negative impression on gamers.

Product placement – a static form of advertising where in-game assets are branded by sponsors – has a longer history than other models. The problem is that as player demographics change, the assets fail to adapt, meaning advertisers cannot personalise the content.

The goal in many marketers’ minds is to minimise disturbances to the experience or to customise the content to better target the right audience. Boonyawattanapisut says one solution to tackle the problem could be branded in-game assets.

“Integrating branded in-game assets into the gameplay narrative allows for products to be introduced within the world of the game in a more natural manner. The more important these branded assets are, the higher the possibility of gamers to engage with (the ads and branded content),” she explains.

Personalisation is crucial to maximising brand messages. What may be key is the localisation of in-game features, and developing key brand relationships with merchants that have greater brand recognition with any given target audience.

But personalisation can also build customer loyalty. As Boonyawattanapisut tells Marketing: “Effective personalisation tactics ensure the maximum effectiveness of marketing messages. It is critical to properly address one’s intended audience in a more strategic way.”

Cheat codes

Though Hong Kong developers are getting the limelight, it’s not all been for the most favourable reasons. Intellectual property theft is not new to the gaming industry, but the reputation of Chinese and HK knockoffs is becoming problematic for local developers.

In 2013, Hong Kong-based mobile application developer Mad Head was accused of plagiarism due to alleged gameplay similarities between its mobile game Tower of Saviors and a previous title from Japanese mobile game developer GungHo Online Entertainment, Puzzle & Dragons.

Yet six years on, Tower of Saviors remains a popular mobile game. Lau says developers have become used to the situation of suspected plagiarism, and there’s not much they can do about it.

“We can take shooting games as an example. There are no major amendments on the gameplay over the years, and you won’t say the developers are copying each other. Also, the mobile game (which is accused of plagiarism) must have some features better than the ‘original’ one to be appealing to gamers,” William Lau says.

Yu agrees that developers can do almost nothing to prevent competitors from taking reference, if not copying, their products.

“Developers won’t use licensed characters since they will get sued. It is a common practice for game developers to take reference from their rivals and competitors, but it’s immoral to claim that you (have) developed a new product when in fact it’s just copying others’ hard work,” Yu concludes.

This article was produced for the July issue of Marketing Magazine. For more features and other magazine-exclusive content from this and upcoming issues, you can subscribe to receive your free monthly print copy here or you can read our digital version in its entirety here.