Free mobile games, tablets are making developers rich

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Mobile gaming is flourishing--and developers can thank tablet adoption and freemium pricing models for vaulting the business to the next level.

There are now more than 125 million people playing mobile games in the U.S. and U.K., according to a new survey conducted by Information Solutions Group on behalf of Electronic Arts' PopCap Games division. Forty-four percent of adults play at least one mobile game per month, an increase of 29 percent compared to a year ago; the number of daily players is up from 35 percent in 2011 to 45 percent in 2012, and 22 percent of mobile gamers play more than three hours a week, compared to 14 percent a year ago. No less impressive, the ratio of new gamers (defined as consumers playing mobile titles for less than a year) has doubled over the last three years, making up 44 percent of the overall mobile gamer market.

Nine percent of these new mobile gamers credit a recent tablet purchase for fueling their interest, PopCap reports--in all, devices like Apple's (NASDAQ:AAPL) iPad and Amazon's Kindle Fire are responsible for bringing about 11 million new gamers into the fold in the last 12 months alone. Thirty-six percent of all mobile gamers are tablet owners, and 74 percent of tablet gamers did not play mobile titles previously; in addition, 12 percent of all mobile gamers play exclusively on tablets, and respondents who play on both tablets and smartphones log more time on the former than the latter. (That being said, 57 percent of subscribers who own both smartphones and tablets play mobile games every day, compared to 41 percent of gamers who own just one device.) 

But tablet penetration tells only part of the story--in fact, just 25 percent of survey respondents cited a tablet purchase as the reason they're now playing more games. Seventy percent credit the availability of more free mobile titles for increasing their interest in gaming, but the good news for developers is that all these free installs are still translating into moneymaking opportunities. Fifty-one percent of survey respondents made mobile game-related purchases in the past year: Sixty-two percent of expenditures were for premium downloads, with close to $4 of every $10 spent on additional game content and/or in-game currency. PopCap adds that 48 percent of subscribers who spend money on mobile games are under the age of 35; eighty-six percent tend to play multiple times a week, and 45 percent own a tablet. Also worth noting: Mobile gamers who play exclusively on tablets are bigger spenders than smartphone gamers, averaging $25.47 a year compared to $16.68.

PopCap Games derives more than a third of its overall revenues from sales of premium mobile blockbusters like Bejeweled and Plants vs. Zombies. But moving forward, Electronic Arts will take the results of the PopCap survey to heart, shifting its business away from premium sales to focus on the freemium model. "We started to see that freemium was coming in, and it took us a long time to move over," Electronic Arts Senior Vice President and Group General Manager Nick Earl said in a recent interview with All Things D. "In all candor, we are behind." Earl said the company's EA Mobile unit will begin the transition from premium to freemium this summer with the release of a new Simpsons title. The game will be free to download, generating revenue via sales of in-app virtual goods and content. "There will be a few one-time download games in the future, but they are the exception, and the norm will be freemium games," Earl said.

Earl added that Electronic Arts has been slow to embrace the freemium model in part because the business is so different from one-time premium downloads. He said freemium games are essentially a live service that must support a host of transactions as well as thousands of daily active users. As a result, EA Mobile will now devote more of its resources to supporting individual titles and will also ship fewer games in the future. The freemium model may be the key to building a successful mobile gaming business, but just because a title is free for consumers to play doesn't mean it's free for developers to maintain.--Jason

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