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Glu Mobile has seen some ups and downs in the past year in mobile games. The San Francisco game publisher’s fortunes will rise and fall based on how well it predicts the trends of the future. The ups have come from surprise hits like Kim Kardashian: Hollywood, a mobile game that has generated an estimated $130 million in revenues to date. But other branded game titles, such as James Bond: World of Espionage, aren’t burning up the charts. We asked Glu’s chief executive, Niccolo De Masi, what’s in store for 2016.
De Masi didn’t make specific predictions about how well Glu will do. But he was perfectly happy to talk about the strength of trends such as celebrity gaming, personalized media, virtual reality, the future of game platforms, the future of indie game companies, and whether the top-grossing-games list will change much in the new year. We’ll be making our own predictions about the state of the game industry in 2016, but De Masi’s opinions are a nice start in this ongoing conversation.
As for celebrity games, Glu is making some big bets. It just launched a new game based on the life of pop star Katy Perry, and it has signed deals with celebrities who have more than 1 billion social followers.
Here’s an edited transcript of our interview.
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GamesBeat: What would you predict for this particular segment of mobile games where Glu is strong, the celebrity game business?
Niccolo De Masi: There will be another Kim Kardashian-sized game based on a person in 2016. I don’t know if it’s Katy Perry or Kylie and Kendall or Britney Spears or Nicki Minaj. Certainly Glu thinks we’re most likely to produce that size of hit. Someone else might – Demi Lovato, Eminem, Snoop Dogg – but there will be a Kim-sized revenue producer. Kim made $130 million in the first five quarters.
GamesBeat: Does that wind up being Kim’s most lucrative venture?
De Masi: I doubt it. She has a big deal with E! that was just re-upped in this last year. But I aspire to be on the podium, as I like to put it. For Katy, her touring and performances are probably number one. Sponsorship and merchandise are also high. The records are up there. But gaming, I hope, is number three or four for Katy and number two or three for Kim. That would be a good performance.
GamesBeat: If celebrity gaming is still going to be strong in 2016, what do you think makes it more than a one-time thing? What keeps it healthy?
De Masi: It’s not fair to call it celebrity gaming. It’s like saying if you buy a Katy Perry album, you’ll never buy a Taylor Swift album. A musician’s not the same as a reality star or an action star or a sports star. There has to be room in this.
Every game we make is obviously not going to be at the top of the grossing charts at the same time, but there are lots of spots in the top 100 and the top 50. If you can follow a lot of these people and be relevant and see a lot of retweeting and liking going on on social media, there are lots more games based around people than most common industry observers see.
The other trend I’m long on is that I think there will be a big shooter in 2016, and I hope it comes from Glu. We’ve announced our WeFire partnership with Tencent. It’s already the biggest mobile shooter ever just based on China revenues. All the other regions – North and South America, Europe, east Africa, Australia, New Zealand – we have the rights to all these territories.
We’re combining the WeFire engine with the Frontline Commando or Contract Killer IP. That, to me, is interesting, because it combines a proven engine with proven IP. That’s what we did with the Kim Kardashian game. We’re taking a high-LTV shooter engine from China and merging that with proven IP. That will hopefully lead to some new record-setting for the shooter category in mobile again.
GamesBeat: What other trends do you see coming up this year?
De Masi: The personalization of media is a big trend. Media is going to be more about the Glenn Beck/Howard Stern/Kim Kardashian model. People being the brand. Living and breathing IP partnerships are much more powerful than static IP. You can make a Star Wars or Marvel game, but it’s not as powerful as a partnership with a person. You’ll see more and more people from Hollywood be involved in the promotion of mobile games.
The other big trend is VR. VR is farther ahead technologically than people think it is. Headsets are going to get cheaper and cheaper at the rate of Moore’s Law. I expect that we see a situation whereby the Oculus store, in 2016, is where the Apple app store was in 2009, or the Google store in 2011. You’ll start to see meaningful revenues generated. It’ll become a lot bigger in three years, but you’ll start to see an installed base.
Mobile VR is very much going to be the trend, not PC or console. Mobile VR is going to be where the action is.
GamesBeat: Do you already have any experiments underway on that front?
De Masi: Deer Hunter is out on the Oculus store as of a week or two ago.
GamesBeat: Do you think you’ll be doing more of these regularly, then, with different properties?
De Masi: We’re going to launch and see how Deer Hunter does, but we’re certainly bullish on where the space can go. We’re investing in it.
GamesBeat: How do you feel about some of the big events of the last year and how they’ll play out in the new year? I think of Activision buying King as one example.
De Masi: The consolidation will continue. Capital is going to flow from east to west. There’s a lot of profits in China and Korea. They have big domestic markets and low cost bases. They’re starting to tap international markets. Tencent is our biggest shareholder now. You’ll see Asian companies pick up more assets in international markets, far more than the other way around. At least for mobile companies.
Consolidation is happening where profits are found. Other than King and Supercell, you’re seeing mobile gaming profits largely in Korea and China and Japan. But you’re seeing console companies stay healthy. EA and Activision are healthy. The current console cycle is retaining core shooter and sports players. Those segments are going to remain strong in markets that already have consoles. Which are relatively cheap, by the way, compared to what consumers are paying for phones. Your console is $299 and your phone could be double that if it’s not subsidized. Console will keep acquiring into mobile and eastern will keep acquiring into western.
GamesBeat: Mobile is here to stay in its own right and will continue to get bigger, do you think?
De Masi: The primacy of the phone is here to say. Nobody goes on a business trip and says, “I can leave my phone at home and bring my tablet or my laptop.” The phone is the most important thing. It’s personalized. Just like with kids staying in their bedrooms playing games and chatting on social media, the phone is going to continue growing from strength to strength.
You have a whole emerging market that needs to get a smartphone. Today, I would bet good money that a consumer in a developing nation will spend a month of their salary on a phone way before they’d spent it on a PC.
GamesBeat: You mentioned Google and Apple. What do you think is a trend that you see in 2016 as far as the platform companies and the competition between them? In consoles, we have Sony-Microsoft-Nintendo. In mobile, we have Google-Apple-Amazon. When you bring up the topic of platforms, what comes to mind?
De Masi: It’s great that Google is trying to get back into China, but I don’t expect that it will make them competitive with Apple in China. Certainly not in 2016 and probably not in 2017 either, at least in terms of revenue.
Apple and Google will maintain primacy on the phone and the tablet, and increasingly in laptops, desktops, and the living room. They’re the two most likely companies to string together the quad-screen play I talked about a lot. Apple, Google, Amazon, and Samsung are all trying to lock consumers into a single software platform, a single billing relationship, a single customer experience where you can get the same content on all four screens. Apple is in the prime position, followed by Google. Amazon, Samsung, and Microsoft are a long way behind them.
They’re all going to keep trying. These five companies cannot say their 10-year view is the seed of a relationship with the customer on one of these screens. It cannot be part of their strategic plan.
GamesBeat: They have to be multiplatform themselves.
De Masi: Yep, they do.
GamesBeat: Some things that are on the fringe this year are Apple Watch and Apple TV. Do those play a bigger role in gaming at some point in the coming year?
De Masi: VR is going to be way more interesting for gaming than the watches, no doubt about that. The watch is going to be an extension, whereas VR is going to be an immersive experience.
Apple TV is going slowly. It’s fair to say that the controller has not dazzled people. It leaves a lot of room for improvement. Phones as controllers, in a lot of ways, can be more powerful than a purpose-built controller. We’ve had a game working on Apple TV over Airplay, Eternity Warriors 3, with the phone as a controller. It’s a better experience, in a lot of ways, than a dedicated controller.
GamesBeat: Is augmented reality getting interesting as well?
De Masi: Not as quickly as VR, in my opinion. It’s out there. It’s a topic of conversation. A lot of people like to make comments on one being bigger than the other. But here’s the thing. Game companies and porn companies usually figure out new hardware first. Both of those categories are seeing opportunities in VR in the next three years. It’s not as easy to say that AR is going to get there.
The problem with AR is that it’s only interesting if you wear the headset all the time. We built the first Google Glass game, if you remember. Google Glass has still not shipped. It’s part of that wear-it-all-the-time thing. Putting your goggles on when you’re on the airplane, on the train, kids in the back of the car, that’s a realistic use case. There’s a much higher friction to wearing it all the time.
GamesBeat: We talked about celebrities, but what about more regular folks, like YouTube influencers and Twitch broadcasters and esports players? Do you see these people gathering momentum to become a bigger part of the game industry?
De Masi: That’s possible. Twitch is going to get into video. Video with celebrities is interesting together with VR. Interactive apps, entertainment with VR video, these are things we can push into if we want to.
There was an article in the Wall Street Journal about some YouTube celebrity, a violinist. That game, I don’t think, did shit. They wrote a whole article on this violinist who had maybe a million social followers. I said, “That will never be a big game. A million is not enough.”
I maintain that 100 million social followers is what it takes to be meaningful in today’s discovery environment.
GamesBeat: The question with these people, maybe, is less about whether they’ll be making their own games and more about whether they’re becoming a necessary part of game marketing.
De Masi: People in Hollywood are going to be a bigger part of promoting games. YouTube influencer networks are part of that too, no doubt about that.
GamesBeat: Are you feeling like tablets are hitting a peak?
De Masi: They’re going to be pretty flat. The reality is, phones are getting bigger. You need your tablet for less when your new iPhone 6+ is almost the side of an iPad Mini. It’s heading there. Those are PC replacers. They’re not phone replacers.
GamesBeat: There’s been some talk of an indiepocalypse. We talked about consolidation. Do indie games and game developers get hit pretty hard in the coming year?
De Masi: Indie developers are going to struggle to be viable in a world where scale of bets, scale of marketing, matters a lot more. Indies are going to struggle in a world of high CPIs. Glu is a big beneficiary of high CPIs because we make a fair amount of money off advertising. That keeps us able to distribute our games.
Indies will still distribute. They’ll always have the occasional reasonable success that keeps the dream out there. But it’s increasingly becoming more of a dream, the same way it’s a dream to build a console game. A lot of people had that dream in the ‘80s and ‘90s. How many of them have that dream today? That whole 20-year period in console has been compressed in mobile to 20 quarters. You’re already five years into it going, “Yeah, it’s not viable to be a two-man shop anymore.”
That trend will only continue. Private company valuations are coming down, not only in the so-called unicorn space but in the private sector game space as well.
GamesBeat: How about the top 10 in 2016? Do you think it’s going to change much in mobile as far as the top-grossing list goes?
De Masi: It’s been changing more slowly. Eventually consumer tastes change. There’s no doubt that slot games, match three, and RTS/RPG have done well over the last three years. They do well on the platform. They’ll continue to do well. But there will be some surprising new entrants in the category that do something new. Consumers need to be reinvigorated on their phones for their games.
It will keep changing slowly. The big stay big for longer. That’ll continue to be the case in a scaled market. But I do think consumers eventually get tired of every type of game. That leaves room for renewal. Renewal, right now, is good for Glu. We don’t dominate the top-grossing charts as much as some companies. There’s more opportunity for us.
We’re still the smallest of the big companies, is the way to put it. A $100 million game does a lot for Glu. It doesn’t do anything for King. King concluded that you have to ship a lot of $100 million and $500 million games to keep a $2.5 billion revenue base going. That’s hard to do. But for us a $100 million game is very interesting. A $50 million game shows up on a P&L. If we ever ship a $200 or $250 or $300 million game, that’s a game-changer for us. It’s very possible.
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