Kent Wakeford, the chief operating officer of Kabam, returned to the stage at our GamesBeat 2016 event to talk about how tough the mobile game business — a $36 billion worldwide industry — has become. And doing business in China is even more difficult.

San Francisco-based Kabam is a big player in mobile games, with 700 employees. And it makes more than $25 million a month from its free-to-play mobile game Marvel Contest of Champions. Wakeford thinks Kabam’s focus on “regular” players, who keep on coming back every day, is why that game has succeeded. It is the highest-grossing Marvel game of all time.

But that doesn’t mean its success is universal. Kabam recently launched its Marvel Contest of Champions game into the iOS market in China. The title shot to No. 1 and attained 2.5 million downloads, but it quickly dropped down in the charts. “It’s complicated,” Wakeford said.

Here’s an edited transcript of our conversation. You can also watch the video embedded below.


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Kent Wakeford, chief operating officer at Kabam, at GamesBeat 2016.

Above: Kent Wakeford, chief operating officer at Kabam, at GamesBeat 2016.

Image Credit: Michael O'Donnell/VentureBeat

GamesBeat: Kabam has done very well in mobile and social games, with six titles that have generated more than $100 million in revenue. Marvel Contest of Champions is the latest. It’s been a top-10-grossing game for the last 14 months. But you’ve also had to adjust your staff in San Francisco, recently cutting 25 jobs. You discontinued and sold off some other games. You announced two new games, Avatar and Transformers. It seems like you’re continuously changing the way you do business.

Kent Wakeford: “Complicated” is an understatement for the mobile game industry. It’s complicated. It’s dynamic. It’s fast-paced. It’s a lot of fun.

Think about what’s happened over the last six months. You had John Hanke sitting right here yesterday talking about Pokemon Go. We have introduced, through a mobile experience, a whole new way of playing and engaging outside the home, bringing location-based gaming to the masses. What they’ve done is grow the entire mobile game industry. Just months before that you had Supercell with Clash Royale, introducing PvP to a global audience on a simultaneous launch date.

At Kabam we’ve been leading the way with licensed IP. Recently, Marvel Contest of Champions became the highest-grossing Marvel game of all time, across every platform. The mobile gaming industry is growing dramatically. Multi-billion-dollar games are in development that rival traditional console and PC. It’s a lot of fun.

GamesBeat: How do you account for your Marvel game’s continued success?

Wakeford: We launched Marvel Contest of Champions in December 2014. This July was its highest revenue month of all time. The game continues to grow.

GamesBeat: That’s $25 million a month?

Wakeford: Generating in excess of $25 million a month in revenue, yes. You can see that via AppAnnie. First, you start with amazing teams. Kabam’s Vancouver team is one of the best mobile game developers. But there’s also a fundamental shift in how we think about games within Kabam.

Kevin Chou, our CEO, wrote about this for VentureBeat, that we’ve shifted from traditional ways of thinking about DAU (daily active users) and MAU (monthly active users), or what a lot of people have talked about in terms of whales or VIPs. We’ve thrown that all out the window and focused on what we call regulars. Regulars are people who play our game every day. If you think of it like a bar, it’s the people who come in after work every day. How do we make the game experience for these customers — customers engaging with your content every single day — whether it’s the payers or the players, how do you create an environment where you put on a show for them and engage them every day? If you can do that right, that flows through the entire game.

Marvel: Contest of Champions Iron Man character at ChinaJoy.

Above: Marvel: Contest of Champions Iron Man character at ChinaJoy.

Image Credit: Dean Takahashi

We’ve created a shift in our mentality. We’re catering to this much smaller subset of our player base, but they represent 80 percent of our revenue. They play our games more than 90 minutes every single day. It’s not casual gameplay. It’s not optimizing for DAU. It’s optimizing for this core base of users who play every day. And by the way, with that core base of users, we have almost 100 percent retention. They’re playing every day. They’re engaged every day. They’re sticking around. If you’re thinking about how to invest in a game to make it last for years, that’s what we’re doing. Now we’re thinking about how we have games that can last, in the mobile space, for a decade.

GamesBeat: The funny thing is that I remember Kevin describing that audience as the main audience of Dragons of Atlantis, the un-branded original Kabam game. Now, with this big Marvel game that has so much more potential reach, you’re still addressing the same kind of player as your main target.

Wakeford: It’s a key audience for many games, whether it’s our early games like Dragons of Atlantis or The Hobbit or Kingdoms of Camelot. They’ve been there. But how do you serve this audience group? So much historic thinking had been focused on DAU. How are we getting these players who may come in and leave, how do we get them to retain? We were putting lots of energy there. There were swings in the industry focused on big spenders.

What we realized, with a lot of data and a lot of hindsight, is that it’s really this core player base. If you can engage them and create social systems and social engagement and provide content for that group, they will stick around for the longest period of time. That kind of eye-opening analysis shifted how we think about game development.

GamesBeat: You mentioned the two new games, Avatar and Transformers. How do you approach these differently so they can be global hits?

Wakeford: We’ve taken a lot of that same learning about how you create deep system that will engage customers for years. When we think about creating games, we’ve talked about our strategy of “fewer, bigger, bolder.” The average development cost for each one of our games is about $14 million just to get to launch, not including marketing.

There’s two key buckets we think about. One is, how do you create a game that has exciting visual elements and accessible gameplay that can get people in quickly, get them engaged, and help with some core early conversion metrics? Opening the top of the funnel, getting lots of people to play the game, and effectively lowering your CPI. We spent a lot of time looking at that so you can drop down your CPI as much as possible. That’s critical in the world we live in today.

The second, which is more important — when we greenlight a game, we’re already thinking about, what is the social gameplay within the game? How are you going to get people to play together, interact together, and engage together for years? Then you also start with, even very early in the prototype stage, what are the deep elder game loops or game systems you’ll have? We look at putting those into the game to make sure we can have a deep social system and deep elder gameplay. That will ultimately correlate to higher LTV.

Marvel Contest of Champions

Above: Marvel Contest of Champions

Image Credit: Kabam

GamesBeat: You guys had a peak of maybe 800 people. You’re about 700 now. Recently you had this layoff of 25 people in San Francisco. Can you talk about what that means?

Wakeford: We’ve been pretty transparent about our strategy. We’re moving away from a lot of the legacy games we had. We had about 15 different tech stacks at one time between all the different studios. We’ve consolidated everything in the company on to one tech stack. Unfortunately we had to say goodbye to a number of employees because of that.

Recently one of our games didn’t perform the way we’d expected, our Star Wars Uprising game. Unfortunately we adjusted the team size there and said goodbye to some people, which is always hard. But meanwhile we’ve been aggressively staffing up in our Vancouver studio that has our new Transformers game, the Los Angeles studio that has our Avatar game, and another unannounced game that’s being developed in L.A.

We’re growing. We’ve added more people than we laid off recently in those locations. But we did make some adjustments in San Francisco.

GamesBeat: You put 18 months into adapting Marvel Contest of Champions for China. You had a partner for it, and then had to switch to publishing it on your own on iOS. It made it to number one, but then dropped in the charts. What are some of the lessons there?

Wakeford: You started this off by saying mobile gaming is complicated. Emphasize that China is even more complicated than anything else. We put a lot of emphasis into China. China now represents the largest geography on iOS. It surpassed the U.S. and Japan. It’s the largest mobile gaming market in the world. It’s a market we all need to be thinking about. We’ve been spending a lot of time there. We’re fortunate to have a Beijing office that’s developed some of our most successful western games.

We set out with an audacious goal. Can we self-publish a game in China on iOS? Can we drive installs? Can we drive it to the top of the charts? Can we get consumers into the game? That meant, from a technical perspective, getting all the hosting done. It meant, from a regulatory perspective, getting all the licensing done. But most important, from a marketing perspective, getting all the performance marketing, the attribution, the ad networks — both Chinese and western, who are moving into China — getting that all aligned and launching.

We had success. I’m excited, because this is a success that can be replicated by anyone in this audience. It’s a success any western company can go after. It’s not easy. It’s hard. But what we proved to ourselves is that you can launch a game in China and drive it to become the number one downloaded game, with more than 2.5 million installs in a short period of time.

The other part of the equation is the game itself. Unfortunately, gameplay in China is radically different than in the west. We’ve learned a lot of lessons. I don’t think we had the balance of the game the way that we thought. The retention didn’t stack up the way we wanted. Performance of the game wasn’t exactly where we wanted it to be. But now we know, and we have the infrastructure to publish games into China on iOS. That’s a huge milestone.

Kent Wakeford says China is very complicated.

Above: Kent Wakeford says China is very complicated.

Image Credit: Michael O'Donnell/VentureBeat

GamesBeat: Because of your track record with licensed IP, I imagine a lot of companies are knocking on your door to give you more. Eventually it seems as though you want to do your own IP. Will you have a chance to do that, given that somebody may throw another license like Avatar at you?

Wakeford: At Kabam we’ve developed a special infrastructure to handle licensed IP. We’ve had a lot of success. Marvel is a tremendous example. The teams work so closely together that Kabam has actually created Marvel characters — Guillotine, Venompool, Civil Warrior — that have been introduced into the Marvel universe by Marvel down here in Burbank. It’s a testament to how great our team in Vancouver is. We’re proud of what we can do with licensed IP. But that’s not the only think we do.

We’ve had our own IP in the past. We have a game in beta right now with an exciting original IP. We’re not only about licensed IP. But we’ve become brand stewards for some of the biggest licenses in the world. We’re proud of that.

GamesBeat: Two of the three largest M&A deals in games have come from Chinese companies. Will we see more of that coming?

Wakeford: Yes. I just got back from China Joy. There’s so much excitement in the industry. There are so many different companies, a consortium of companies, that looked at Supercell, that looked at Playtika. A lot of companies weren’t successful in those acquisitions. They’re all looking. You’ll see a lot more M&A activity coming from Chinese or other Asian companies acquiring western companies.

GamesBeat: What do you think of the state of mobile gaming, and how does that affect your strategy? Why is mobile still your beacon if there are other things out there, like AR and VR?

Wakeford: Mobile gaming continues to grow. You’re seeing games that are now generating multiple billions of dollars in revenue. Pokemon Go, I don’t know what the latest forecasts are, but that’s a multi-billion-dollar franchise. Everyone here has one of these in their pocket. Everyone here has the opportunity to play, whether it’s while they’re listening to me talk right now or when they go outside. Mobile is here. It’s everywhere. It’s ubiquitous. In terms of platforms that have deep penetration, mobile is the biggest opportunity that we as a company see today. We continue to invest everything we do in terms of free-to-play and being a mobile-first company.

VR is exciting. It’s dynamic. It’s immersive. I think it has the ability to radically change how we experience things in life. But from a device penetration standpoint, we’re not there yet. We’re still early days, even though it’s growing rapidly. From a free-to-play infrastructure perspective, it’s not there. I believe it will get there, and quickly, but for us to make a commitment of tens of millions of dollars to start developing for it, we don’t see the penetration yet.

That being said, it will happen.

Kent Wakeford and Dean Takahashi at GamesBeat 2016.

Above: Kent Wakeford and Dean Takahashi at GamesBeat 2016.

Image Credit: Michael O'Donnell/VentureBeat

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