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What does it mean for Activision-Blizzard and Take-Two to be mobile first?

The two titans of console and PC gaming have seen their revenue share take a massive turn, becoming mobile first. So, what does this mean for them and for the industry?
What does it mean for Activision-Blizzard and Take-Two to be mobile first?

There are, maybe, no two companies lmore visible and well-known within the console and PC world than Take-Two and Activision-Blizzard. Each has a myriad of IP's and games that have defined the gaming landscape for years. From Grand Theft Auto on one side to World of Warcraft on the other.

But this past financial period it wasn't these blockbuster games that led the way… but mobile gaming instead. The numbers don't lie, and they show that Take-Two and Activision-Blizzard are, at least for now, mobile-first publishers.

Yet, what seems on the face of it to be a relatively seismic shift, has gone largely unreported on most media channels. Is this just the latest indication of the lack of consideration shown to the potential of the mobile industry? Which by many accounts forms the largest portion of the gaming industry, accounting for more than half of total revenue. Maybe, but for those digging in deeper the questions on their mind will be, what does this mean when these giants change tack and what ripples might it send through the mobile games industry at large?

Mobile first, and foremost

For context, as we’ve previously reported both Activision-Blizzard and Take-Two Interactive have reported that the largest share of their overall revenue is now coming from their mobile games portfolios. Activision-Blizzard reported in their Q3 figures that their mobile share stood at 52% of their overall revenue, with Take-Two reporting similar figures. This represents a major change from previous years, where console and PC titles had remained the dominant force within the companies, but in truth it is just the latest example of a trend that has continued for several years; the increasing dominance of mobile gaming.

Although this doesn’t mean either party are likely to abandon their ‘traditional’ gaming platforms, given the massive investment and strength of their IP's, and that much of the activity is still coming via dedicated mobile units King and Zynga respectively. So whilst their console and PC divisions are still bringing in money, we’re not likely going to see Activision-Blizzard or Take-Two suddenly dump their Xbox, Playstation and PC releases in favour of iPhone and Android any time soon.

So what might Take-Two and Activision-Blizzard do?

The fact is, many of the moves we would expect these two to make have already been done.

Ports of older games (the GTA trilogy on mobile), adaptations of their popular franchises (Call of Duty and Warzone Mobile) as well as the acquisition and promotion of new divisions within their company. Take-Two recently acquired mobile giant Zynga whilst King, creators of Candy Crush, forms the unnamed third part of the Activision-Blizzard conglomerate.

All are the sort of major moves we would usually expect to see after such a shift, however they've already been done, and these companies have shown their intent to push into the mobile market for years now. If anything these two companies are likely to push on in the same direction with only minor shifts in course. But what we can expect even more is for other companies to sit up, take notice and follow suit, mimicking what Activision-Blizzard and Take-Two have done to become leaders in this market.

Is the console market shrinking or is mobile growing?

A major barrier to entry for gaming is one simple word, hardware. The earliest days of PC gaming for example were dependent on having the right sound-card or RAM to run a game, with requirements changing virtually yearly if not monthly. Console gaming, by far, made top-flight gaming more accessible. But today both are equally expensive, and during the period of the great ‘chip shortage’, graphics cards and consoles were both difficult to get a hold of.

Meanwhile, as we so often point out, a mobile phone is in everyone’s pocket. Across the world as the digitisation of countries grows, so too does the potential gaming audience. But this audience is not on console, or even on PC, but on mobile.

You need only look as far as reports that India will soon surpass China as the largest gaming market by users. Many of these players are on mobile, and as the dedication by companies such as Krafton, who have been pushing to have BattleGrounds Mobile India reinstated after it was delisted in the country, shows that the potent nature of these new mobile markets is recognised by publishers and developers.

However, as mobile grows exponentially, consoles and PCs still grow as well, albeit somewhat slower. As of now, it’s clear that the current console gen has not yet reached its peak and it’s certainly not shrinking. However, there may be a perception that the time to pull away is nigh, which may precipitate a fall in interest from publishers towards console. As we move towards a ‘one-screen ecosystem’ then, it may be that the lines are blurred between what is made for console, PC and mobile.

But wait. There’s more

Of course, it wouldn’t be fair to mention Activision-Blizzard and Take-Two without bringing into account other companies. Tencent and Netmarble for example are two companies with massive presences in the Asian market. Their approach has been different, utilising well-known properties in their gacha titles and producing original franchises that expand from, rather than into, mobile.

However, companies in this market face their own issues, with Tencent in particular having a difficult time in home country China due to the opaque regulations towards game content and licensing freezes preventing it from capitalising on a huge domestic audience. These freezes have begun to thaw however, and with Tencent investing abroad, it may be that they come into conflict with Activision-Blizzard and Take-Two directly.

Activision-Blizzard in particular, after a long period where many perceived them as attempting to break into the Chinese market, refused to renew a publishing deal with Chinese company NetEase only a few weeks ago. Putting the services of their popular games such as World of Warcraft and Overwatch in jeopardy within the country.

Given the competition in Asia, and the still growing mobile gaming market in Europe and America, it’s possible that these two companies may make the prudent choice to keep their attempted entries limited. A strategic approach that other companies emulating Activision-Blizzard and Take-Two may follow.

Looking forward: What does this mean for mobile and these companies?

Although some analysts have suggested that one or both companies are ‘lowering expectations’ on their mobile revenues, we’re not sure if this holds much water. Although Take-Two’s investor presentation does indeed mention caution, this is in part a reaction to the wider uncertain economic climate and a slight post-covid ‘correction’ in games as a whole.

As Take-Two CEO Strauss Zelnick said in a prepared statement on the company’s Q2 financials and their views going forward “Our reduced forecast reflects shifts in our pipeline, fluctuations in FX rates, and a more cautious view of the current macroeconomic backdrop, particularly in mobile.“

If anything, it could be considered to be an indication that Take-Two are reconsidering just how much they should be putting into mobile, and may see even more put into it. However, it could also indicate that any further big commitments to mobile may come in a matter of months rather than years as the company keeps a close eye on changing macroeconomic circumstances.

Mobile developers and studios may either see further competition in the space, or possibly acquisition offers from other major publishers. Although virtually no major companies have ignored the mobile space completely, those who were extremely optimistic are now likely to feel vindicated. Take-Two and Activision-Blizzard of course, now seeing their investments paying off, are for better or worse likely to be viewed as the template for mobile investment going forward

The state of play on mobile

Right now it would be surprising if both companies weren’t examining their mobile strategies, figuring out where their success came from and how to further capitalise on them. It’s perhaps not surprising that this success can be attributed partially to major acquisitions and highly publicised releases. Take-Two Interactive acquired mobile giant Zynga earlier in the year, and Activision-Blizzard’s Diablo Immortal, which was touted heavily when it was announced at E3, has raked in millions of dollars for the company.

However, this success, while welcome, could also spell trouble for Activision-Blizzard specifically, aiding claims that their proposed acquisition by Microsoft would create a monopoly in too many aspects of gaming. Console and PC is one thing, but ‘owning’ all three elements of the trifecta would surely see calls for regulators to scrutinise the deal even more intensely than they have been already. King being a major part of the Activision-Blizzard family after their merger may have already rung alarm bells for regulators.

Xbox boss Phil Spencer has made light of the matter. Commenting that Microsoft was ‘irrelevant’ in the mobile gaming scene and that the Activision-Blizzard deal is primarily about the mobile gaming sector of their business. If we see any conciliatory moves by Microsoft in regards to the deal it may be interesting to note whether that’s mainly console and PC focused, and if it avoids infringing on their potential mobile goldmine.

What’s absolutely clear is that mobile gaming is now a force that’s impossible to ignore in the gaming industry. Although most will be aware of its growing potential, mobile is still been seen largely as an attempt to diversify revenue streams and as an add-on to more lucrative console and PC investments.

Now, however, it looks more and more as if mobile itself will become the driving force behind everything from the smallest to largest companies in gaming.