Americans are now spending almost as much on smartphone and tablet entertainment as at the box office. In 2014, SNL Kagan estimates mobile entertainment generated $9.14 billion in revenue, fast approaching the roughly $10 billion per year the box office generates from ticket sales. The combined revenue from mobile games, video, music and location-based services (LBS) has grown at a 50 per cent CAGR since 2011, up from $2.71 billion in 2011.
The new era of touch-screen smartphones is a great fit for mobile games. The larger screens, touch capabilities, accelerometers and easy-to-navigate app stores made the pre-iPhone mobile game business of WAP decks and pixelated grey screens feel very distant. The games category has always dominated mobile entertainment as the leading revenue generator, with growth from $1.47 billion in 2011 to over $5 billion in 2014. Last year, 57 per cent of all mobile entertainment revenue was from game sales.
And today’s new bevy of single-title publishers like Mojang, King and Supercell are finally making the economics of mobile games attractive. Compared to the old overhead-intensive strategy of “throw everything at the wall to see what sticks,” these new entrants are logging EBITDA margins north of 30 per cent on a handful of titles — a commendable feat, given the notoriously lackluster economics of mobile games. More details on mobile game economics will be available in SNL Kagan’s upcoming “Economics of Mobile Games” report, due for release in early 2015.
Mobile video is the second-largest revenue category. Most mobile video revenue is derived not from the carrier-based mobile video subscription services, which have flatlined, but from strong advertising revenue growth and mobile views at sites like Google Inc.’s YouTube. In 2014, we estimate mobile video generated $1.8 billion in revenue in the U.S., primarily from advertising. More details on mobile video economics are available in our Economics of Mobile Programming report.
Mobile music, the third-largest mobile entertainment sector, is also mid-transition: ringtones are fading while a crescendo is building for subscription streaming and radio services. The US ringtone/ringback business topped nearly $1 billion in its 2008 heyday before shrinking to what we estimate is now less than a $50 million per year business.