According to a new report from SNL Kagan, Americans are now spending almost as much on smartphone and tablet entertainment as at the box office. In 2014, mobile entertainment generated $9.14 billion in revenue, fast approaching the roughly $10 billion per year the U.S. box office generates from ticket sales. The combined revenue from mobile games, video, music and location-based services (LBS) has grown at a 50% CAGR since 2011, up from $2.71 billion in 2011.
U.S. Mobile Entertainment Revenue ($M)
LBS (location based services)
Source: SNL Kagan, January 2015
The new era of touch-screen smartphones is a great fit for mobile games, notes the report. 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% of all mobile entertainment revenue was from game sales.
Today's new bevy of single-title publishers are making the economics of mobile games attractive. These new entrants are logging EBITDA margins north of 30% on a handful of titles; a commendable feat, says the report, 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," due for release in early 2015, says the report.)
According to the report, 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, mobile video generated $1.8 billion in revenue in the U.S., primarily from advertising. (More details on mobile video economics are available in the SNA Kagan 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 U.S. ringtone/ringback business topped nearly $1 billion in its 2008 heyday before shrinking to what is now estimated to be less than a $50 million per year business.
Mobile Music Tempo Revenue Change (US $M)
Streaming & Radio
Source: SNL Kagan, January 2015
Replacing unfashionable ringtones are subscription-on-demand streaming services from players such as Spotify, and online radio services such as Pandora Radio, with both companies reporting that the majority of their usage is on mobile devices. In 2014, mobile music, including ringtones, radio and streaming services, is estimated to have generated about $1.76 billion in the U.S. More details on the global mobile music space are available in the SNL Kagan Economics of Mobile Music report.
Location-aware services remain the smallest piece of the mobile entertainment pie, concludes the report. The startups built upon location-aware services have gone through many re-inventions over the years, including game-based location apps, augmented reality, location-aware dating apps and "check-in" mobile social network services like Foursquare. Advertisers will increasingly require location data for mobile spends, opines the report, and LBS as a stand-alone service from an app may play second fiddle to the revenue generated from advertisers expecting LBS capabilities from all mobile apps and web searches. (More details on the location-based services marketplace are available in the SNL Kagan Economics of Location-Based Services report.)
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