The Power of Franchises and IP Licensing in the Video Gaming Industry Today

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The Power of Franchises and IP Licensing in the Video Gaming Industry Today. How utilizing established franchises and powerful IPs can make or break your game's success in an ever more competitive market.

Introduction

In a recent report, the data analytics firm Newzoo discovered that only one iOS (Apple App Store) game out of the top 100 download charts was not based on an existing franchise or intellectual property. Additionally, data indicate that "whales", aka high-spending players, are roughly three times more likely to download a game based on an IP they know and enjoy. Therefore, it should come as no surprise that game developers and publishers are increasingly using established franchises and obtaining licenses for well-known intellectual properties (IPs) in order to create new games. Having a strong franchise or licensed IP is increasingly important for success in the competitive gaming market of today.

In today's newsletter, we'll examine the factors that have led to franchises and IP licensing's increasing importance and use in the gaming industry. We'll also look at how they affect a game's success and look at some successful industry partnerships and adaptations.

The Need for Strong IPs in the Changing Gaming Landscape

The games market is forecasted to increase from $179.1 billion in 2020 to $211.2 billion by 2025, rising at a +3.4% CAGR, even if we currently observed a dip of 4.2% year over year in 2022 compared to 2021. At the same time, the market is consolidating. Moats widen. Indie developers are hardly having a chance. Virality is slowly dying and user acquisition gets more expensive.

1. Organic app store discovery is (nearly) dead: When was the last time someone on LinkedIn bragged about the sizable platform feature that was responsible for millions of installs? The beginning of the end came with the elimination of top X lists in favor of customized experiences on the Apple App Store and Google Play. Since there are millions of apps available, it is getting harder and harder for developers to stand out and grow their audience organically. You cannot rely on organic growths unless you are Angry Birds, Subway Surfer, My Talking Tom, or another popular IP!?
2. Complexity of marketing has increased: Performance marketing is responsible for the vast majority of advertising budgets for game developers. However, it has become more difficult and less efficient as a result of data privacy legislation like the General Data Protection Regulation (GDPR). Additionally, Apple's crackdown on in-app tracking did not help and significantly disrupted user acquisition. As a result, game developers need to come up with new strategies for interacting with their target market and increasing user acquisition. In the short term, this definitely led to a significant decrease in advertising spending.
3. Increasing cost of user acquisition: let's face it, the market is stacked against us. If you have $15 to spend, advertisers will try to sell you the user for $14.99, and the competition will offer $15.01. Higher user acquisition costs as a result of the rising competition in the gaming sector make it more difficult for developers to generate a profit from their marketing initiatives.?

Due to these difficulties, game developers and publishers are concentrating more on already-established franchises or acquiring new intellectual properties to improve their chances of success. Developers can tap into an existing fan base, lower marketing expenses, and increase the discoverability of their games by utilizing well-known franchises and intellectual properties (IPs). That being said, those licenses are not getting any cheaper.

The Power of Franchises and IP in the Gaming Industry

The Marvel Universe has become a goldmine for game developers. Marvel's Spider-Man, Marvel Contest of Champions, and Marvel Strike Force, for instance, are just a few of the popular games. Apropos Strike Force. Scopely, recently sold for close to $5 Billion to Savvy Games Group, wholly owned by Saudi Arabia's Public Investment Fund (PIF). The team mastered the inclusion of IP. Besides Marvel Strike Force, the company utilizes IPs like Star Trek, WWE, The Walking Dead, Looney Tunes, and most recently Hasbro’s Monopoly.

Along with Scopely, the collaboration between Electronic Arts (EA) and Disney for the creation of Star Wars video games is another outstanding illustration of a fruitful IP licensing arrangement. Star Wars fans may enjoy immersive gaming experiences thanks to games like Star Wars: Battlefront, Star Wars Jedi: Fallen Order, and Star Wars: Squadrons, which take advantage of the Star Wars universe's enormous popularity.

IP Licensing's Effect on the Gaming Industry

IP licensing has emerged as an important tactic for game developers wanting to provide gamers with distinctive and captivating experiences. Obtaining the license to use well-known characters, tales, or universes enables developers to make games that appeal to both current and potential players. This tactic gives the game a competitive edge in the saturated gaming market while simultaneously increasing its visibility and popularity.

1. Built-in Fan following: By utilizing a well-known franchise or IP, developers can reach an already-existing fan following, boosting the likelihood of the game's success and cutting down on marketing expenses by around 30%
2. Enhanced Credibility: A credible franchise or intellectual property (IP) can give a game credibility, which will increase its player appeal and the likelihood of success. Only a quarter of people in the UK and Germany reported trying a game they had never heard of, and this figure continues to decline in the US (23%) and South Korea (11%).
3. Creative Possibilities: Acquiring a license for a piece of intellectual property can provide game developers the chance to explore their creativity in new ways, allowing them to build on preexisting plots, characters, or universes to offer players fresh gameplay.
4. Increased Monetization: Players are more inclined to spend time and money on a game featuring their favorite characters or tales, therefore a famous brand or IP can increase the monetization possibilities of a game. In a 2021 report, Facebook finds that title and IP recognition not only leads to discovery but also drives purchases. On consoles like Playstation and Nintendo Switch, sequel and title familiarity are already among the most important factors when deciding to buy a new game. Console players are reporting that the most recent game they purchased was the latest installment of a game franchise they had owned.

Conclusion

The significance of utilizing franchises and licensing well-known IPs in the constantly changing gaming industry cannot be emphasized. Having a distinctive franchise or intellectual property (IP) behind your game can be the secret to success as competition increases and user acquisition costs increase.

The potential of already-existing franchises and IP licensing prospects must be carefully evaluated by game developers and publishers, taking into account elements like brand recognition, fan base, and creative potential. Developers may improve their chances of success, produce distinctive gaming experiences for gamers, and eventually flourish in the competitive gaming market by carefully utilizing these resources.

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About Patrik Wilkens

Patrik Wilkens is an influencer and thought leader in the fields of gaming, social media, creator economy, and general management. Over the last 15 years, Patrik delivered close to .5 Billion app installs and managed B2B deals for channels with over 1.5 Billion subscribers on over 25 social media, SVOD, AVOD, and OTT platforms.?

Patrik is a regular podcast and conference speaker, including Social Day, Youth Marketing Summit, Game Developer Conference, PocketGamer Connect, etc. He published 20 + articles on process optimization, artificial intelligence, digital media trends, and the social media industry. Patrik is also Entrepreneur.com Leadership Network Contributor.?

His consulting company Mournival Consulting focuses on management consulting, product, monetization strategy, digitalization, and gamification.