Internet Services UBS Evidence Lab inside: new mobile games drive growth even as gamers return to work

In Q1, China gaming revenue growth accelerated amid quarantines. We expect a mild slowdown in Q2, but H220 mobile games revenue growth could exceed expectations, driven by summer promotions & a strong pipeline (domestic and overseas).

28 Jul 2020

Average time spent per day on mobile games (hours)

This column chart compares average time spent per day on mobile games from January 2019 to January 2020 across the US, China, Japan, and Korea.

No major slowdown post Q1; new games could drive Q3 to a new high

In Q1 gaming revenue growth accelerated amid quarantines. We expect a mild slowdown in Q2, but believe H220 mobile games revenue growth could exceed
expectations, driven by summer promotions and a strong games pipeline (domestic and overseas. We forecast 16% 2019-22E CAGR for China's domestic mobile games grossing, driven by continued improvements in gamer engagement and spending, and adoption of subscription models, based on a UBS Evidence Lab survey. We also believe overseas markets are now an important growth driver for Chinese games companies with 33% 2019-22E CAGR in mobile games revenue. We see potential upside from the US given the rising popularity of mobile games, according to the survey, though monetisation could take time.

Domestic market: further growth in gamer spending and strong games pipeline

The survey (conducted before COVID-19) reflected improving engagement of Chinese mobile gamers and better acceptance of subscription models and willingness to try upcoming new games than we expected. Average time spent on mobile games in China grew to 2.4 hours/day from 1.6 hours a year ago, and average spending on mobile games grew 11% to Rmb210; 69% of respondents have tried subscription services.

Overseas: ramp-up of mobile games in the US suggests more opportunities

We forecast overseas markets to contribute 30% of total mobile games revenue for Chinese gaming companies in 2022E,vs 22% in 2019. The survey suggests improving acceptance of mobile games in the US, the second largest games market globally. In the US, average time spent per day on mobile games grew from 2.1 hours a year ago to 2.6 hours; and 77% spent more than 30 mins/day on mobile games vs 71% a year ago. But US mobile gamers lag China/Korea with avg spending of US$12 per month.

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