Hey Big Spender!

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FAT PROPHETS: In the mobile gaming world, a so-called “Big Spender” is just as important, if not more important than the “Whale” is to the casino industry. According to research from video game industry research firm Newzoo, this subset of mobile gamers recently numbered around 49.3 million, although it is growing all the time.

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Globally, this is just a small fraction (2.8%) of total mobile gamers, but the percentage varies significantly from country to country. According to Newzoo estimates America currently contains the highest percentage of these with 4.8%, and this category includes those who spend more than US$25 per month on mobile games. We note though that the amount varies from country to country (to account for purchasing power).

Newzoo’s research provides some new insight on this group, some of which fits in with most preconceptions (i.e. globally 67% are male) and some that doesn’t, such as the fact that these Big Spenders are generally quite keen (real world) sportspeople or viewers.

That they spend big on mobile does not stop them from splashing out on other gaming platforms either. This is generally positive for the console and PC gaming industry and goes against some common beliefs, with some believing that the rise of mobile is a death knell for console and PC gaming. We believe they can co-exist well and the most savvy game companies will broaden their offering to try and keep the consumer within their ecosystem for as long as possible and increase monetization.

The recent release of the massively successful Fallout 4, available on consoles and the PC is a prime example, with the buzz so big for this game that the Fallout Shelter game has been one of the most popular apps on Alphabet’s (NASDAQ: GOOG, initial buy $219.65) Play Store and Apples App Store. This has been a massive financial windfall for the company behind the franchise – the privately held Bethseda.

In terms of cross-screen expenditure, Newzoo estimates that 71% of Big Spenders also spend up large on consoles and 69% also splash on the PC platform.

This is a far higher percentage than the average mobile gamer, with only an estimated 11% avid console gamers and spenders and even less, around 8% on the PC platform.

We view Tencent Holdings (HK: 0700, entry price HK$145.20) and Activision Blizzard (NASDAQ: ATVI, initial buy $20.61) as well placed and these companies are actively pursuing the cross-screen opportunity in a fashion that should provide substantial rewards.

Sony (NYSE: SNE, initial buy $13.64), another one of our holdings, is soundly beating Microsoft in the battle of the current generation consoles, but has yet to really outline a compelling approach to the mobile opportunity in our view. This is certainly an opportunity for the company and given the company has decided not to continue making in-house games for their handheld, the Vita, some resources could be diverted in this direction going forward.

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