The increase in the number of users is what’s driving the overall increase in revenue for mobile game developers. The average American consumer is paying just $0.11 an hour to play a mobile game in 2014 while the average pay-TV customer is paying $0.64 for an hour’s entertainment, or 432% more than the mobile gamer, according to Flurry, a media research firm owned by Yahoo! Inc. (NASDAQ: YHOO).
Rapid growth in the number of smartphones and tablets may be the principal driver, but the cost of new development has also risen as consumers demand better quality games for their mobile devices than they did just a couple of years ago. As games get better, though, they are likely to continue nibbling away the time consumers spend with their pay-TV channels.
Does that mean that the price of mobile gaming will soon rise to meet the price of pay TV? Prices will have to rise, certainly, as costs increase. Far more likely, though, is that pay TV will have to lower its costs to meet the challenge from mobile devices. So far, the networks and cable/satellite companies have shown little inclination to break with costly bundled pay-TV packages.
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Consider the current dispute between Dish Network Corp. (NASDAQ: DISH) and CBS Corp. (NYSE: CBS) over carriage fees in certain markets. CBS has said it plans to sell its Showtime network programming as an independent streaming digital service beginning sometime next year. The network believes it is leaving money on the table by not making an offer to the millions of households that currently do not pay for cable or satellite services.
Dish, on the other hand, sees an unbundled offer of CBS programming as a threat to its very existence and most other cable/satellite players would say the same thing. Time Warner Inc. (NYSE: TWX) has made similar noises about offering its HBO programming as a streaming digital service.
While the so-called over-the-top (OTT) deal is not the entire cause of the dispute between Dish and CBS, the threats to the cable/satellite distribution channel are real and the growth of mobile gaming is just one more sign of the assault on the old model.
To conduct this analysis, Flurry used data from the FCC Media Bureau’s Annual Survey of Cable Rates, and used the “Expanded Basic Service” as its baseline for average monthly costs of the cable bill. For mobile gaming numbers, Flurry used data from Flurry Analytics, as well as data released by Newzoo about mobile gaming revenues in the United States. In order to get an apples-to-apples comparison, the researchers broke down all the costs to an hourly rate for both channels of entertainment.
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