Game studios need to level-up innovative abilities

Fresh development approaches key to capturing share of booming market

Rovio Entertainment, the Finnish tech titan behind the mobile gaming sensation Angry Birds, is looking to spread its wings in early childhood education. The company is now busily promoting Angry Birds Playground, an interactive preschool and kindergarten curriculum that it hopes to export to schools around the world. Here in China, the company, in conjunction with partner 123 Education Group, launched its first such playground in Shanghai Wednesday.

As many know, the hugely successful Angry Birds franchise has hatched a merchandizing empire, with the game's furious fowl appearing on everything from toys and bed sheets to clothing and movies.

At first glance, this foray into education may seem like an odd step for a video game developer. Yet, as Rovio has explained, its new program is modeled after Finland's national education curriculum, which consistently ranks as one of the best in the world. While the company can surely count on hordes of children flocking to anything bearing the Angry Birds brand name, this reference of the Finland's educational bona fides stands, crucially, to win favor among parents as well. This is perhaps especially true in China, where demand for extracurricular educational services is booming, and where many parents are eager to expose their children to Western pedagogical methods as early as possible. In fact, the value of China's preschool education market was placed at 30 billion yuan ($4.89 billion) in 2013, according to local media reports.

Game developers in China should look carefully at Rovio's push to expand its business model. By looking past obvious choices, companies stand to win new players and open new sources of revenue. The need for mold-breaking decisions is perhaps especially critical among smaller studios looking to quickly build scale in a cutthroat market.

Many of the world's most successful mobile game titles offer free-to-play demos which players can test before upgrading to a paid, full-feature version. Others make money through in-game purchases or advertising sales. Whichever model they choose, getting a foot in the door early with gamers is crucial. According to a report released in April by Swrve, an app marketing and testing platform, 19 percent of players open a new game only once, and 66 percent stop playing within the first 24 hours.

Of course, even established names cannot count on success in today's highly competitive video gaming market. Indeed, Atari Inc, the US-based company which helped create the home gaming revolution back in the 1970s, filed for bankruptcy protection for itself and several affiliates in January 2013 - it emerged from bankruptcy in June. Prior to this, THQ Inc, another developer, announced its own filing for bankruptcy protection in December 2012.

Moving back to China's domestic gaming market, the rewards open for successful developers have never been greater. The industry pulled in 49.62 billion yuan in revenue during the first half, up 46.4 percent year-on-year, according to a report from the China Audio-Video and Digital Publishing Association. Meanwhile, the number of game players in the country reached 400 million by the end of the same period, up 9.5 percent, the association also mentioned. China's long-standing ban on console gaming devices, combined with the rapid proliferation of smartphones, means it's hardly a surprise that industry figures show that mobile gamers accounted for 330 million of this cohort, up a staggering 89.5 percent year-on-year.

The market's size and rate of expansion haven't gone unnoticed by commercial players outside of the country's game industry. Indeed, during the first half, 11 listed companies acquired or announced plans to purchase 16 Chinese mobile game companies for a combined 13.558 billion yuan, according to local reports.

Game studios cannot continue to rely on existing models. Drawing inspiration from Rovio's path-breaking example, they must actively seek new growth strategies. For optimal results, these new business models must be based on each company's unique strengths and brand characteristics.