Make a hole! Breaking into the free-to-play shooter market

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Online first person shooter games have long been a staple in the free-to-play segment. Its game mechanics are a nice fit with the sale of unique items and boosters to give players an edge in combat. Especially popular titles like Crossfire (SmileGate) and Counter-Strike Online (Nexon) managed to exceed industry averages when it comes to monthly active users and monetization.

The biggest threat today for free-to-play shooters is not more shooter titles flooding the market. Rather it’s the overwhelming success of MOBA titles like League of Legends (Riot Games) and DoTA2 (Valve). Offering fast-paced action and an emphasis on online player-vs-player is arguably the biggest rival for gamers’ attention today.

Amidst this increased competition, Crytek recently launched Warface. With around 8 million players in Russia alone, the company has set its sights on the Western markets. The question, of course, is whether the market can sustain another shooter.


Typical of a mature free-to-play market is a gradual but ongoing decline of the total user base. After reaching its initial peak of total players, the overall market begins to decline in overall users. In return, however, the users that stay become more valuable. If we compare the total audience for the top shooter games currently in the market, we see a steady but persistent decline of roughly 16% since last year. At the same time the average spending per user (total revenues divided by total player base) has gone up 14%. Based on our end-of-year forecasts, we expect this discrepancy to widen further, with the audience declining another 6% and the spending to go up 26%.


So Warface faces a declining market in which the incumbents will fight fiercely to retain their existing user base. At the same time, Warface has been mostly popular in markets where titles like Crossfire and Counter-Strike: Online don’t dominate.


Based on what we know of the market, we ran three different scenarios to project Warface’s market potential. According to our estimates, in the most depressing case, Warface still stands to make about $4 million every month, although this is unlikely to offset the increasing user acquisition costs and ongoing development.


The more optimistic scenario gives an estimated $14 million in monthly earnings, or roughly 3.6x more. This gives Warface an earnings potential of about $150 million annually (2015E). Ultimately, we expect that the existing brand and its high-production values will generate Crytek just under $10 million a month, in our base scenario.

As the free-to-play market continues to change and mature, make sure to keep a close eye on innovative efforts. It might just tell you something about what’s to come.

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