NEW YORK – Americans are now spending almost as much on smartphone and tablet entertainment as at they are at the box office.
According to a recent article by American research firm SNL Kagan, mobile entertainment was estimated to have generated $9.14 billion in revenue last year, fast approaching the roughly $10 billion per year the U.S. box office generates from ticket sales. The combined revenue from mobile games, video, music and location-based services (LBS) has grown at a 50% CAGR since 2011, up from $2.71 billion in 2011.
Touch-screen smartphones are a great fit for mobile games. The larger screens, touch capabilities, accelerometers and easy-to-navigate app stores made the pre-iPhone mobile game business of WAP decks and pixelated grey screens feel very distant, the article continues. The games category has always dominated mobile entertainment as the leading revenue generator, with growth from $1.47 billion in 2011 to over $5 billion in 2014. Last year, 57% of all mobile entertainment revenue was from game sales.
Mobile video is the second-largest revenue category. Most mobile video revenue is derived not from the carrier-based mobile video subscription services, which have flatlined, but from strong advertising revenue growth and mobile views at sites like YouTube. The article estimates that in 2014, mobile video generated $1.8 billion in revenue in the U.S., primarily from advertising.
Mobile music, the third-largest mobile entertainment sector, is also mid-transition: ringtones are fading while a crescendo is building for subscription streaming and radio services. The U.S. ringtone/ringback business topped nearly $1 billion in its 2008 heyday before shrinking to what the article estimates is now less than a $50 million per year business.
Replacing unfashionable ringtones are subscription-on-demand streaming services from players such as Spotify and online radio services such as Pandora Radio, with both companies reporting that the majority of their usage is on mobile devices. In 2014, the article estimates that mobile music — including ringtones, radio and streaming services — generated about $1.76 billion in the U.S.
Location-aware services remain the smallest piece of the mobile entertainment pie, the article continues. The startups built upon location-aware services have gone through many re-inventions over the years, including game-based location apps, augmented reality, location-aware dating apps and "check-in" mobile social network services like Foursquare (which itself has transitioned into two distinct services, one of which is chasing after Yelp’s online reviews turf). The article predicts that advertisers will increasingly require location data for mobile spends and that LBS as a stand-alone service from an app may play second fiddle to the revenue generated from advertisers simply expecting LBS capabilities from all mobile apps and web searches.
