An Executive Voices Blog by Rachit Moti, Co-Founder of Layer Licensing

The global gaming market is stronger than it’s ever been, with 3.38 billion gamers generating an estimated $184 billion in revenue last year. Recent licensed releases such as Hogwarts Legacy, The Legend of Zelda: Tears of the Kingdom, and Marvel’s Spider-Man 2 have shifted millions of copies, while adaptations of games like Super Mario Bros. and The Last of Us ended up being the most-streamed film and television series in the U.S., showcasing the worldwide appeal and profitability of video game properties.

However, it’s also been a rough year for those working in the industry, with approximately 6,500 people losing their jobs due to redundancies in 2023. And while there’s no escaping the fact that studio closures and mass redundancies are bad news for the industry, there are several factors to consider. Rising interest rates are partly to blame, and the market is still stabilizing after phenomenal growth during the pandemic. In fact, many of the games announced during that period are now finally hitting shelves.

It’s also worth mentioning that game development often involves Hollywood-sized budgets and lengthy timelines. And, because 2023 was one of the busiest years for new game releases in the last decade, many releases have struggled to capture the attention of time-strapped gamers, making it difficult for some investors to recoup.

That said, there are still plenty of opportunities out there in the gaming space if you know where to look. For licensors, their biggest focus should be on mobile.

Opportunities in 2024

It’s easy to assume that the biggest in-game licensing opportunities are with the AAA video games that dominate media headlines, but it’s important to remember that mobile games generate nearly half of global gaming revenues, and there’s still a largely untapped market here as far as licensors are concerned.

According to Newzoo, players are almost three times more likely to download a game if it’s based on an IP that they like. For example, SensorTower data shows the mobile game for the K-Pop group Blackpink has reached nearly four million downloads since its release in May 2023. It’s made over $1 million in revenue and, months after its launch, has 100,000 average daily users playing the game.

While developing new mobile games based on a non-gaming IP can be profitable, there are arguably more opportunities for licensors if they integrate their properties into popular mobile games already on the market, usually through limited-time events in a game’s LiveOps campaign.

Most mobile games operate on a live-service model, where games are free to download and monetized through in-game purchases. IP plays an important role in this format because players are more likely to engage with in-game purchases when the games feature IPs they’re already familiar with.

When the manga/anime franchise Dragon Ball collaborated with PUBG: Mobile for an in-game event in July 2023, it resulted in a 124.7% increase in revenue for the game, according to SensorTower data. Similarly, Sanrio’s Hello Kitty in-game event in the Chinese mobile game Honor of Kings let to a 35.9% increase in revenue.

These figures are important because licensors should take a 30–50% royalty share on any revenues generated through in-game purchases of their IP-based cosmetic items (if they have royalty shares in place).

Trends and Innovations 

As mobile games continue to innovate with new monetization techniques, we’ve seen this impact the way IPs are integrated and monetized through in-game experiences. 2023 saw significant growth in IP-based battle passes (subscription passes), where players spend money to unlock additional items based on the integrated property.

Another major highlight from 2023 was Fortnite’s launch of the Unreal Editor for its tools, essentially positioning the game as a major competitor to the Roblox platform by finally giving developers the tools they need to create their own experiences. This means licensors no longer have to rely on direct collaborations with Epic to get their properties into the game; they can now work with independent developers to create IP-based experiences that are accessed through the Fortnite ecosystem. With this mode still in its infancy, and developers still figuring out how to make the most of these tools, we expect to see significant growth in IP-based experiences within Fortnite throughout 2024.

The Key to Collaboration

Nearly every category can find strong partnerships in video games. For example, automotive properties should seek opportunities in racing games and fashion IPs should look to popular video games with a heavy focus on player customization through cosmetic items. But almost any partnership or collaboration can be successful as long as you stay true to your brand, stay true to the voice of the game, and understand its audience.

If you’re looking to develop an original experience around your property, make sure the studio you’re working with has a solid track record of IP-based game projects. Or, at the very least, is passionate about your brand, as this will be reflected in the final product.

Finally, most deals are agreed on the basis of a minimum guarantee (MG), sometimes involving an advance upfront payment and a royalty share thereafter. Budgets can vary significantly from studio to studio, but it’s important to remember that they need you as much as you need them. The live-service nature of mobile games demands constant new content to keep players engaged, and non-gaming IP is an important part of that!

Layer Licensing
Founded in 2021, Layer is an online intellectual property (IP) marketplace that enables game developers to connect and negotiate with the rights holders of a growing list of well-known brands. In 2021, Layer secured almost $4 million in seed funding after participating in the Starmate Accelerator Programme. The round was led by Carthona Capital and investors including Aura Ventures, TEN13, Flying Fox, Black Sheep Capital, Luxem and Tribe Ventures.