AN OVERVIEW OF THE HOTTEST GAME GENRE

AN OVERVIEW OF THE HOTTEST GAME GENRE

THE SUCCESS OF BATTLE ROYALE GAMES BATTLE ROYALE: A MIX OF OLD AND NEW ELEMENTS FEATURED GAMES The battle royale genre blends the survival, exploration, and scavenging elements of survival games with the last-man-standing gameplay of many multiplayer, first-person shooters. Battle royale games challenge a player to search for weapons and armor and eliminate opponents while avoiding being trapped outside of a shrinking safe area. The winner is the last man standing. As such, battle royale is a new type of gameplay, built from elements of other genres. This draws an interesting parallel to the origins of modern MOBA games, which were derived from Defense of the Ancients (DotA) as a custom game mod for Blizzard s real-time, strategy game Warcraft 3. Instead of focusing on managing an entire army, DotA (and all subsequent MOBAs) focused on managing a single hero. Similarly, battle royale games focus on a few specific elements of survival and shooter games and blend them into a quick, fun-to-play, and fun-to-watch gaming experience with endless replay ability options. of viewership hours on Twitch & YouTube Gaming February 2018 of viewership hours on Twitch & YouTube Gaming February 2018 EARLY ADOPTERS Jelle Kooistra Head of Market Analysts 2 copyright Newzoo 2018

MARKET OVERVIEW AND UPCOMING TRENDS

THE RISE OF THE BATTLE ROYALE GENRE Inspired by mainstream movies such as the identically named Japanese cult classic Battle Royal (2000) and Hollywood blockbuster The Hunger Games (2012), Minecraft was one of the first games to transfer survival elements to its game. Shortly after The Hunger Games, Minecraft featured a competitive survival player mode known as Survival Games in which players start in a central location with loot scattered around the central and peripheral areas. DayZ (2013), a mod for the PC first-person shooter Arma 2, had players survive in a world full of hazards, both from the environment and other players. More mods appeared when some players wanted to focus on competitive PvP elements. The Battle Royale mod, developed by Brendan PlayerUnknown Greene in 2013, was the most notable. Wildcard Studios also developed a battle royale adaptation of Ark: Survival Evolved at the end of 2015 called ARK: Survival of the Fittest. Meanwhile, H1Z1, a game officially still in development, made plans to develop a version of its game with battle royale elements, dubbed H1Z1: King of the Kill. Daybreak Game Company also hired Brendan Greene to advise on the game s design. This version was later renamed to H1Z1, with another version renamed to Just Survive. After finishing this project, Brendan Greene, together with Bluehole Studios, began developing his own take on the genre. This was PLAYERUNKNOWN S BATTLEGROUNDS (PUBG), which entered early access in March 2017. In what can only be described as an overnight success, PUBG dethroned CS:GO and Dota 2 as the most popular game on Steam. It even managed to be the most viewed game on Twitch, knocking League of Legends down to the #2 spot for the first time in years. PUBG is one of the first games in history that has more viewers than it has players. Fueled by the success of PUBG, major studios began adding battle royale elements to their games. Epic Games launched Fortnite: Battle Royale in September 2017. The game is currently gaining popularity, partly because it is free to play. of core PC gamers played Ark: Survival of the Fittest in February 2018 of core PC gamers played H1Z1: King of the Hill in February 2018 5 copyright Newzoo 2018

PLAYERUNKNOWN S BATTLEGROUNDS AND FORTNITE PLAYERUNKNOWN S BATTLEGROUND PLATFORMS: PC, XBOX ONE LAUNCH DATE: MARCH 2017 (EARLY ACCESS) PUBLISHER: BLUEHOLE STUDIO HQ: SEOUL, SOUTH KOREA FORTNITE PLATFORMS: PC, PS4, XBOX ONE, MAC LAUNCH DATE: JULY 2017 (EARLY ACCESS) PUBLISHER: EPIC GAMES HQ: CARY, USA Bluehole s PLAYERUNKNOWN S BATTLEGROUNDS (PUBG) was an instant hit on Steam and Twitch. The tactical, open-world survival game pits 100 players against each other and ends with a sole survivor. It is still early days for PUBG, but its viewing success combined with its tactical gameplay make the game a real contender as the first big massive multiplayer online esports franchise. watched game on Twitch by viewership hours in February 2018 Fortnite was first released in July 2017. By adding battle royale mode to Fortnite, Epic Games introduced a standalone, free-to-play game Fortnite Battle Royale two months later. Seen as a free alternative to PLAYERUNKNOWN S BATTLEGROUNDS, Fortnite is gradually overtaking its predecessor on streaming platforms thanks to the game s price point and far lower system requirements. watched game on Twitch by viewership hours in February 2018 6 copyright Newzoo 2018 Source: Newzoo Game Streaming Tracker

BASED ON UNIQUE PLAYERS FOR BATTLE ROYALE GAMES PC GLOBAL Aggregate of Battle Royale Games PUBG Fortnite ARK: Survival Evolved H1Z1: King of the Kill DayZ 35% 30% 30.1% 25% 20% 15% 10% 5% 16.3% 14.6% Fortnite Battle Royale didn t start as a free-to-play game and went from idea to launch in less than 12 weeks. Epic revealed that the idea for the game came from their strategy team (based on market insights), but the whole company quickly agreed on the new plan. 0% Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 7 copyright Newzoo 2018 Source: Newzoo PC Game Tracker

BASED ON TOTAL VIEWERSHIP HOURS DAILY TWITCH & YOUTUBE GAMING COMBINED GLOBAL PUBG Fortnite ARK: Survival Evolved H1Z1: King of the Kill DayZ 25% 20% 15% 10% 5% 0% Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 17.9% 11.8% Twitch and Epic Games teamed up on February 28 th to deliver the Fortnite Twitch Prime Pack, which gave Twitch Prime subscribers and Fortnite players a pack of exclusive gear and skins. According to players, collecting gear and skins is a major proponent of Fortnite's success and Twitch's exclusive pack has reportedly led to people buying Twitch Prime accounts from third-party vendors to collect skins. 8 copyright Newzoo 2018 Source: Newzoo Game Streaming Tracker

RECENT HEADLINES 9 copyright Newzoo 2018

GROWTH OF NINJA S VIEWERSHIP HOURS ON TWITCH VIEWERSHIP HOURS OF NINJA S STREAMS BY GAME TWITCH JULY 1 ST, 2017 MARCH 16 TH, 2018 PUBG Fortnite 3.0M 2.5M 2.0M 1.5M 1.0M 0.5M 0.0M Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 10 copyright Newzoo 2018

PUBG IS FAR MORE POPULAR IN ASIA THAN FORTNITE TOP 5 COUNTRIES FOR FORTNITE AND PUBG BY PLAYER CONCENTRATION PER TITLE* FEBRUARY 2018 Percentages for Fortnite marked in BLACK, PUBG marked in GREEN In China, 1. France 29% vs. 8% 1. China 52% vs. 1% 2. Saudi Arabia 27% vs. 14% 2. South Korea 32% vs. 1% 3. Denmark 27% vs. 19% 3. Hong Kong 31% vs. 5% of the core PC gamers played PUGB in February vs. only for Fortnite 4. Belgium 27% vs. 12% 4. Japan 30% vs. 3% 5. Sweden 26% vs. 20% 5. Iceland 26% vs. 19% *As a share of all core PC gamers in each country, based millions of gamers using Overwof in-game apps. 12 copyright Newzoo 2018 Source: Newzoo PC Game Tracker February 2018

BASED ON THE 20,000 CORE PC GAMERS WHO USE OVERWOLF TOP 5 MOST PLAYED PC GAMES IN CHINA* PER FEBRUARY 2018 JANUARY 2017 FEBRUARY 2018 PUBG League of Legends Overwatch Counter-Strike: Global Offensive Wolfenstein: Enemy Territory 80% 70% 60% 50% 40% 30% 20% 10% 0% 51.8% 23.3% Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 In November 2017, Tencent became Bluehole Studio s official local partner to publish PUBG in China, which further secured the game s success in the country. Tencent is currently working on localizing and optimizing the game for Chinese players, with an attempt to provide stable servers and effective anticheat systems. More than 11 million players have signed up for Tencent s Chinese publication of the game so far. Those who previously purchased PUBG on Steam can play the Chinese version for free when it s officially launched. *Among 20,000 gamers using Overwolf in-game apps in China. 13 copyright Newzoo 2018 Source: Newzoo PC Game Tracker February 2018

THE FUTURE OF BATTLE ROYALE GAMES ON PC FUTURE RIVALS The battle royale format has not finished growing, with triple-a developers now racing to either implement the game mode in their titles or to launch new games fully focused on the genre. While the success of the battle royale genre has surprised many publishers, the format and game mode are not hard to copy. Many publishers already have titles that can easily incorporate a battle royale game mode into their game play. For many developers, this is a much safer strategy than betting on a completely new battle royale game, and we will likely see many of them incorporate the game mode in their existing titles. THE NEXT STEP: ESPORTS AND LIVESTREAMING Viewership has always been a good indication of any game title moving toward an esports scene. While both Fortnite and PUBG have quickly grown to become the most viewed games on Twitch and YouTube Gaming, the games are still far from being solid esports titles. In fact, after PUBG s overnight success, the game has been actively pushed as an esport, with ESL and Bluehole partnering for competitive events, such as Gamescom and IEM Oakland. At Gamescom, ESL invited 80 players to compete over a $350,000 prize pool. With a massive number of eyes following the matches at Gamescom, PUBG once again proved to be a viewership success. However, while the game is fun to watch, the random nature of the battle royale format will provide a challenge for future competitive formats. This will be a challenge that developers need to overcome if they want their battle royale game s esports scene to flourish. 14 Total viewership hours of Fortnite in February 2018 on Twitch & YouTube Gaming Total viewership hours of PUBG in February 2018 on Twitch & YouTube Gaming copyright Newzoo 2018

MARKET OVERVIEW AND UPCOMING TRENDS

THE BATTLE ROYALE GENRE ON MOBILE Driven by the overnight success of PUBG on PC, large mobile game publishers are all looking to capitalize on the battle royale genre. The trend started in Asia, largely driven by the mobile-first culture of the region. Especially in China, the genre has gained considerable market share in a short time. Tencent and NetEase, the two largest Chinese gaming companies, are both actively seeking opportunities in the genre. NetEase enjoyed the first-mover advantage by a global launch of two mobile battle royale games, Knives Out and Rules of Survival (called Terminator 2 in China), at the beginning of November in 2017. Knives Out is a native battle royale game, featuring up to 100 players competing against each other. Rules of Survival was first designed as a shooter game and battle royale mode was added later to meet the trend. Both games have made a hit not only in China, but also globally. Roughly 30% of ios revenues from the two mobile games come from overseas markets. NetEase is also actively creating esports scenes for the games. The publisher recently announced another five mobile battle royale titles, each featuring unique gameplay. Tencent published the mobile battle royale game Glorious Mission in November 2017. Though the game recorded a great number of downloads at launch, it did not generate as much revenue as the publisher expected. Tencent s biggest competitive advantage is its exclusive partnership with Bluehole Studio to publish two official mobile PUBG games in China: PUBG: Exciting Battlefield and PUBG: Full Ahead. Both games launched open beta in China at the beginning of February and immediately became the most downloaded games. Other popular mobile titles in Asia include Elex s Last Battleground: Survival, Archbears s Black Survival, and Garena s Free Fire: Battlegrounds. Following the success of mobile battle royale games in Asia, Western publishers are also seeking opportunities in the genre. In addition to Fortnite s popularity on PC, Epic Games confirmed the title s mobile launch, which, according to the company, will eventually feature cross-play with PC, Mac, consoles, and mobile. EARLY ADOPTERS KNIVES OUT RULES OF SURVIVAL MAU globally as of January 2018 MAU globally as of January 2018 OTHER MARKET PLAYERS Source: 17 copyright Newzoo 2018

NETEASE S TWO VERY POPULAR BATTLE ROYALE TITLES KNIVES OUT PLATFORMS: ios, ANDROID LAUNCH DATE: NOVEMBER 2017 PUBLISHER: NETEASE HQ: GUANGZHOU, CHINA RULES OF SURVIVAL PLATFORMS: ios, ANDROID LAUNCH DATE: NOVEMBER 2017 PUBLISHER: NETEASE HQ: GUANGZHOU, CHINA Launched at the beginning of November 2017, Knives Out has become the most popular mobile battle royale title. Knives Out features up to 100 players competing against each other. The game recorded 20 million DAU globally one month after launch. Of its ios revenues in February, 32.6% came from overseas markets, with Japan accounting for 96% of overseas revenues on ios. grossing mobile game in China on ios in February 2018 Rules of Survival was first launched in China as a shooter game based on the Terminator 2 IP. Battle royale mode was added later, featuring up to 120 players. The game reported more than 150 million players globally as of February 2018. NetEase has organized an esports league, the Terminator 2 International Super League (TSL) for the game, with a total prize pool of $855,000. grossing mobile game in China on ios in February 2018 18 copyright Newzoo 2018 Source: Newzoo Mobile Metrics Tracker

TWO DIFFERENT VERSIONS OF PUBG LAUNCH IN CHINA PUBG: EXCITING BATTLEFIELD PLATFORMS: ios, ANDROID LAUNCH DATE: FEBRUARY 2018 PUBLISHER: TENCENT HQ: SHENZHEN, CHINA PUBG: FULL AHEAD PLATFORMS: ios, ANDROID LAUNCH DATE: FEBRUARY 2018 PUBLISHER: TENCENT HQ: SHENZHEN, CHINA After securing the exclusive rights to run PC PUGB in China, Tencent gained the rights to develop and publish two official mobile PUBG games in China. PUBG: Exciting Battlefield mirrors the gameplay and look of the original PC game. The game had 7.3 million downloads in China on ios in February. Global expansion of the game is also on Tencent s roadmap. downloaded mobile game in China on ios in February 2018 PUBG: Full Ahead was developed by Tencent s Timi Studio, which is also responsible for Tencent s most successful mobile game in China: Honor of Kings. PUBG: Full Ahead will feature naval battles that the PC title lacks. It launched an open beta at the beginning of February and accumulated 2.9 million downloads in China on ios in February. downloaded mobile game in China on ios in February 2018 19 copyright Newzoo 2018 Source: Newzoo Mobile Metrics Tracker

OUTLOOK OF MOBILE BATTLE ROYALE GAMES IN ASIA MOBILE-FIRST ASIA TERMINATOR 2 INTERNATIONAL SUPER LEAGUE Early data from games such as Knives Out and Rules of Survival show that the mobile battle royale genre is mostly popular in Asian markets, particularly China, Japan, and Southeast Asia. We have seen a similar trend with mobile MOBAs, which began as a typical PC genre but showed enormous potential with the success of Honor of Kings in China. A number of its competitors, such as Mobile Legends, Heroes Evolved, Heroes of Order & Chaos, and even Vainglory, gain the majority of their revenues from Asian markets. Part of the reason why the genre performs so well in Asian markets is because mobile gaming in these areas is much more similar to typical PC gaming. Games that are popular are far more likely to be graphically intensive games. Popular games are also often more complex and less casual when compared to Western top grossing games. As PC and console gaming are typically less popular in Asian markets, this can be partly explained by consumers using their mobiles as their primary gaming devices. We see a big opportunity for mobile battle royale games to grow in the region, with more titles and a bigger variety of features coming up. THE NEXT STEP: ESPORTS AND LIVE STREAMING Fueled by the mobile-first culture, mobile esports has grown in the region, especially in China. NetEase responded quickly to the success of Rules of Survival by organizing an esports league for the game. The Terminator 2 International Super League (TSL) has a total prize pool of $855,000 and teams from China and six overseas countries joining the global finals in March 2018. Following the launch of Tencent s two mobile PUBG games, esports events are also expected from the publisher. Prize pool of Terminator 2 International Super League (TSL) in China Streaming videos of mobile battle royale games in China have already attracted huge traffic and other countries are expected to follow trend, especially in Japan where mobile battle royale games prosper. Nationalities participating in the TSL Global Finals in Shanghai copyright Newzoo 2018

OUTLOOK OF MOBILE BATTLE ROYALE GAMES IN THE WEST FORTNITE STARTS A REVOLUTION The fact that the mobile MOBA genre has a much more outstanding performance in Asia than in the West led people to predict that mobile battle royale games would face a similar challenge in the West. However, the launch of Fortnite on mobile convinced us that mobile battle royale games will be a craze in the West as well. AS OF MARCH 24 TH 2018 Epic Games launched an invite-only version of Fortnite on ios in mid-march and the game became an immediate hit on mobile. In the first week of launch, Fortnite reached 5.4 million downloads and generated $2.8 million revenues, with the United States as the biggest contributor to both downloads and revenues. What is revolutionary to the gaming industry at large is that Epic Games has made cross-play with PC, console, and mobile possible. Players on different platforms can play against each other in the same squad and one account can be accessed on all these platforms. PUBG Mobile on ios & Google Play combined Global Downloads Global DAUs NEW RIVALS COMING TO THE GENRE The competition between Fortnite and PUBG has extended to mobile. Tencent launched PUBG Mobile on Android globally almost at the same time as Fortnite launched on ios, with PUBG Mobile going live on ios one week after. PUBG Mobile is a Western adaptation of China s PUBG: Exciting Battleground that mirrors the PC and console versions almost identically. With the ongoing battle royale phenomenon, more mobile titles are expected to hit the Western market, but in the short run, Fortnite and PUBG Mobile will still dominate the genre, neck-and-neck in rivalry. The overnight success of the battle royale genre has certainly surprised many game publishers and developers. We believe the genre is not at its peak and will continue to grow in the coming months as it rolls out to all platforms. Fortnite on ios Global Downloads Global DAUs Note that even though PUBG Mobile outperforms Fortnite in terms of downloads and DAU, Fortnite has only launched an invite-only beta version and is only available on ios so far. Source: copyright Newzoo 2018

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