Game developer Machine Zone is in talks with JP Morgan over in the US to raise funding that could value the company at over $3 billion.

Who is Machine Zone? Well, you may know them as the name behind a little game called Game of War: Fire Age – a free-to-play mobile game where you build and wait, and fight and wait, and quest and wait, etc.

Haven’t heard of it? How about Candy Crush? Surely you know that. That one belongs to King Digital Entertainment, which recently listed in the USA and is currently valued at around $6.2 billion.

Also let’s not forget about Zynga – the FarmVille creator which has a rather checkered past – which is worth close to $2.7 billion.

Love them or hate them, mobile and social games are a massive deal. So much so that investors are taking keen note, and the companies who develop them are actually faring better (in the stock market at least) than many established “core” game developers we’ve come to know and love.

How hardcore is core?

By market capital, as far as game developers go, Activision Blizzard is still a powerhouse unmatched, with a market value of over $16.5 billion, with other gaming giant, EA, weighing up at $11.6 billion.

To put that into perspective, Nintendo, which is a game developer, publisher, and hardware maker and gaming icon, is worth only $17.5 billion (Sony and Microsoft are even bigger, but have a much wider scope).

And those are the really big guys.

“Smaller” game companies and publishers like Square Enix are worth just $2.4 billion – and Capcom is just stretching past $1.2 billion.

Even Ubisoft, which has massive franchises that ship millions of units across the globe, is worth “only” $1.9 billion – a far stretch from the $6 billion company behind a simple match-three title based on candy.

Company	Market cap
Nintendo	US$17.5 billion
Activision Blizzard	US$16.5 billion
Electronic Arts	US$11.6 billion
Konami	US$3.3 billion
Square Enix	US$2.4 billion
Take Two	US$2.2 billion
Ubisoft	US$1.9 billion
Capcom	US$1.2 billion

Data from Bloomberg, 17 July 2014

If you were wondering, market capital is a measure of the total value of a listed company. It’s effectively the total value of all shares issued in a listed company multiplied by its share price (total shares x share price), which forms a basis on which to determine how well a company is doing, investor confidence, and a whole lot of other business-y stuff.

Obviously this makes it difficult to determine the exact value of companies which aren’t listed.

However, even though Angry birds creator Rovio Entertainment is not a listed company, analysts estimate that the company is definitely worth more than $6 billion – and may even be valued as high as or higher than $9 billion.

Similarly, Supercell – the developer behind Clash of Clans and Hay Days – is also estimated to be worth over $3 billion.

Company	Market cap
Rovio Entertainment	US$9.0 billion*
King Digital Entertainment	US$6.2 billion
Supercell	US$3.0 billion*
Machine Zone	US$3.0 billion*
Zynga	US$2.7 billion

*Estimated

It’s not all the same

Now, before you start drawing conclusions, there are a number of important things to note here.

Firstly, these are two different groups of companies with two different business models. The “core” gaming companies tend to have higher production costs, with much larger overheads (lots of employees), and many more divisions (publishing, developing, marketing, etc).

Secondly, “core” games cost millions to make, millions more to market, and exist across a wide variety of genres (including the casual market).

Simply put, the companies are bigger and do a lot more.

A massive game success thus doesn’t always equate to massive profits. Best-seller GTA V (among other big titles) helped pull in over $760 million in revenue for Rockstar parent company, Take-Two Interactive in the quarter it released – but ultimately, the company’s profits were only $210 million for the period.

The big games help – but the bigger picture is always more complicated.

Conversely, developers like King Digital and Rovio have made their fortunes mostly around one or two titles, which are relatively cheap to make, and draw repeated revenue from gamers making in-app purchases for in-game items, or some “pay to win” mechanics.

Angry Birds, for instance, cost Rovio a paltry $140,000 to develop – and earned US$70 million back in 2011. And that’s before counting the sequels and other merchandise which has been drawing money in.

Almost every other casual title mentioned here banks on players’ impatience and offers ways to speed up the wait-to-play gameplay (and you wonder why so many big game developers want to cash in on the model).

In the end, these two different business models are both successful in their own way – but going by the numbers, the casual mobile side of gaming is fast becoming a force to be reckoned with.

Do you play casual mobile games? Do you think they’re kinda lame? Share your thoughts in the comments or on the forum.

More gaming articles

Great gaming studios that shut their doors

Help make the next Mass Effect

The poison that’s killing game development

The penis gaming peripheral you never knew you wanted

Forum discussion