The hottest video game genre around is cooling off

Superman from the Infinite Crisis game.
Warner Bros. Entertainment

Superman may be faster than a speeding bullet and more powerful than a locomotive, but his arrival in the fast-growing gaming genre may have been too little and too late.

Last month, Warner Bros. Interactive Entertainment announced it would pull the plug on "Infinite Crisis," its superhero-themed entry into the lucrative multiplayer online battle arena genre—better known as MOBA—only two months after it launched.

It was the highest-profile retreat in the white hot strategy-and-fighting category yet. The U.S. user base for MOBAs has surged to about 28 million monthly active users from 2.2 million four years ago. Some market watchers are taking the fall of "Infinite Crisis" as a sign U.S. user growth has peaked for now and new entrants will have a tough time breaking into the space.

"Most MOBAs are exceedingly complex games," SuperData Research CEO Joost van Dreunen said in a research note. "Players who have invested substantial time to master one game are unlikely to jump ship."

MOBA is a strategy subgenre in which two teams launch coordinated attacks on one another's base. It rose to prominence with the launch of Riot Games' "League of Legends" in 2009, and has fueled the growth of competitive gaming and live video game streaming. MOBAs are generally free to play, but developers make money from in-game purchases.

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The genre peaked at 29 million monthly active users in the U.S. last August, according to SuperData Research. In May, that metric stood at 28 million, van Dreunen wrote.

The MOBA space has grown and dipped at pace for the last five years with little volatility. But following the holiday season last year, when gamers shifted their attention to big releases, SuperData noticed the U.S. market plateaued after bouncing back in January. That could be a sign the genre has matured, said van Dreunen.

This comes at a time when developers are crowding into the space. The same week Warner Bros. Interactive canceled "Infinite Crisis" Activision Blizzard debuted its much-anticipated MOBA, "Heroes of the Storm." That title features characters from franchises like Diablo and Starcraft that have been going strong for the better part of two decades.

The prospect of duking it out with some of the most popular characters on the planet—"Infinite Crisis" features Superman, Batman and Wonder Woman—simply isn't enough to support a game alone, said Eric Handler, analyst at MKM Partners.

"The MOBA business and the whole premium play market is a tough market. [Warner Bros] had their good characters, but you need more than just characters," Handler told CNBC. "They took a chance in the MOBA space. It didn't work out. They pulled the cord rather than throw money at a bad situation."

Warner Bros. Interactive did not explain why it shut down "Infinite Crisis" in its initial announcement, and a spokesman told CNBC the company had no further comments.

A handful of developers have also released MOBAs designed for mobile devices in the last year, opening yet another front for the hearts and minds of genre loyalists and future players.

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While U.S. user growth may be topping out, sales could continue to expand. SuperData forecasts the massively multiplayer category, which includes MOBAs, will earn $13 billion worldwide by 2017, up from $11 billion last year.

MOBA pioneers "League of Legends" and "Dota 2" from Valve own much that growth. "League of Legends" has the lion's share of the market with 90 million monthly players. "Dota 2" boasts significantly fewer monthly users—about 11 million—but those players are fiercely loyal.

E3 Conference: Activision Blizzard ready to play
E3 Conference: Activision Blizzard ready to play

Whether Blizzard can achieve long-term success with "Heroes of the Storm" depends largely on its ability to draw in and retain players not yet committed to the genre's top games, said van Dreunen. But Blizzard also brings to bear strong intellectual property, experience operating tournaments and a proven record of breaking into genres dominated by other developers, he added.

"After seeing their offering at E3 and hearing about their lineup with regards to franchise expansions and cross-promotion, Activision is maneuvering into a position that will allow them to both pull users from ["League of Legends"] and expand the overall market because of their more mainstream approach," van Dreunen said in an email.

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"Heroes of the Storm" also features relatively simple gameplay, MKM's Dan Handler said. Early MOBA games are notoriously complex and have a reputation for turning off new users, few of whom can compete with early adopters.

"You can actually be less knowledgeable about how to play these MOBA games and pick it up as you go, and I think that's one of the value-added features," Handler said.

Activision reported that "Heroes of the Storm" garnered 11 million sign-ups during its beta period. That soft launch generated about $30 million, according to an estimate by Atlantic Equities.

In a research note, Stifel Nicolaus said "the range of outcomes span from immaterial to something that rivals 'League of Legends.' " Stifel forecast that sales may reach $384 million by 2017, but its analysts admitted they could only venture a guess at this point.