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Kabam is blowing up with help from Jedis and superheroes

Video game developer Kabam has seen the future of mobile gaming, and it looks a lot like a galaxy far, far away.

Kabam, the gaming darling with a billion-dollar valuation and the backing of Alibaba, this year said it would focus solely on creating console-quality games in what it called a "Fewer, Bigger, Bolder" strategy. A significant part of the push to put more resources into fewer games is licensing highly recognizable intellectual property like "Star Wars."

For the most part, the plan seems to be panning out.

Kabam has partnered with some of the most lucrative franchises in pop culture: Universal's "Fast & Furious," Warner Bros.' "The Hobbit," Lionsgate's "Hunger Games," and Disney's Marvel superheroes and "Star Wars."

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Games based on those five franchises have earned a combined $433.4 million in revenue on Apple iOS and Google Android platforms from their launch through September, according to monthly metrics gathered by SuperData Research. "The Hobbit: Kingdoms of Middle-earth," which debuted in November 2012, accounts for about two-thirds of that total.

It's latest game, "Star Wars: Uprising," debuted Sept. 10 and earned $1.9 million in revenue from iOS and Android devices in its first weeks in app stores.

By leveraging recognizable properties, Kabam is leaping one of the highest hurdles developers face: Attracting new players at a time when gamers have more options than ever and the cost of acquiring users is marching steadily higher.

Star Wars: Uprising
Source: App Store

But while brand recognition goes a long way in app stores, it comes at a cost. Kabam is investing $5 million to $15 million dollars to make premium mobile games. Standard advances baked into licensing deals for mobile games typically run between $5 million and $10 million.

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Shave off a standard royalty rate — usually 10 to 15 percent — and subtract app stores' cut, and it's clear that licensed games need to put up big numbers.

"If you don't make a game that's great, you're not making anything back," Kabam Chief Operating Officer Kent Wakeford told CNBC. "As a game developer, with any major IP, you are taking risk."

Iconic properties

To mediate that risk and create games that can keep earning, Kabam is focusing on iconic properties that stick in the popular consciousness and reappear regularly in theaters and living rooms, Wakeford said.

Disney will release at least one "Star Wars" movie per year and has more than a dozen Marvel films planned through 2020. Universal has been turning out "Furious" films every other year.

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"There's multiple beats to these franchises that we can then tap into and build off of — potential story lines, plot lines, characters," Wakeford said. "It allows us to really think about investing for the long term behind these games."

This year, Kabam has taken advantage of Marvel's growth across platforms, introducing new playable characters to "Contest of Champions" to coincide with film and streaming TV debuts and major comic book events.

When "Avengers: Age of Ultron" hit theaters in May, Kabam released a number of tie-in characters, as well as new gameplay modes and features. That month, iOS App Store revenue surged nearly 70 percent to more than $10 million, according to CNBC analysis of figures provided by SuperData Research.

Marvel Contest of Champions
Source: Marvel.com

That in-game spending has made "Contest of Champions" Kabam's fastest-growing game by revenue ever. Monthly revenue reached $11.3 million in September following the rollout of new gameplay.

At the moment, "Contest of Champions" seems to be "defying gravity," said Joost van Dreunen, CEO of SuperData Research.

"Every time there's a movie release ... they up the ante by just improving the game a little bit, and I think that's what's benefiting the bottom line," he told CNBC.

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Kabam has also been wary of creating games that hew too closely to the source material. For its companion game to the new "Star Wars" trilogy, Kabam situated the action 30 years prior to the story in the upcoming "Star Wars: Episode VII The Force Awakens."

"Sometimes going too close to an actual movie puts constraints around creativity, imagination and direction," Wakeford said. "We're trying to find something where it fits the game, it fits the genre, but creates a story line that we can run with a little bit."

Licensing games is not a bulletproof strategy, though. Kabam has seen monthly iOS and Android revenues for "The Hunger Games: Panem Rising" decline about 91 percent from more than $650,000 at launch in November to just under $54,000 last month. The company attributes the falloff to "the general volatility" of the video game business.

Conquering China

Another box that Kabam is looking to check: global resonance. The developer is looking to expand its presence in the lucrative Asian market, and is currently developing a version of "Contest of Champions" for China.

While Kabam faces many challenges in the country, many of its games feature brands that have been hits with Chinese consumers.

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"Furious 7" is the second-highest grossing film in Chinese box office history, and the market typically generates the largest ticket receipts for Marvel Studios films outside the United States.

As for whether the force will be strong with China, Wakeford said, "I would put money down on it that 'Star Wars' will have that same impact."

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