Tony Dennis says that despite recent technical advances, the mobile gaming industry still faces issues around discovery, delivery and revenue management
To a great extent mobile gaming still doesn't enjoy the full respect of the broader gaming industry which includes PC, dedicated handhelds and consoles plus online. Yes, at some point in time the proverbial tail may wag the dog and mobile gaming will consume a predominant slice of the overall game industry, but to reach this goal several obstacles need to be tackled. New technologies need to be harnessed; revenue sharing needs to become more equitable; and games need to be more easily 'discovered' by the typical handset user.
Not that the opportunity isn't still a promising one for operators. In terms of (non-voice and messaging) mobile services revenues, Screen Digest predicts that by 2011 mobile television will be the dominant service in Europe (generating revenues of €4.7 billion). In second place will be mobile gaming with €2.0 billion revenues and music comes in third with €1.47 billion. Looked at another way, Pricewater-house-Coopers sees video games the third fastest-growing segment of the entertainment and media market after television distribution and Internet advertising and access spending.
So mobile gaming is a sector which operators can ill afford to ignore – but which technical challenges remain to be overcome to boost this sector?
Mike Yuen, a senior director with Qualcomm's Mike Gaming Group, says, "We've always believed in 3D as a technology which would be one of the key evolutions for mobile gaming, particularly since it will essentially be ‘free' and contained in all devices in the future." Ben Wood, a director with market analysts, CCS Insight, agrees. "There have been improvements in handset design – such as larger colour screens and support for 3D graphics – which will boost the games market," he explained. "Memory is no longer an issue. It's possible to purchase a memory card for very little money these days."
Possessing leading technology is one thing – but delivering it to handset owners is another thing altogether. John Wood with platform delivery specialist, C3, highlights the importance of relevant delivery channels and the types of supplier in the market. He estimates that in terms of delivering games voice is still the chief method at present. Wood claims that delivery of games via text/SMS is actually declining. "However, the biggest growth area is very definitely video which is growing much faster than the other two areas," Wood maintained. C3's delivery mechanisms for mobile gaming go way beyond simply supplying Java games to consumers via a WAP download. He argues that mobile games can be played via a voice call, for example, where a mobile phone user can dial into an IVR centre and play a simple game by selecting a series of options from the keypad. More significantly, however, C3 has moved into making games available through the handset user placing a standard 3G video call. Wood identifies two major types of supplier for mobile video game delivery. The first kind is the content owner – typically a broadcaster with existing content. This type of client is aiming to develop a 'sticky' web site which participants re-visit frequently. In order to generate a 'community' feel, such sites are beginning to incorporate user-generated content into their games. The second type of client is the service provider who is always looking for new ideas that will attract customers. These providers view video games as a kind of Trojan horse for attracting the consumer. Wood believes that it will be these service providers who will approach the ad agencies with the aim of embedding their brands into interactive video such as games.
Tony Pearce, CEO with mobile games distributor, Player X, tells Mobile Europe, "In terms of getting games to market we've tried all three key routes. These are: – direct to the operator; direct to consumer – mostly via a major player like Jamba; and setting up your own WAP site." Despite popular hype to the contrary, Pearce says, "By far the biggest market is direct to the network operators. We've tried direct to consumer where you place an advert asking consumers to text 'xxxx' to this particular shortcode and then try to get consumers to buy games that way." Pearce continued, "But the downloads I've seen from this have been tiny. Unless you are a big, established player – with a big budget to spend on advertising and content acquisition to back it, it doesn't work." The third option of creating your own WAP site to sell direct has the same drawback, Pearce argues. "You still have to spend the money to drive traffic to the site. I feel that the companies who are jumping up and down and saying that direct to consumer (D2C) is best are those who've been largely unsuccessful in selling their games to mobile network operators."
There's also another popular misconception as to what actually attracts subscribers to play games on their handsets. "What we see as being successful is what we term 'casual games', Pearce explains. "They're those games where the player only has to push one button and they are very easy to play. We've done particularly well with games bases on TV game shows. That's because everyone already knows the rules. The typical mobile phone user can't be bothered to learn how to play a complicated shoot-em-up game."??Rather than 'casual games', CCS' Ben Wood sees a new genre of 'brain teaser' game as emerging in the market. "This has already happened with handheld games consoles and is starting to make the crossover into mobile games," he points out. "Typical of this genre is Sudoku and similar games which challenge the player mentally." Multiplayer games is another sector with plenty of potential, Wood believes. Part of the reason is that now handsets can enjoy the kind of bandwidth that everybody thought that 3G would offer. "With HSDPA it's now feasible to download more complex games and HSUPA is just around the corner," he says. Wood therefore predicts that this will revive the whole concept of networked games which Nokia tried before with dedicated gaming hardware in the same of the N-Gage. "The building blocks are being put in place although I don't see networked games taking off for two to three years," he said. . "The N-gage is set to re-explode into this market sector."
"The majority of games played are still those which are shipped with the phone – such as Nokia's Snake," Wood confessed. Tim Barber, vp of sales marketing with SurfKitchen, argues, "Although we have seen an increase in popularity in mobile games, games aren't about phone personalisation but about entertainment. Basically, most mobile users will only play a game when bored." Like Ben Wood he also thinks that when handset owners play, it will be a game that is already available on the phone. "Downloading new games or updating existing games in order to receive next levels has not proven to be very popular."
So how do you get mobile users to play more, he asks? SurfKitchen believes that there are two ways to solve this problem. Either mobile game vendors should work more closely with device manufacturers and pre-install games on devices, or operators should ensure there is a consistent up-to-date catalogue of games available that are easy to download. "Improving game discovery continues to remain an extremely relevant issue despite all the talk that has occurred regarding the need to improve it," claims Mike Yuen. "We've been discussing this issue for years now and it tends to always pop its head up at mobile gaming conferences as well as more general mobile content events. We as an industry have still not universally solved the dreaded 'one line of text' issue and this has got to change if mobile gaming is to achieve its true potential that analysts are forecasting."
CCS's ben Wood argues that it's not just the discovery of pre-installed games that counts for handset owners. It's hanging onto the games that they've already purchased when they upgrade to a new handset after 9-18 months. "A very positive move which Nokia will promote is the creation of a 'games library', "Wood explains. "This will enable consumers to migrate their existing games to a new handset without becoming embroiled in license key issues." So if the consumer has paid once for a particular game, there's no repeat fee for migrating that game to another device.
Another big issue is revenue sharing. "The i-mode model has worked extremely well in Japan. It's a fantastic model with content providers receiving 85 -90 per cent of the revenues. NTT DoCoMo's sharing model has allowed publishers to receive more revenues which they can then plough back into creating better content," Tony Pearce says. "The 50:50 revenue split, however, applies across most of Europe. It makes things so much more difficult for games vendors because the margins are so thin. Sadly European operators aren't prepared to change that model right now." Mike Yuen agrees, "I think you have to give the publishers their fair share and then some because no matter how good your platform is or underlying technology you need high quality content to make it work. It would be akin to having TV, but no quality programming to watch so no one tunes in. A symbiotic relationship has to develop between the publisher and the operator and I'm not quite sure this is a universal situation just yet."
Like many others in the mobile industry, C3's John Wood sees advertising as a potential source for raising the revenues received from providing games. "I can see a betting company, for example, being prepared to subsidise a football game [for mobile handsets] by burying its own banner ads into the background," Wood suggests. He also believes that games could form part of a wider marketing campaign. For example, where a demo mobile game might be given away for free as part of a wider promotion for a new blockbuster – such as Harry Potter. He also sees mobile games as providing an additional outlet for brand owners who wish to extract the maximum profits from a particular franchise – such as the TV show – like Who wants to be a millionaire?
There's a general consensus that the mobile industry has to move way beyond the mere supplying of Java games via a WAP download from an operator's portal. There are ways that operators can expand their gaming revenues by incorporating other steams – such as 3G video calls and the uploading of user generated content. But if the revenue predictions are to be met, then the industry cannot afford to stand still and maintain the status quo of operators demanding the biggest slice of the cake and forcing subscribers to purchase games solely from their portals.