What other $5 billion industry in 2008, that only 5% of potential customers use, has its major progenitors losing money at a faster rate than ever? A perplexed Monty Munford investigates
The figures speak for themselves. According to industry analysts Screen Digest, the global mobile games industry will be worth $5 billion in 2008, so why is everybody so depressed about it?
Juxtapose that number with recent figures from mobile analysts M:Metrics that only 5% of mobile customers have ever played or downloaded a mobile game and surely here is an industry that will not only ride out the credit crunch, but give it a good seeing-to.
Bizarrely, this is not the case. Every publisher is losing money, the operators don't know whether to stay or go, D2C companies are in a vortex, advertisers are drunk on the potential, technologies are stuttering, licensors want to skin a cat and the customer refuses to budge.
Or as the Talking Heads song goes, ‘My God, how did we get here?'
Some background then… and a personal anecdote. Five years ago, I worked for a PC/console games company that had no interest in mobile. Then I sent out a press release saying that our company had ‘launched the first games lab dedicated to mobile games.' I realised I was catching a wave when the calls wouldn't stop coming in.
The ‘first games lab' happened to be two iPaqs that we used to test Tomb Raider for a somewhat disinterested Eidos, but the amount of interest the press release engendered was extraordinary. Operators from around the world wanted to know about mobile games and this ‘wireless lab'. I figured it would be career-defining to do the same.
That press release led to a $2 million per annum testing deal with an operator that secured my job for a bit. Then, the reality and the five-year, strangled gestation of the mobile games industry that shows no sign of critical mass and fulfilment of the utter potential it could offer and has habitually promised.
It all started with the contempt from the traditional games players. These naysayers were happy with their console and PC games. To them, mobile was a channel or platform that was risible and only fit for puzzles, and was defined by the Nokia brand known as Snake, that came embedded with Nokia handsets, and was as engaging as a non-alcoholic beer in a degenerate bar.
So, bad start. The community that should have been the first step to greatness didn't want to know. But, unlike the internet or a lower installed based of PlayStation users, the global mobile community was already there; they just needed to be told about it.
Stage Two. The operators couldn't be bothered. They had a business plan of long-term contracts based on text and voice. They had a fractious relationship with the handset makers. Both of them thought they owned the customer, so worked against each other. The handset maker could offer games with their hardware, and the operators could offer easily downloaded games, but neither of them put any marketing spend against it… and allowed games to be part of their offering by default.
No marketing support. Great. Then operators came to the table late in the day and realised they could easily source tens of mobile games publishers and stack them on their respective decks and see what happened. Surprise, surprise, confusion all round.
Just when the handsets were better and 3G was finally available, there were hundreds of games on operators' decks that mobile customers would have to be ambidextrous genii to find one game in the Top Ten, as opposed to a sports game that was in 129th place and about 25 clicks away from being found.
And then the operators overnight would decide to re-jig their decks without telling any of their content partners. So, anybody that might have begun a revenue stream, were nowhere.
Just imagine, doing that overnight with an EPG on digital TV. Somebody, somebody quite stupid, who may just have bought a PVR and was utterly terrified about trusting it and using it, then gradually becoming inured to it, then turning on and finding everything upside-down.
And while that was going on, mobile publishers were trying to get their games on operators' decks in the first place. So, how did they do that? They did it like this:
– They found a TV/film/gaming brand and paid a licensor money to publish it. Early on, that was OK. Most traditional media companies didn't have a clue about mobile and gave away licences for a song
– Then they found a developer to make the game
– Then they realised that the European market meant they had to publish it in different languages. So that was English, French, Italian, French and Spanish (for now) and more costs
– Then they realised the game had to work on every handset and the operators wouldn't take the game unless it was verified by an independent test house (hence the deal at my previous company)
– Those ‘porting' costs from handset to handset were more expensive than the price of the licence and the development combined
– So the games cost £5/$5/5 Euros to download
– Then the licensors became savvy and started charging big bucks
– Then the game finally inched its way onto operators' deck with no guarantee it would ever be found by a customer, that it would never be marketed, it would be moved around on a daily basis… and it would only work on the latest handsets
– Then the pricepoint changed when advertisers moved in. Could games be free?
– After all THAT process, nobody was in a rush to do that and stymied that particular market
I kid you not. What type of industry is that? But, with the potential in mind, the valiant few carried on and there were glimpses of sunlight and some games sold. But they sold in North America, where there were only two major languages, only five operators, a smaller range of handsets and a begrudging admission by even hard-core gamers that some mobile games weren't so bad after all.
So the US took over from Europe and then the industry constricted and evolved. Traditional games publisher EA bought Jamdat for $780 million and renamed it EA Mobile. The deal wasn't ridiculous. Jamdat had 15-year rights for Tetris, and that has almost paid for itself four years on.
French gaming giant Ubisoft bankrolled Gameloft and employed 1,200 people to crack the mobile gaming market (they succeeded) and Glu Mobile was born out of acquisitions, IPO and big bovver licence-acquiring financial bovver boots. The Big Three were born.
Then the smaller publishers ached for an exit and were happy the Big Three ran the show. And some were bought, and some were absorbed, and some just about continue to exist.
Then, suddenly it was 2008 and everybody's worried and losing money. Soon come, credit crunch and there seems to be no hope.
And, between you and me, there is no hope at this moment. The mobile games industry is all about luck and the weird habits of customers, who finally find what they're looking for.
So, solutions. Handset makers and operators need to work together. They are beginning to. Operators have sorted out their decks, got rid of the useless publishers, outsourced their portals to specialist games aggregators.
Licensors have lowered their revenue expectations and got real with the mobile channel. Customers are realising what their handsets can do. Mobile games are worthy, and original IP is beginning to raise its lovely head. Even handsets are easier to port to now the technology has grown up.
So, the 95% of mobile users who haven't played a game yet. The publishers who have persevered. It's all out there. Seriously. The dreams can still come true… and maybe the mobile games can finally begin.
Monty Munford is Creator of Monty's Gaming and Wireless Outlook, a weekly email newsletter for the mobile gaming industry