Sep 19, 2006
By Fiona Chau
Television and music have been stealing the limelight in the mobile content arena recently, but after years of development, mobile gaming has established itself as a serious content player. It is a core element of the growing market for mobile entertainment services and a stable revenue generator for cellco data services.
The emergence of advanced 3G handsets has helped mobile gaming reach new levels in terms of quality and user experience. Today end-users can play a variety of games, from simple embedded or downloadable Java games to 3D games and connected multiple-players games.
Industry figures show that worldwide mobile gaming revenues have been on the rise over the past few years, and mobile gaming is poised for continuous growth in terms of not only revenues, but also audience and game capacity over the next five years.
According to Informa Telecoms and Media, the worldwide market for mobile games will grow from $2.41 billion in 2006 to $7.22 billion by 2011. Juniper Research is more bullish, projecting global revenues will grow from $3 billion this year to $17.5 billion by 2010. Either way, the Asia Pacific region - which has dominated the market since its inception - is expected to continue to rule the sector during that time. Informa says Asia will account for over 60% of the global market this year, driven primarily by Japan and South Korea. Juniper Research, meanwhile, suggests Asia will contribute 38% of global revenues over the whole forecast period, followed by Europe with 31%, North America with 22% and the other 9% split between South America and the rest of the world.
Interestingly, however, it's not sexy cutting-edge MMORPGs (massive multiplayer online role playing games) that will serve as the key growth engine for mobile gaming over the next five years, but casual games designed for one chief purpose: killing time.
"Mobile gaming is entering into a new phase of development which sees casual gaming rather than hardcore gaming to be the next big thing," says Bruce Gibson, research director with Juniper Research. "Casual games make most use of the inherent advantages of the mobile platform. People want to fill 'dead time' with easy to use, but fun games. This is the same in just about every culture."
Beyond the hardcore niche
Gibson says one of the key drivers for casual gaming is mobile's advantage of provisioning games and entertainment anytime, anywhere, as well as the high penetration rate of handsets, which position mobile gaming as one of the more prosperous gaming platforms, along with online and console games.
"Unless you are a really dedicated gamer you will not have your electronic games device with you most of your walking day - but you may well have your mobile phone," he says. "As mobile phones increasingly become accepted as multi-functional devices, a whole new market opens up for casual games playing that simply has not existed before."
Gibson says the casual gaming market is developing now as mobile operators, game publishers/developers start pushing mobile gaming beyond the niche "hardcore" or serious gamers.
Game developers like I-Play, for instance, are targeting that sort of market by introducing games designed very much with mobile in mind - not just games that have been ported from console titles to a mobile environment.
These games are designed for people to use with one hand, or with traditional mobile controls, to play for fun and for a short period of time, Gibson says.
Although there are no official figures, industry players say that the popularity of casual games like classic Tetris, board games and shooting games is on the rise. Even in the most advanced mobile and gaming markets like South Korea and Japan, it's simple casual games that are the most popular. In Japan, for instance, Tetris is one of the most popular casual games for NTT DoCoMo's users, who playing whilst commuting to and from work by train, according to Yoshiteru Yamaguchi, DoCoMo's executive director of content development.
In South Korea, games associated with local movies or local console games are also very popular, while in China games based on famous proverbs are gaining popularity, according to Enda Carey, chief marketing officer at mobile games developer and publisher Telcogames.
Changing the playing field
Changes in mobile games demographics, in terms of socio-economics and gender groups, are also opening up new market segments for mobile gaming. In addition to hardcore young male gamers, various studies show that there is also a large proportion of women playing mobile games.
Another driver for mobile gaming is the consolidation of the gaming industry which analysts say helps produce better quality games and introduce better mobile gaming experience to end-users. In its infancy the mobile games industry was populated mainly by specialist development and distribution companies. Over the past two years some of these have merged, or grown organically, to create powerful brands in their own right. They have been joined by large electronic games brands, which are developing mobile games and/or licensing the mobile rights to their games, as they begin to see mobile games as a legitimate sector of the electronic games market that they can't afford to ignore. The most notable example is Electronic Arts (EA) which last year acquired mobile games developer Jamdat Mobile, turning it into the world's largest mobile gaming developer/publisher.
Meanwhile, big media and sports brands are also increasingly aligning themselves with mobile game products and publishers, using the cellphone as a new channel for brand promotion and merchandising. In the US, ABC Entertainment and Touchstone Television recently clinched an exclusive multi-year agreement with French-headquarted mobile game developer/publisher Gameloft to develop, publish and distribute mobile games based on popular ABC television shows "Lost" and "Desperate Housewives", which are scheduled for release in early 2007.
If nothing else, Microsoft's announcement to extend its gaming business into the mobile space next year is also expected to help drive adoption of mobile gaming. Chris Sorensen, Microsoft's lead product manager for the mobile and embedded devices division, Asia Pacific and Greater China region, says the company aims to create a unified casual gaming universe across all Microsoft devices and platforms including MSN games, Xbox Live Arcade, MSN messenger, Windows Mobile and Windows OS. By this time next year, Microsoft plans to unveil a centralized mobile gaming network that will be available on Windows Mobile and selected mobile platforms as part of the "Live Anywhere" initiative.
"By leveraging the rich features within the Windows Mobile platform - such as instant messaging, cameras, email, video and music playback - gamers can access cross-platform gaming communities at any time, from any location, even while on the go," Sorensen says.
Ovum analyst Jonathan Arber says the entry of big brands like Microsoft is vital as they would help attract consumers' attention to mobile games. But he also warns that game quality is also vital.
"The key focus has to be on the quality of title offered, and on the overall experience, because even if people are attracted once by a big brand, they have to be willing to come back," Arber says.
But while casual gaming is touted as the key to unlocking the mobile gaming mass market, that doesn't mean there's no money to be had in targeting hardcore gamers. Indeed, some mobile operators and games developers/publishers are implementing connected multiplayer games in an attempt to increase customer retention and drive games revenue further.
Already there are signs that connected/multiplayer games are gaining popularity in some markets within Asia. In South Korea, according to a research note by Ovum Asia Pacific analyst Suran Seong, networked games are gaining momentum, generating about 12.5% of mobile games revenues in 2005. Meanwhile, connected multiplayer games are also gaining traction in China, due to the popularity of MMORPGs.
Telcogames' Carey says moving forward there will be a split in the mobile game sector, with the casual games market to be served by very low-priced Java games with limited game-play. At the high end, he says, there will be a real appetite for high-end games to show off the power of the devices and also taking advantage of previously unavailable features, such as 3D graphics and network connected functionality. That will also include so-called "native games" written for smartphone OSs targeting hardcore gamers.
"The fact that we can now access the core functions of the handsets means that it is easier to have networked games," Carey says. The performance of these games is much better, as is the ability to access phone functions like cameras, voice and WAP, he adds.
The upshot, says Gibson at Juniper Research, is that mobile gaming will see a tiered pricing structure with more complex high-end games priced as premium content, while the price of popular casual games will drop to the level required to target the mass market.
Make it easier to buy
But despite the hype and the continuous growth and impressive revenues projection, it's important to remember that mobile gaming is still a small market by general mobile content standards. Ringtones and wallpaper downloads are a far bigger market than games. Indeed, industry figures show that embedded games account for the vast majority of mobile gaming - only a paltry 5% of mobile users actually download games. And, unsurprisingly, those tend to be young "hardcore" gamers.
The reason? Downloading games is still a pain for casual gamers, says Ovum's Arber. "Currently mobile users have to click through all these different pages if they want to download a title. It just makes the process very difficult for them and poses a real barrier for end-users repeat purchasing".
Arber says mobile operators and game developers/publishers must make it easier for end-users to find, purchase and download games, if mobile gaming is to truly go mainstream.
That includes educating end-users about mobile gaming services and growing awareness about them.
"It's beyond just marketing, letting consumers know what gaming services are available, and if there are particular benefits to them, for example, if there's any special offers or whatever," Arber says.
Telecogames' Carey admits that the current distribution method has prevented mobile gaming from gaining mass adoption. He says there has been insufficient effort from all players in the value chain in promoting and marketing mobile gaming to end-users, although he adds that cellcos should put more effort in marketing and promoting mobile games, since they get the largest share of revenues.
"Operators are constantly looking for the next big thing, which currently is mobile TV, so they're losing focus on games, and they also don't support publishers in their efforts to market games and drive sales," he says. "They are still keeping a very high percentage of the revenues from games and not using this revenue to promote the titles in any way."
Instead, he says, cellcos ask publishers - that have to pay for licenses, development, quality assurance and localization - to also pay for marketing out of their small revenue share.
"We don't believe it is fair to share equally our revenue with the operator who acts as the retailer," Carey says. "If we can have an acceptance of this in the industry, then we will start to see investment by publishers in marketing and proper trade marketing with retailers/operators."
Beyond marketing and promotion, Carey says cellco could also help in creating pull-in embedded products - pre-install demos or downloads - by reducing or even removing the "hidden charges" for data downloads.
This is vital as games become more advanced and bigger in terms of file sizes. If the operator does not have zero-rated data charges, Carey says, the user can end up paying a large amount for the data download as well as the game itself.
"We cannot have hidden charges for data downloads, as end-users will only hit the purchase button as long as the path is smooth and the costs transparent," Carey says. "The user will only become aware of the hidden charge when they get their bill and we believe this prevents repeat purchasing, which is the key here."
This has been the case in South Korea, where high traffic fees imposed by operators has been cited as a hindrance to wider uptake of mobile games, particularly connected multiplayer games.
The good news is that some operators have started addressing the issue with the introduction of bundled services or flat-rate pricing.
However, other market obstacles remain - piracy, for example, which is also hindering the adoption of mobile gaming in Asia, according to Alan Yung, assistant general manager of iNFOiSLIVE Corporation Limited (iiL), the holding company of mobile game developers and publishers MOffY and Gameislive. In Thailand, he says, a mobile user can easily get a load of mobile games for 10 baht in a shopping mall.
Similar issues can be found in most countries in Southeast Asia, as well as China.
"Mobile users may not aware that this is illegal, but for them, it's more convenient to get the games, instead of going through difficult navigation and downloading process that required via mobile phones," says Yung.
However, Telcogames' Carey says the piracy issue is not very serious if the games are low priced.
"We do see a lot of games that copy branded licensed titles in the region, which is worse as publishers spend huge money licensing a brand or title only to see the operator launch the unbranded titles alongside the brand," he says. "We believe the key here is for operators to get a better understanding of branded content and the publishing process to prevent this from occurring."
Slow growth ahead
While many industry players, particularly game developers, remain convinced of mobile gaming's potential, some continue to have doubts about this.
Franky Lo, sales and marketing supervisor at Capcom Asia, says mobile gaming is only popular in Japan and South Korea, where there is a strong culture of using mobile phones as a playing platform. In the rest of Asia, particularly in markets like Hong Kong, mobile phones are mostly used for voice communication.
"The biggest challenge is to change end-users' habits, turning their mobile phone into a playing device," Lo says.
Arber at Ovum says that mobile gaming will continue to grow but perhaps not as rapidly as many expect. Even in the mobile operator community, there is also a slight degree of pessimism about mobile gaming, he says. "We recently spoke to mobile operators about their kind of priorities, and they said mobile gaming isn't so much what they want at the moment. Also they think it would become less so in the future."
But it may depend on who you ask. NTT DoCoMo, for instance, is upbeat on the potential of mobile gaming. DoCoMo's Yamaguchi says gaming content, together with music content, is one of the key growth engines in its i-mode service. He didn't reveal revenue figures, but says DoCoMo's mobile gaming business has increased "significantly" in terms of revenues and user growth due to the expansion of its FOMA900i series handsets.
Analysts say cellcos will continue to maintain a very strong position in the value chain, despite the consolidation in the gaming industry that is helping games publishers/developers become more powerful. And ultimately it's going to be the mobile operators that drive gaming services to the mainstream market, says Arber at Ovum, simply because they have much better access to the majority of consumers.
"Hardcore gamers might be willing to go to off portals and look for mobile games," he says. "But standard consumers would recognize the operators' brand, and they won't necessary be interested in looking at publisher brands or a third-party brand, because a lot of it is about trust."