Fun times

Mobile gaming services have long held revenue-generating potential for operators and developers alike, though the construction of a viable ecosystem has been longer in the making. With the development of appropriate terminals, the greater amount of social networking taking place across mobile devices, and an evolved charging regime, the coming 12 months are set to witness strong mobile gaming activity

At the end of October, Nokia announced the closure of its N-Gage store, which was specifically designed to sell games for Nokia phones. Many lessons have been learnt in the mobile gaming space since the first N-Gage device was introduced in 2003

Growth in mobile gaming is occurring faster in emerging markets than it is in developed markets, with the current compound annual growth rate in emerging markets estimated by independent researchers at 13 per cent compared to a global average of 10.2 per cent.

It is true that the higher growth rate in emerging markets can be explained partly in terms of the installed base of mobile gamers in these markets being lower, but this does not take away from the fact that in some markets the overall number of mobile gamers purchasing content and consuming it exceeds the number being added in some developed countries.

According to Pyramid Research, mobile gaming is enjoying solid growth. The number of gamers is estimated to have increased from about 55 million in 2005 to around 183 million in 2008, and global revenue in 2008 came to US$6.9 billion. The research company points out that emerging markets contributed heavily, with China and India being among the most important in terms of new mobile gamers.

A number of underlying factors contribute to this growth – first of all the evolving mobile technology environment: Better and faster wireless networks as well as more advanced and easy-to-use handsets are enhancing the user experience. Features such as touchscreens, 3D capabilities and online interactivity allow content developers to improve games. But apart from technological improvement and business level innovation – which in the form of the iPhone App Store is revolutionising the industry – the mobile gaming market is also evolving fast on account of mobile adoption.

This trend is led by emerging markets, where improving economies are allowing consumers and businesses to catch up with the more advanced markets in terms of technology uptake. Although most people in emerging markets cannot afford sophisticated devices, they are eager to experiment and use mobile data services. This is true for both mobile communications and entertainment, of which mobile videogames are a major driving force. For many users, handsets are the first device they own that enables access to electronic forms of entertainment.

“There are a number of trends we are witnessing in the mobile gaming space right now that are driving its development,” says Sunil Mahaja, vice president, mobile for India based mobile value added services company Comviva.

“There is a growth in casual users; there is growth in feature rich phones; 3G is fuelling mobile gaming; and lastly low PC penetration in emerging markets fuels mobile gaming.”

Comviva’s Mahaja sees great potential for mobile gaming uptak in emerging markets given the expansion of casual users and the lower PC penetration rates

A number of decelerators still exist for the widespread adoption of mobile gaming and theses include expensive gaming prices, where in some cases the cost to download a game may be more than the cost of a voice recharge voucher. There is also limited trial and micro-pricing that currently exists in the market; and poor discovery/ research mechanisms hamper uptake further.

“A factor that remains something that needs to be overcome is the cumbersome download procedure for many games,” Mahaja says.

“Ease-of-use and simple directions are necessary in order to make the gaming experience less intimidating.”

Device dependency is also a negative trait in many mobile gaming offers at this time; given that the downloaded games reside on the device and should a user look to change devices he or she is unable to transfer the games to the new device.

Factors that are set to drive even higher take-up of mobile gaming include reducing the overall costs involved in mobile gaming; ensuring that access to the games is as easy as possible; and the offer of flexible pricing. Online gaming solves many of these issues and given the growth in the percentage of mobile devices that can access the Internet, appears to be a potentially viable long-term solution.

In more developed markets, mobile gaming has already taken root, and according to San Diego-based strategic market research and consulting firm DFC Intelligence the worldwide market for portable and mobile games is expected to grow to US$11.7 billion by 2014. The primary driver of this growth is expected to be the Apple iPhone and iPod Touch systems. By 2014, the research firm forecasts sales for games on the iPhone/iPod Touch to account for about 24 per cent of total portable game software sales.

In October DFC released some results from a study on the mobile game habits of over 8,000 game players in North America and Europe. Fifty-four per cent of respondents in North America and 69 per cent of respondents in Europe had played a game on their mobile phone in the past year. Furthermore, 45 per cent of respondents in North America and 36 per cent in Europe had paid to purchase an application for their mobile phone.

Among respondents, the App Store was already the most popular service for making purchases. Across both North America and

Europe about 15 per cent of respondents already owned an iPhone or iPod Touch, compared with 29 per cent that owned a Nintendo DS. According to Comviva’s Mahaja, mobile operators must decide whether to price mobile games on a content basis or on a consumption basis, but should not attempt to utilise both pricing regimes. And with research identifying that the market for mobile games is most active amongst individuals of 25-55 years rather than only the very young, the opportunity to appeal to a demographic that has the disposable income to spend on such content is evident.

“There is 7-8 per cent worldwide gamer market penetration, while this figure is closer to 2-3 per cent in emerging markets, so again the potential exists to ramp the number of mobile gamers up, should the right strategies be implemented by operators,” Mahaja says.