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Europeans' busy thumbs to generate mobile gaming revenues worth nearly $7 billion by 2006

October 18, 2003

It was not until the arrival of colour, download-enabled devices in the mass market in 2003 that games on mobile devices advanced from Gameboys, embedded games and limited text-based games using SMS and WAP.

A godsend for hard-pressed mobile operators that are concentrating on driving data applications against a backdrop of stagnating voice markets, the mobile gaming industry will further benefit from established and sustainable mobile content business models and value chains.

Games are universally attractive and with an ever-increasing number of subscribers owning, and always carrying, a colour handset with data capabilities; content owners and application developers are seeing a new medium through which to sell their products and services.

A new study by Frost & Sullivan is optimistic that widening distribution channels, increasing awareness of mobile gaming, coupled with the rising degree of comfort with payment and delivery over the air amongst subscribers, will trigger an explosion in growth.

he universal appeal of games will be further fuelled by deepening penetration of more sophisticated handsets, propelling revenues in European mobile gaming market from just under $800.79 million in 2002 to just below $7 billion in 2006.

Jan ten Sythoff, Industry Analyst at Frost & Sullivan, notes that the most potent driving force behind growth in the European mobile gaming industry is the increasing number of people with games capable devices, as well as the increasing availability of quality games titles.

The media gaming sector, including games for mobile consoles delivered typically through physical media, currently constitutes the dominant revenue source, accounting for 62.7 per cent of total sales in 2002.

From 2003 onwards, however, the development of Java gaming will inject new vigour into the over the air (OTA) sector, comprising those games delivered to the phone over the wireless wide area network. By the end of the study period in 2006, the OTA sector will steal the limelight, amassing 88.3 per cent of total sales.

The total European mobile gaming market is made up of hard-core gamers, the true game fanatics, and casual, occasional gamers. Casual gamers are filling in time while travelling, waiting and other such spare moments. Hard-core gamers are those that will make time for gaming specifically in their day. Typically, a media game will cost between $25 and $45, while an OTA game can cost between $15 (for a branded Symbian game) and $0.25 for a simple SMS quiz.

Mr ten Sythoff agrees that this analysis is simplistic. "These two segments will increasingly converge, particularly with OTA gaming moving closer to the higher end media games, facilitated by the technical improvement of handsets, increasing network bandwidth and competition driving the quality and capability of mobile gaming," he adds.

"However, as our analysis focuses on the value chain, this segmentation is significant as the two business models and value chains differ substantially. We also project that the mobile consoles will be increasingly marginalised as handset gaming improves greatly in affordability and convenience."

By the end of the forecast period in 2006, mobile gaming is expected to represent around five percent of total operator wireless data revenues, equating to around 30 percent of total video gaming revenue.

Around 50 percent of devices sold in 2003 are expected to be download-enabled, while all operators have invested into offering gaming and other content services. "Operators have also set up revenue share agreements such that games developers and publishers have a solid business model, and are therefore motivated to continue developing quality games," Mr ten Sythoff continues.

However, mobile gaming is and will be a way of filling in time for most subscribers. As such, there is a limit to how often users will download a game, and how much time they have to play it. To drive uptake, interactive capabilities, a wide selection of gaming types to appeal to a wider user base, as well as other elements which mobile technologies enable, must be integrated to expand interest in mobile gaming, and consequently the amount of money spent on it.

Perhaps one of the biggest question marks hovering over the mobile gaming (and indeed many other mobile content) industries, is which channel to the subscriber will ultimately reign supreme.

Will the end-user choose to order a mobile game through the operator owned portal, or will other channels win? The issue is highlighted by the dramatic development of the ringtones and logos market. With focused marketing from non-operators, the market suddenly ballooned, and it is estimated that nine out of ten ringtones are sold through non-operator portal channels.

Network operators are the predominant channel to market at present for mobile gaming, and will remain so, but other channels such as independent portals and interactive TV are emerging as strong alternatives and will drive market growth. The report includes an in-dpeth value chain analysis looking at different channel scenarios, shedding light onto the likely long term winners in this growing opportunity.

Frost & Sullivan's study concludes that interactivity provides significant further growth opportunities, enabling extra revenue generation on top of simple download revenues. There are, however, significant limitations on interactivity, in particular real time multiplayer gaming will have very limited growth opportunities up until 2006.

 


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