Informa Telecoms & Media: Play time for the mobile games industry

Nick Lane at Informa Telecoms & Media has a lengthy analysis of the buzz surrounding the mobile gaming industry. He points out that EA's acquisition of Jamdat Mobile for $680 million for adding to the hype and notes that Jamdat in 4Q05 "would have contributed just 0.08% of EA's revenues."

Lane looks at industry growth and while "not the triple-digit growth that has so far characterised this young industry (both Jamdat and Gameloft's revenues more than doubled in 2005)," he still believes "it is healthy growth nonetheless, fuelled by industry consolidation which has reduced the number of pureplay mobile games publishers, while also tempting in firms such as EA, Yahoo! Games and Microsoft, which recently announced that its casual gaming division is planning a mobile push."

Lane says it is surprising that "all this past growth has come from a relatively niche group of mobile users." He puts the number of mobile subscribers paying to download games at around 5 percent, but finds it unrealistic to think the remaining 95 percent are potential gamers.

He then cites usage data from M:Metrics of the number of mobile game players in the U.K. Lane thinks the data "implies - at least in the UK - is that the potential market for mobile games stands at around 30% of all mobile subscribers. This is not the 95% of yore, but it is a large potential base which, yes, may justify paying $680 million for the company which has so far been most successful in addressing it."

Lane looks at the challenges the industry faces trying to continue healthy growth rates while converting more mobile gamers into paying downloaders. He gives some examples of business models being tested but says:

Perhaps the most important solution, however, will be having more good games for people to play. In the last two to three years, there have been a number of high-profile examples of mobile games which have been based on big brands, have been heavily promoted by the operators, yet which have been - in layman's terms - rubbish. Operators are now realising that while the strength of a brand-name may sell more downloads in the short-term, many consumers will only be fooled into parting with their cash once. Talk to several publishers, and they'll say that perhaps the biggest impact of EA's full-scale entry into the mobile games market is the fact that it will force everyone else to raise their game. If true, this will be a key spur to continued industry growth.

For me it depends on the three Cs - compelling content, convenience in terms of game play and cost. Nail these and you'll get more people to download and buy. Of course, even then with all the various carriers, platforms and handsets, it might not be a winning proposition for developers from a cost perspective...