Friday, June 09, 2006

Steve Palley: Verizon Wireless Gets It Now

Steve Palley at Foci Mobile has been a welcome addition to the analyst scene since there has been a definite shortage on commentary about mobile gaming. He writes a lengthy post about Qualcomm’s (QCOM) annual BREW conference and notes the importance of the event to the gaming community with presentations by Square Enix, Microsoft Casual Games, and Electronic Arts.

Palley explains where BREW fits in the wireless data space,and points out that "BREW technology drives Verizon Wireless’ (VZ) Get It Now storefront, which is widely considered to be the prime mover behind wireless data growth in the U.S." Palley states:

It may sound a little far-fetched, but in terms of revenue potential, it’s absolutely true: The Qualcomm/Verizon Wireless tandem is one of the most important alliances in video games that you’ve never heard of.
Palley says the "perennial highlight of the BREW show is Verizon Wireless’ presentation, when one of the carrier’s highly placed officials emerges from the corporate shroud of silence and delivers growth statistics and future strategy to a rabidly expectant audience." He writes about John Stratton's, Verizon Wireless’ Vice President and CMO, presentation:
VZW currently sports 27.1 million data customers, who are expected to account for about 160 million downloads over the course of 2006. That’s a tidy 400% growth rate over the last 36 months--a pretty darned decent result for most retail outlets, eh? But Stratton made sure the audience understood that VZW isn’t content with mere organic growth, especially since it’s shown recent signs of slowing down. Sounding an introspective note, he wondered aloud, “are customers moving on to other types of entertainment services? Are the carriers taking their eye off the ball?”

Then came a truly startling admission, along with a plan for action. Stratton outlined several problems that have stunted data growth: VZW is continuously hit with a “fire hose” of content from publishers that it lacks the resources to sort through, its present download deck is “way too packed,” and the Get It Now experience “hasn’t fundamentally improved” for customers since its inception.
Palley then writes that:
VZW’s evolving solution on the commerce side, said Stratton, will be to branch out to new sales channels, including the internet and retail (there are 1800 VZW stores in the U.S.), as well as allow certain off-portal partners to sell applications. At the same time, Get It Now is undergoing a complete user interface overhaul, which will allow for voice searching, contextual recommendations, and even Flash animations.These revelations constitute the massive paradigm shift that mobile games publishers have dreamed of for years, but never dared to expect, since they knew that any change would be impossible without carrier involvement.
Palley asks "Verizon Wireless may have committed to a historic program of reform at BREW 2006--but what will happen to mobile games during the long months and years it will take for the carrier to develop its new technology, roll out its new handsets to customers, and achieve sufficient market penetration to finally switch off the old Get It Now?" He guesses:
we will be stuck with business as usual for some time to come. In fact, Stratton roundly and explicitly rejected the most sensible short-term solution to stagnating growth--culling the download decks--by telling the audience that VZW had no interest in deciding “what’s good and what isn’t” for their customers. I agree that VZW probably doesn’t have the personnel necessary to exercise this sort of judgment right now, and that allowing the market to choose is clearly the best of all possible options--but I have to wonder how VZW’s present policy of shuffling hundreds of games up, down, and around their decks arbitrarily is any better than a pure, merit-based dictatorship.
Palley concludes with:
The significance of Verizon Wireless’ announcement at BREW 2006 cannot be understated, because without these kinds of commercial reforms, mobile gaming will never be anything more than video gaming’s dimwitted sidekick. Kudos to VZW for taking this step (even if they had to be prodded into it by Qualcomm, as I suspect). Neither they nor we will be sorry they did.