Tuesday, July 18, 2006

Steve Palley: The Old World's New Rules

Steve Palley at Foci Mobile write how Europe is "a continent-sized hotbed of innovation for the mobile entertainment industry." He writes that:

firms over there aren’t just willing to try new things--if they aren’t able to adapt to changing commercial conditions on the fly, they’re going to be in big trouble. That’s because there are many more factors mobile content companies have to worry about on the Continent. The most important difference by far is the sheer number of carriers available to sell your products. In the United States, there’s the Big Three--Verizon Wireless, Cingular, and Sprint Nextel--and if you’re not on at least one of them, you’re basically out of luck. In Europe, however, every single country is likely to have its own Big Three, if not Big Four or Big Five.
Palley states that "the large number of carriers in Europe boosts competition for customers and data revenues. This, in turn, pressures the carriers to obtain the best games and implement the best commercial services for their subscribers as soon as possible. The American Big Three can afford to move at their own deliberate pace, but the European operators can’t. That’s why European firms like Overloaded have access to sales vectors that US companies are still dreaming about, such as Premium SMS, PayPal and credit card payments, and WAP."

Palley notes that in Europe "the incentive structure is entirely different, because there are so many more opportunities for customers to discover and purchase products. Consequently, the best strategy there is to have as many products making money across as many regions and carriers as possible."

He also points out "Europe has its own unique set of challenges to wrestle with, to be sure. One of the most serious is localization, particularly when it comes to languages. Some operators simply refuse to accept games that aren’t in the local language at all. Maintaining the delicate balance of political considerations between all the various countries, operators, and business units in Europe can also require a serious outlay of resources, as hinted at above. This is especially true for US publishers attempting to do business in unfamiliar European territory, which explains why so many have purchased local companies that have experience navigating these dangerous waters."

Palley concludes that:
So, given the vast differences between the two markets, why is it important for US mobile games firms to pay attention to the European mobile content model? Besides the obvious answer--there’s money to be made over there!--it looks like the European way of doing business is expanding rapidly. New markets are also burgeoning across the fertile demographic soils of Africa and the Middle East, where European companies like Celtel have already set up shop.

More importantly, looking at how European firms operate now may give us a glimpse into the American market’s future, because our market model is likely to evolve towards theirs over the next two to three years. MNVOs like Amp’d Mobile and Helio will grow up and put pressure on the Big Three with their innovative content models, and off-deck portals will gradually gain a foothold as carriers loosen their restrictions.

Once American financial clout is married to European business practices, mobile gaming will start to live up to the hype. Until then, I highly recommend taking a fact-finding tour to watch the process unfold. And don’t forget the bitterballen!