“We don’t think (wireless) is quite mass market enough, and the business model is not quite there yet,” said Trudy Muller, spokeswoman for Electronic Arts, the nation’s No. 1 video-game maker, in explaining why the company has not entered the wireless market.
Although many have echoed EA’s assessment of the budding market for wireless video games, not all are in agreement. Indeed, the market for wireless video games is growing by leaps and bounds, with new games introduced at a staggering pace and new players entering the industry at a similar rate. It has become clear that there’s money to be made in the wireless gaming market-for those willing to overcome the industry’s obstacles.
Research and consulting firm IDC predicts the market for wireless games in the United States will surpass that of ring tones, reaching $350 million in revenues by next year. Worldwide the numbers are much bigger-$5 billion by 2005. It’s certainly nothing to scoff at, and plenty of players have already proven the potential of wireless games.
Startups Jamdat Mobile Inc., Mforma and Mobliss-early players in the wireless gaming market-have all managed to reach profitability. A number of other wireless pure-plays are hoping for similar successes. The market is growing at such a rate that several major gaming and entertainment companies have decided to try their hand in wireless -rejecting the position of EA and others. And in some cases they have managed to score significant revenues.
“Our clear goal is to be a leader in this space,” said Tim Walsh, president of THQ Wireless.
THQ is the nation’s No. 2 maker of video games. The company builds games for Microsoft Corp.’s Xbox, Sony Corp.’s PlayStation and desktop computers and sells such well-known titles as “Red Faction” and “MotoGP.” The company in 1999 began researching wireless, following a meeting with Siemens AG about applications for third-generation mobile phones.
“From that beginning meeting with Siemens we realized there’s a lot of potential in the business,” Walsh said.
Fast forward four years later, and THQ Wireless is one of the wireless industry’s biggest games makers. The company won’t disclose its revenues, but said it is profitable. Further, THQ has expanded beyond the realm of just video games and is now offering a range of wireless content, from information services to text-messaging applications. The breadth of THQ’s technology helped it land one of its most notable deals-the license to sell wireless content and applications based on the popular “Simpsons” animated TV show.
“Games are where we began … but what you can deliver in wireless is much more broadly defined,” Walsh said.
THQ isn’t the only major entertainment company to enter wireless. Sega.com last year launched its own wireless division, Sega Mobile, and offers several popular games. On the entertainment front, Sony Corp. has been extremely active in wireless, with its music and motion-picture divisions offering a variety of content. Indeed, Sony Pictures Mobile scored 120,000 subscribers and $2 million in revenues in just 10 months with only two games. However, THQ, Sega.com and others are in the minority-to date the wireless gaming market is dominated by wireless pure-play companies.
“The mainstream gaming companies haven’t really gotten into wireless,” said Schelley Olhava, an analyst with IDC.
Activision, Take 2 Interactive, Ubisoft Entertainment and other major video-game companies-including EA-have so far declined to play directly in wireless. However, most have used wireless as an advertising vehicle for their console games. For example, EA licenses some of its sports games to wireless gaming company Sorrent Inc. Gameloft built a wireless version of Ubisoft’s popular “Prince of Persia” game. And the trend only seems to be increasing.
“As for licensing, there’s some revenues there without us expending resources on it,” EA’s Muller said. “It’s sort of a toe in the water.”
But wireless, some argue, is an entirely different animal than the Xbox and PlayStation console market for video games.
“When (gaming companies) look at wireless, it’s a very different business,” said IDC’s Olhava.
In the console video-game market, publishers like EA work with console makers like Microsoft and Sony to build games for Xboxes and PlayStations. Console makers must approve each game built for their system and typically take $10 from the sale of a $50 game. The situation is essentially the same in wireless, with carriers taking between 10 and 50 percent of the revenues from each game they sell.
However, building games for consoles like the Xbox and PlayStation is much different than building a mobile-phone game. First, development costs are much different-a console game generally costs between $5 million and $10 million to make, while a wireless game costs between $50,000 and $100,000. Further, in most cases wireless games must be modified for each mobile-phone model and each carrier that sells the game, while a console game must be built only once to run on every Xbox or PlayStation.
“It’s a very different industry,” Olhava said.
Nevertheless, the future of the wireless gaming market one day may well include many of the world’s console game makers. Nokia Corp. has been on the forefront of expanding the world of wireless video games. For the launch of its N-Gage mobile phone/video game device, the company lined up games publishers including EA, Eidos Interactive, Activision and others to build N-Gage games. Nokia further blurred the lines when it announced it would design and develop games for the N-Gage, joining the ranks of video-game developers. However, most video-game publishers like EA actually use third-party companies to develop their games; Nokia has a deal with independent games maker Torus Games to develop its self-published N-Gage games.
THQ Wireless argues that wireless is already a major aspect of the video-game industry. In trying to score the rights to make games based on movies or popular characters like Scooby-Doo and SpongeBob SquarePants, THQ can offer to sell wireless games as well as console games. Indeed, Walsh said THQ scored the rights to make games for the upcoming “Punisher” motion picture due in part to its wireless division, and will make both “Punisher” console and mobile-phone games in conjunction with the release of the film in April.
“Now as a company we can bring both the wireless and the console business to the table in order to promote those brands,” Walsh said. “I want to be able to really deliver all the things the consumer expects on that brand.”
As the wireless and console video game industries continue to move forward, more players will likely find themselves agreeing with Walsh.
“I think both sides are starting to understand each other,” IDC’s Olhava said of wireless and console games makers.
“We definitely have our eye on (wireless),” said EA’s Muller.
