Two years ago, the wireless gaming market in the United States comprised a few tiny start-ups selling a handful of black-and-white, text-based games. The wireless gaming market today is a multimillion-dollar industry with dozens of players and literally thousands of games.
Consolidation is rampant. Earnings for some companies have passed from red to black. And there are predictions of as many as 30 million U.S. wireless gamers by the end of this year. “It means that this industry is maturing,” said Robert Tercek, chief strategy officer for wireless entertainment publisher Mforma.
The pace of evolution is furious. Prior to the advent of Java and BREW gaming platforms, most games worked either through WAP or text messaging. Such monochrome games were usually slow, turn-based offerings, and load times for new screens could last a few seconds or more. Things began to change in the fall of 2002, however, when the nation’s handset makers began selling mid-range phones that featured color screens and supported downloadable applications.
“That was when the bell rang,” Tercek said.
Sun Microsystems Inc.’s Java technology and Qualcomm Inc.’s BREW platform allow users to download games to their handsets over the air. The games are stored locally and run directly on the phone itself. Instead of static pictures and black-and-white text, Java and BREW support colorful animated characters and richly rendered environments. Games like “Frogger,” “Tetris” and other arcade favorites have found a new home.
But that’s just the start. By the end of this year, U.S. wireless users will be treated to games that allow them to play directly against other users, rather than just the computer program itself. Further, some phones will even feature three-dimensional graphics, allowing gamers to fully explore an environment rather than moving from one side of the screen to the other.
“This is just day one,” said Thor Gunnarsson of U.K.-based gaming company Ideaworks3D. “We’ve hardly started yet.”
Such rapid growth has forced the industry to make some significant changes. On the carrier side, the focus has turned from quantity to quality. Rather than offering hundreds of games simply because they could, operators now are looking to narrow their focus and not overwhelm their subscribers.
“We’re trying to be selective for our customers,” said Danielle Perry, a spokeswoman for AT&T Wireless Services Inc. “How on a mobile device can you run through 400 games?”
AT&T Wireless last month streamlined its games offering to delete repetitive games and focus on popular, quality titles. Instead of five different versions of poker, AT&T Wireless said it will choose the best and only offer that version. The carrier also updated its Internet site to help subscribers research games before purchase and introduced gaming critiques from Wireless Gaming Review.
“Not only have we lowered the number of games and cut down on the number of repetitive games … we’re also doing more on customer improvement,” Perry said. “We’re talking mainstream now.”
And in an effort to entice additional gamers, AT&T Wireless recently launched a program that will allow users to try up to five different gaming titles free, rather than paying between $3 and $5 for each game.
Perry said the AT&T Wireless streamlining was due to the massive number of games available in the market. Indeed, other carriers are also shoring up their offerings in a similar effort. Sprint PCS, for example, last year formed its PCS Game Board, a 15-person panel that evaluates each game submitted to the carrier. Those that are new, interesting and fun are added to the carrier’s portfolio of games-generally referred to as its “deck”-while older games are then removed. Sprint keeps about 250 game titles and adds new games every few days, said Jason Ford, general manager of the carrier’s games offering.
“We want to make sure we have close relationships” with every game provider, Ford explained. Ford has served as the head of Sprint’s gaming business for three years.
Such management has paid off, Ford said. In conjunction with the Electronics Entertainment Expo (E3) video game trade show, Sprint announced it has sold more than 3.5 million downloadable games this year, bringing its total sales since 2002 to almost 10 million.
The massive nature of the U.S. gaming market, combined with the streamlined approach carriers are now taking, has served to put a squeeze on the market’s gaming vendors. Further, the costs of developing a wireless game are increasing at a staggering pace. A little more than a year ago, the cost to develop a wireless Java or BREW game was between $25,000 and $50,000. Today, that cost has more than doubled. And as technology evolves and handsets become more powerful, such prices will only increase more.
“I think we’ll probably hear about our first $5 million mobile game by the end of this year, if not higher,” said Ideaworks3D’s Gunnarsson. “Those will be very much the exception to the rule in the early instance, but we hear about games that are now coming up on half a million to $1 million in production, and that will definitely accelerate.”
Games for console stations like Microsoft Corp.’s Xbox and Sony Corp.’s PlayStation 2 typically run between $10 million to $15 million to develop, with a few as high as $20 million.
With such conditions in the wireless market, there can be only one result. “The answer is consolidation,” said Mforma’s Tercek. Indeed, Mforma recently purchased Korean gaming company MobileGame, THQ Wireless purchased Minick, Square Enix purchased UIEvolution, Info- Space Inc. purchased Moviso, Index Corp. purchased Mobliss-and the list goes on. Tercek said only the largest games providers-those with an international reach-will be able to keep pace with the market.
In 2003, “there were a lot of small companies that scrambled to define themselves,” Tercek said. “By the end of 2004, you’ll see a handful of leading companies emerge. In the middle of the value chain you can expect some consolidation.”
To maintain their lead, games providers will have to stay on the industry’s cutting edge as well as attract multiple market segments with a variety of strategies.
“We are focusing on quality over quantity,” said Jill Braff, vice president of marketing for U.S. games vendor Sorrent Inc. “It’s a no-brainer that the market is going to continue to explode.”
Braff said Sorrent is going to maintain its competitive edge by staying on top of the technological curve. Companies that offer 3D games and multiplayer functions likely will stay ahead of the competition, she said. Further, Braff said, Sorrent plans to target a variety of audiences, including sports enthusiasts, casual gamers, hard-core gamers and younger players. The focus stands in stark contrast to Sorrent’s original aims when the company launched in 2001. Helmed by video game designer Scott Orr, Sorrent focused solely on sports games and worked closely with Fox Sports.
However, management disagreed over Sorrent’s direction, an argument that eventually caused Orr to resign and video game executive Greg Ballard to take his place.
“Scott firmly wanted to do sports and sports only,” Braff said. “Greg understood that there was more to mobile games than sports.”
Tercek said Mforma is taking a similar strategy. The company recently licensed Atari Interactive’s Milton Bradley and Parker Brothers brands and will distribute wireless versions of “Connect Four,” “Checkers” and other games. Tercek said such brands appeal to a wide range of audiences.
“We think the mobile market has moved on,” Tercek said. “That means casual games will be more important.”
“It’s a broader market, so the game content is going to have to change on this new market.”
