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29 Mar 2005

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Mobile games have passed the important US$1bn mark for revenues during 2004 and global revenues for 2005 are approaching US$2bn, according to a senior Ovum analyst.

The interest in mobile games is rising across the media industry with big games producers, such as Electronics Arts, spinning their best games into mobile versions.

According to a briefing note by senior Ovum analyst Dario Betti, mobile games initially suffered from the unexpected and widely publicised success of ringtones and logos. “It is difficult to stand out while your ‘older brother’ has gained plenty of notoriety,” he said.

“Until recently, the focus of the mobile content industry was on phone personalisation. Meanwhile, mobile games have grown nicely in terms of revenues and user penetration,” said Betti.

According to Betti, mobile games passed the important US$1bn mark for revenues during 2004 with global revenues close to US$2bn forecast by the end of this year. At present phone personalisation still dominates the market for wireless content, with revenues of US$4.7bn in 2004, but Betti believes games are closing the gap.

“However, we are not talking about an industry comparable to the huge market for PC and console games, which is worth about US$23bn. The mobile games market is just waking up to interest from players from the mobile, games and media industry: it should grow to about US$5.3bn by 2008,” he added.

Betti continued: “Users are familiarising themselves with mobile games and new games are being developed to reach outside the typical young male target group. In western Europe, gamers represented 12pc of total users at the end of 2004. Importantly, not all phones can download mobile games yet, as not all of them support Java or Brew. However, the penetration of these phones is growing fast. We are looking at 44pc of the installed base in 2004, but they are expected they to reach 83pc of phones by 2008. Hence, by then 18pc of mobile phones users will be playing games.”

As a result, Betti said, interest in mobile games is very high across the media industry. In the first week of March, Yahoo! announced that it is opening an in-house studio dedicated to creating games for mobile phones. Yahoo! already has an agreement with Verizon Wireless and is looking to expand to other carriers. Traditional gaming companies are now turning their attention to mobiles: they are spinning their best games into mobile versions. For example, Electronic Arts plans to release a mobile version of The Sims later this year.

Betti said the business ante is rising. “Mobile gaming has its home-grown champions such as Jamdat, which went public in September 2004, proving that successful exits are a real possibility. And consolidation is still taking place, with some larger and healthier players emerging.

“In December 2004, the US-based company InfoSpace closed two deals in the space of 10 days: it acquired Elkware, a German mobile games company, for approximately US$26m in cash. A week later it announced its acquisition of UK-based IOMO, an award-winning developer and publisher of mobile games, for US$15m in cash. There are many more deals: Sorrent bought Macrospace in December and in February French company InFusio bought the German developer Mobile Scope.

“Not all of the cards have been played, but it already looks like mobile gaming is a serious business,” Betti concluded.

By John Kennedy