Is mobile gaming in decline?

8 Nov 2007

New research claims the mobile gaming market suffered a reversal of fortune in the second quarter of 2007 as revenues for title publishers declined 9pc, compared with 11pc growth in the first quarter. These declines are prompting operators to look at potentially lucrative area of mobile video instead.

Despite the short-term setback, mobile gaming revenue is expected to nearly triple by 2011, growing to US$6.6bn, managing a compound annual growth rate (CAGR) of 23.2pc from US$2.3bn in 2006.

“While growth compared to the same period a year earlier was slightly positive, the second quarter dealt a significant blow to manufacturers that were expecting their profits to continue to rise,” said David Carnevale, vice-president, multimedia content and distribution for iSuppli.

“While the third quarter performance and the fourth quarter outlook appear optimistic, the pace of growth is slowing, causing great concern to content providers hoping to cash in on this market.”

Carnevale said one of the main problems is that the number of subscribers for mobile games remains quite small.

Game publishers’ and developers’ moves to broaden the awareness of mobile games will help build the subscriber base – but only if they target the right demographic.

He said the coming months expect to see game innovators focusing on characteristics that separate mobile gaming from other types of gaming, including mobility, connectivity, community and location awareness.

Because the current crop of mobile games is centred on casual players, Carnevale suggested one way to encourage a new demographic to play games on their mobile handsets would be to develop titles that support networked and/or multiplayer gaming.

He said allowing other users to play against and with their friends via wireless networks will encourage groups of gamers to adopt the platform quicker. These types of games may also reduce the churn-and-burn effect among targeted subscribers, an area of particular concern and importance for operators.

Because of uncertainty associated with mobile gaming, iSuppli says operators and content providers are turning to the mobile-video market. While still in its early stages, mobile-video holds the most upside potential among the premium content categories.

Most of the early mobile-video deployments are coming from operators that are streaming video over their networks. Mobile television services are debuting simultaneously worldwide and consumer acceptance has been most prolific in Japan and Korea. Notably, MobiTV announced that by February of this year their subscribers topped two million worldwide.

Mobile TV is a catalyst for the expansion of the mobile video market. As mobile TV services continue to garner subscribers, other services such as Video on Demand (VoD) and interactive viewing become more appealing to consumers.

Mobile-video operators are expecting big things from this market. iSuppli forecasts mobile-video revenue will reach US$14.6bn by 2011, rising at a whopping CAGR of 71.7pc from US$977m in 2006.

While significant barriers remain – including content availability, spectrum accessibility and uncertain business models – iSuppli recommends the earlier these obstacles are breached, the faster this segment can become the largest mobile content opportunity for operators and content providers.

By John Kennedy