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Video game industry switching on to cell phones
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Global mobile phone gaming market expected to grow six-fold to $3.8 billion in 2007
Updated: 5:10 p.m. ET June 03, 2004
LOS ANGELES/TOKYO - Koichi Okamoto's phone rings. Looking at the email message that appears on his mobile phone, Okamoto smiles and shakes his head.
<TABLE style="PADDING-LEFT: 15px" cellSpacing=0 cellPadding=0 align=right border=0><TBODY><TR><TD class=textSmallGrey vAlign=top align=middle>
</TD></TR></TBODY></TABLE>"This guy again? I've taken him down three times this week," Okamoto, a 26-year old waiter, says and then launches into a game of "mah-jong" with his latest challenger.
Forget the big-ticket home consoles and hot new handhelds, Okamoto -- who spends 500 yen ($4.50) a month on games -- is part of a legion of loyal customers making mobile phone gaming the fastest-growing segment of the $25 billion video game industry.
The global mobile phone gaming market more than doubled in 2003 to $587 million from a year earlier and is expected to grow six-fold to $3.8 billion in 2007, according to estimates from Informa Media Research in London.
The graphics may be simple and the game play sometimes cumbersome, but mobile phones have become an ideal platform for gamers looking to pass the time. They have also attracted fans who long for the days of less time-consuming games.
"Where you would play a cell phone (today) is kind of where you used to play an arcade machine," said Keith Robinson, president of Intellivision Productions and one of the pioneers of the early 1980s home console business.
The potential of the market is seen as so strong that Nokia, which saw poor sales in 2003 of a gaming phone called the N-Gage, has come back this year with a new model and a wider slate of games.
Nokia targeted serious gamers with a handset aimed at the device that dominates the market, Nintendo Co. Ltd.'s Game Boy Advance, but analysts say the expectations from most users for mobile phone games aren't that high.
"It's still very cheap commodity games and not particularly sophisticated, but users are happy with that," said Hiroshi Kamide, analyst at KBC Securities in Tokyo.
Fragmented market
The dominant players vary from market to market, but many are start-ups funded in part by seed money from investors like Intel Corp. and Qualcomm Inc., a shareholder in companies like G-mode Co. Ltd., Japan's largest mobile phone game developer.
Linktone Ltd., unlisted Jamdat, Mforma, Sorrent and Gameloft hold strong positions in the U.S. market, which has been slower to develop than Japan.
Growth rates in Japan -- where one in every nine people has played a video game on for their mobile phone -- are starting to flatten, but the U.S. market is beginning to take off.
One U.S. wireless carrier, Sprint PCS, has had 3.5 million game downloads already in 2004, and it expects to have its first phone to support three-dimensional graphics sometime later this year.
"You'll see hardware become more gamer-friendly," said Jason Ford, general manager of games for the carrier, a unit of Sprint Corp.
Against the backdrop of continued growth, market players say that consolidation is likely, given rising development costs and a growing number of companies looking to cash in.
"I think (over) the next six months, things are going to start to happen that'll force the issue," said Mitch Lasky, chief executive of Jamdat.
Larger game publishers also see the mobile phone market's potential and firms like Square Enix Co. Ltd. and THQ Inc. offer full-fledged wireless businesses that include everything from games to ring tones.
Part of the challenge for smaller firms, analysts say, is that various phones sold by wireless carriers often run on different software platforms with different button arrangements that require developers to cater games for each model.
Another challenge for the industry will be to protect the intellectual property rights of people who develop and own content to prevent the kind of digital theft that has plagued the music industry.
"It struck me that a business model based on downloaded games is excruciatingly vulnerable to piracy," said Matt Railo. a partner at the law firm of Mitchell, Silberberg & Knupp.
"The industry is so nascent that it still has time to react," Railo said. "If you don't get this issue, I can't imagine how many things you don't get."
($1-110.90 yen)
Copyright 2004 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters.
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