Ten Years of Mobile Gaming—and Its Future
In a wide-ranging presentation, GDC Mobile founding chairman Robert Tercek outlined some of the key steps the mobile games industry has gone through over the last 10 years. He started by pointing out that projections for growth of the market have been too aggressive in the past. In 2003, for example, Informa had forecast that by 2006 the market would be worth more than $3.6 billion. In reality, 2006 mobile revenue was under $2.5 billion.
According to Tercek, the mobile games industry got its start in 1997 when Nokia introduced Snake. Unfortunately it didn't do much to put mobile gaming on the map. The game wasn't original (was on PC first), it didn't help sell phones, carriers didn't market it and the developers weren't paid. Nevertheless, Nokia was able to leverage the game to position itself on the ground floor of a new industry.
As the years went by, a number of innovations took place, not just in technology but in billing systems. Tercek noted that the billing system on mobile really shapes the content experience. He said that the business of publishing is to make money, not art. To some extent other mediums have been shaped by business models as well. Tercek cited Charles Dickens who perfected the method of convincing readers to buy the next book and that the novel was shaped by the business model.
This applies even more so to the mobile games industry. In 2000-2002 the very first billing system that used networks as a platform emerged. Called NTT DoCoMode, the system made efficient use of micropayments and DoCoMode only took nine percent of the share of revenue. Within three years, it had 33 million subscribers and was the world's largest ISP; by comparison it took AOL 15 years to reach that level. Tercek commented that he was "surprised by how much innovation occurred early in this business."
In 2003 there were a number of important landmark moments, including the first "mega" download 3D title (Ridge Racer from Namco), which set a ballsy $12 price point. 2003 also saw the first real-time head-to-head multiplayer games in the U.S. Between 2002 and 2004, the industry welcomed innovation in music games with titles like Samba de Amigo and Name That Tune (Sonic), which Tercek said was "a perfect game" because it had a social element, made great use of the medium and you could purchase new tunes. During this same time period, there were also network aware games introduced, SMS to TV gameplay, and the first publisher branded game channels in the U.S.
Between 2003 and 2004, Tercek noted that there was a real rise of global publishers, and the art of getting games placed on top of the deck became hugely important. Scarcity became a problem (slots were filled), some publishers were given preferred provider status, and there was a real estate land grab, where publishers tried to expand there market share by buying other companies. One source said that the main shift in the value chain from 2001-2003 was the rise of publishers to the detriment of independent developers. In 2003 there was the first wave of strategic acquisitions and global expansion; in 2004 transatlantic and transpacific giants emerged; in 2005 "merger mania" was in full force (notably EA buying Jamdat for $680 million); and then in 2006 the merger frenzy cooled into tactical regional deal making.
Tercek also singled out Verizon Wireless' Get it Now service and the inclusion of Brew as a very significant move, and it gave other operators a model to emulate. In fact, Brew in general led to more success for developers than Java. One developer source said, "I've wasted more time with Java but made more money with Brew."
Another important moment, but in a negative way, was the "curse of the Crazy Frog." Tercek said that Jamba's "sleazy marketing practices" polarized the market in Europe and publishers were deprived of revenue. It had an impact in other parts of the world also; in China, for example, publishers were forced to have a double opt-in procedure, and if a user is asked "Do you really want to subscribe?" twice, it can be devastating.
Mobile gaming has faced a number of challenges in recent years. In general games are not a priority for carriers because they're more of a hassle and generate less revenue than other entertainment on phones. Also, the development and porting costs continue to rise; games for high-end phones routinely break the $1 million mark. And worse yet is that there is no long-tail in mobile. This is a "colossal failure of merchandising," said Tercek. There's no room on the menu for old titles and at some point the decision has to be made to stop back porting older games. Because of this, Tercek doesn't think there will be a long-tail in mobile for the foreseeable future. Another problem is that the mobile industry has a compressed cycle of rapid innovation, which doesn't allow for long periods of stability, as opposed to the console space that has 4-5 years of stability to generate revenue.
Looking ahead, Tercek believes Nokia will continue to be a very major player. He noted that although they were derided for the N-Gage, as a company they've been driving mobile with many billing/browsing innovations and he said that they should be applauded for their commitment to the space. Tercek said he foresees a number of trends ahead, including do-it-yourself marketing, outsourced games service, the continued rise of the Brew signature solution, the proliferation of free games (which will force devs to raise their quality), and the dominance of India and China, which are predicted to add another billion subscribers by 2010—and most of these people do not own PCs or PS2.
Ultimately, Tercek sees the mobile games industry growing to $7 billion by the end of this decade.