Why mobile games need smart retailing..

A recent Business Week article (Tiny games for a giant market, June 23, 2006) about mobile games brought out some fairly obvious but interesting facts about the mobile gaming industry. The article estimated that mobile gaming could be an $18 billion business by 2010, exceeding ringtone and SMS revenues. While painting this optimistic picture, the article also highlighted some key obstacles the industry will have to overcome to meet these forecasts. A few thoughts on how game developers and publishers can use retailing models from the physical retail world to scale up exponentially:

Games not appealing enough

While the Trip Hawkin’s (CEO, Digital Chocolate, a leading mobile game developer and publisher) and Larry Shapiro’s (VP,Walt Disney Internet Group) of the world go on about socially networked games and multi-player games as the future, the industry needs to step back a little and look at typical mobile game playing behavior . As the article mentions, casual games form a majority of the mobile gaming market. Clearly, the consumption behavior of mobile games lends itself to this. A majority of mobile game playing happens in ‘time killer mode’ – while waiting for a train, at the dentist, at an airport, etc. This means the game needs to be easy to learn and easy to play without requiring great skill or concentration. Therefore, game developers and publishers should focus on producing great “casual games” which have mass appeal instead of putting their effort on reproducing console games for the mobile or games with great special effects.

Prices too high

The economics of downloading a game over the operator’s network means that game publishers have very little option but to price their games at $5 or higher. It is hard to imagine operators lowering their obscenely high share of content revenue in the foreseeable future (between 30% and 50%). This means that the onus is on game publishers, distributors and content retailers to drive down price points and make it more attractive to consumers to spend their money on mobile games.

One option is to use technologies that give consumers flexible pricing options like rentals for “n” plays of the game. So for example, a consumer with 15 minutes to kill at an airport may be willing to spend $1 for 3 plays of a game, but may find the $5 price point for outright purchase too high.

A second option is to use distribution options that bypass the operators network, thus allowing games to be retailed a much lower price points. These options include Bluetooth kiosks, PC based purchase and transfer to the phone, etc. However, the bigger publishers who are currently dependant on operator decks for a majority of their revenues may risk incurring the wrath of operators by pushing too hard on alternative distribution. Mitch Lasky’s (Electronic Arts) recent comments on going D2C and the subsequent “misquote” drama is sufficient proof. Interestingly, physical retailers all over the world are waking up to the possibility of retailing mobile content through their retail outlets and are keenly exploring options.

Only 4% of mobile users purchase or download games.

Surveys show that while 50% of mobile users play games that are pre-loaded on their phone, but only 4% actually purchase and download games. While a number of factors may influence purchase behavior including data plan subscription, price sensitivity, etc, a tried and proven way of increasing purchase behavior is to offer free trials of games, in other words “try before you buy”. Try before you buy is not a new concept and has been around for at least a couple of years now and most game publishers and retailers acknowledge the success they’ve experienced. However, the problem game publishers face is in re-writing game code to enable try before you buy for their large catalogs (larger game publishers have 30,000 SKU’s or more), across all the hundreds of devices and network and billing anomalies. The need of the day is a technology or tool that allows game publishers to enable try before you buy easily and distribute games in minimal time. Such tools already exist in the market and game publishers need to partner with technology companies and make investments if required to refine and develop these tools.

Here’s to the $18 billion pie that’s there for the taking..

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About Deepak
Venture Capital and M&A advisor, Entrepreneur, Startup enthusiast..

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