Games on cellphones becoming serious business

reuters.com | Wed Sep 21, 2005 7:12 PM ET8
By Tarmo Virki

HELSINKI (Reuters) - Since graduating from university Maija Parjanen has mostly been paid to play games.

Eight hours a day, five days a week, she beeps and clicks her way through the working day, testing new mobile phone games for Helsinki gaming studio Sumea.

"When my friends ask me what games to buy, I usually suggest one-button games, which can be played well even on cheaper phone models," said the 27-year-old in an office much like any other in the Finnish capital's high-tech district Ruoholahti.

Small screens and limited computing power restrict how fancy mobile phone games can be, but customers want them, either already on their new phones or to download -- and they are willing to pay for the privilege.

The increasing demand has grabbed the attention of conglomerates seeking growth prospects. In order to keep ahead, games manufacturers like mobile game studios and boutique firms have started merging to reach the scale needed to meet demand.

Sumea was bought by U.S. firm Digital Chocolate last year, the same year the mobile phone games market passed the sales milestone of $1 billion.

Industry analysts expect average annual growth of at least 50 percent for the next five years.

"After the market passed the $1 billion mark it is clearly being noticed more ... Everybody wants to get into this market in the early phase," said Matti Airas, chief executive of Finnish gaming firm Fathammer.

Airas expected the market to consolidate over the next 6 to 18 months. "In 18 months entering this market will be very expensive," he said.

A STEP BACK IN TIME

Groups like Walt Disney Co. (DIS.N: Quote, Profile, Research) and Time Warner Inc. (TWX.N: Quote, Profile, Research) are lining up for a share of the new growth market.

Media group Time Warner invested $7.5 million last month in privately held Glu Mobile, which was born only last December when gaming firm Sorrent Inc. bought rival Macrospace Ltd.

Video game firms Electronic Arts Inc. (ERTS.O: Quote, Profile, Research) and THQ Inc. (THQI.O: Quote, Profile, Research) have also entered the business as growth in their traditional market has slowed. They are now among the biggest cellphone gaming firms.

Merger and takeover deals have grown bigger as the market has increased. Jamdat Mobile Inc. (JMDT.O: Quote, Profile, Research) paid $137 million for Blue Lava Wireless with its 15-year global license for Tetris, which industry players say has totted up more sales than any other mobile phone game.

While Tetris is the most popular game to buy, Nokia's (NOK1V.HE: Quote, Profile, Research) Snake, pre-installed on about 250 million phones from the world's top handset maker, is the most widely distributed.

As companies cozy up to gain market share, they may want to reflect on the common link between success stories like Tetris and Snake -- simplicity.

"The hit will always be some very simple, retro-style game. It has to be something the consumer would be able to enter very easily," said Juha Ruskola, head of European mobile gaming operations at RealNetworks Inc (RNWK.O: Quote, Profile, Research).

The U.S. Internet media software group, known for its RealPlayer software, bought Finnish mobile games firm Mr. Goodliving earlier this year in a $15 million deal.

QUICK BURSTS OF FUN

Ilkka Paananen, head of European operations at Digital Chocolate, agreed that simple games would work best.

"It is important for the sector not to fall into the same trap (as the video) console games industry ... where the audiovisual effects surpass anything else," he said.

"If you're really interested in the Lord of the Rings, please go to the movies."

Vesa-Pekka Kirsi, European head of games publishing at Nokia, said the rules of the mobile gaming industry differ from consoles, where players can sit at their screens for hours.

"The mobile phone game has to be quick-in, quick-out," Kirsi said. "Users are not expecting you to be able to play on your mobile phone like you play on your PC."

Research firm IDC said recently that most mobile gamers want short bursts of entertainment, with three out of four cellphone players active for less than 15 minutes at a time.

"It's a quick way to step out of the environment," said full-time player Parjanen.

Industry players agree the most successful games will be designed to be played anywhere, using just one thumb.

Parjanen said that in addition to office work, she also likes to play video games at home -- but only on a console.

"I do not like to mix work and pleasure," she said.

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