If wireless gaming has any chance at all of penetrating the market deeply enough for game publishers to make money, it is with the coming generation of cell phone users. When Jupiter asked 1,600 U.S. cell phone users about the sort of data services they had used at least once on their phones in the last six months, the rate of interest in cell-based gaming among 18- to 24-year-olds spiked remarkably relative to other age groups.

Still, games almost certainly will run a distant third behind other forms of downloadable data. Jupiter estimates that U.S. spending on paid content over wireless will amount to a "paltry" $200 million over the next two years, and most of that will go to the simpler rings and screensavers, not games.

As Joe Laszlo, senior analyst, JupiterResearch says, "games are going to have a third as much revenue potential as ring tones and screen savers. That seems like a first guess."

Several important points bubble up from these numbers. First, text messaging is being underestimated as a force in mobile data, with almost 20% of all users having done it. Game companies that can find ways of weaving a gaming experience into that compelling mobile format could have a real killer app on their, and users', hands. No doubt the carriers would love them too, because text messaging eats up usage time or per-message fees, and the carriers desperately want games that will burn user minutes. Unfortunately for them, another stat, the very low rate at which cell phone users are even trying online games, suggests that live multiplayer contests are not likely. On a positive note, gender seems to have little to do with attraction to a game on a phone, since males and females equally had tried one. Since cell games (or at least the tolerable ones) tend to be familiar puzzle, card and basic arcade challenges, which more women tend to play, this platform may not suffer the gender gap of previous game platforms and could allow a much broader marketing plan.

Caveats abound when it comes to these early-stage findings, however. Jupiter's research polled the entire universe of analog and digital cell phone users, so it is not entirely predictive of customer behavior as advanced cells penetrate the market. Also, just because a mobile user performs a certain activity at least once in six months doesn't mean that experience will translate into the kind of repeat behavior that builds markets. Anyone who gets a phone with a built-in game like Snake or Blackjack is bound to try it now and then. Whether that customer is going to bother browsing for a game and then buying and downloading a title once or more is another story.

Money to Be Made

While not as shamelessly enthusiastic about the revenue potential of wireless gaming as some research analysts, Zelos Group does see a reasonable opportunity on this platform for publishers that can keep development costs low and cut good distribution deals. "There are low barriers to entry here, says analyst Billy Pigeon. Relative to other game platforms, "the margins are much, much larger. It's lower risk." Pigeon quotes game budgets of $25,000, which is on the very low end of the costs most of the major players claim for a mobile title. Still, he feels that "a game that secures decent placement with two or more leading carriers and enjoys mediocre success has the potential to generate several hundred thousand dollars in revenue."

Just Wait Till Next Year

While even the mobile carriers are remaining mum about the actual number of game sales they make currently, Vesa-Pekka Kirsi, senior manager, game applications, Nokia (Finland), says that we should have a decent sample by the end of this year. "Over the last six to eight months the information is starting to kick in on what is selling. Java games are priced at two to five Euros," ($2.30 to $6 U.S.), he says, "and that seems to be the price ratio the gamer is willing to pay." No genre seems to be emerging as a natural yet.

Fragmentation in hardware standards, a crowded field of developers, and a long value chain with many people taking their cuts along the way all make wireless gaming a challenge, he agrees. Nevertheless, shakeouts and standardization will come. For now, "the key to development today is to become an international seller," he recommends. "They need to sell widely. No company in the market can maintain itself in their home market."

Mobile Activity            All Users  Male    Female
Sent a short text message  19.80%     21%     18.80%
Checked e-mail             6.70%      8.40%   5.20%
Played an offline game     22.30%     22.30%  22.20%
Played an online game      1.60%      1.80%   1.50%

Mobile Activity            18-24 years  25-34 years  35-44 years
Sent a short text message  36.40%       19.60%       15.70%
Checked e-mail             7.30%        6.70%        9%
Played an offline game     40%          25.50%       21.60%
Played an online game      4.80%        2%           0.90%

Mobile Activity            45-54 years
Sent a short text message  11.60%
Checked e-mail             5.30%
Played an offline game     11.90%
Played an online game      0

Source: JupiterResearch

Growth Projections for Next-Gen Wireless and Gaming in the U.S. (all numbers
and dollar figures in millions)
                          2002    2003     2004      2005      2006      2007
Game-capable Handsets     7.9     22.5     42.4      52        59.7      67.1
Wireless Gamers           0.8     4.7      11.1      18.7      23        27
Wireless Gaming Revenues  $3.40   $41.90   $127.90   $254.30   $323.80   $385
Source: Zelos Group

Contacts: Joe Laszlo, jlaszlo@jmm.com; Vesa-Pekka Kirsi, +358 7180 08000, vesa-pekka. kirsi@nokia.com; Billy Pigeon 415/834-9444

[Copyright 2003 PBI Media, LLC. All rights reserved.]

COPYRIGHT 2003 PBI Media, LLC
COPYRIGHT 2003 Gale Group