Mobile Games Give Consoles a Run for their Money

The Hollywood Reporter
December 20, 2004
By Paul Hyman

When a console video game sells over a million copies, that's big. In 2003, a record nine did. Last month, two widely anticipated, heavily advertised over-achievers - "Halo 2" and "Grand Theft Auto: San Andreas" -- sold slightly more than 3 million each. That's really big.

Then there's "Jamdat Bowling." It's sold several million copies and you've probably never even heard of it. How is that possible?

Because it doesn't play on Xbox, it doesn't play on PlayStation 2, it only plays on cell phones. The tiny sports game -- in which not a single person is shot -- was the number one mobile game in both 2002 and 2003, according to Mitch Lasky, CEO of Los Angeles-based Jamdat Mobile, the game's publisher. "Unfortunately, I can't talk about exactly how many units we've sold, but let's say it's just a small multiple less than what 'Halo 2' sold. It could certainly be on the bestseller list of games sold in North America in 2004."

And it's likely there'll be more and more mobile games outselling console games in the next few years.

"Everyone talks about the one billion cell-phone users in the world. That number is headed to one-and-a-half billion and even two billion very quickly," says Mike Yuen, director of BREW developer relations at San Diego-based Qualcomm. "Compare that to the Nintendo Game Boy which has sold perhaps 150 million consoles since it first came out in 1989. I mean, in one quarter alone, a large OEM phone manufacturer can pump out 30 million to 40 million units. So just by sheer scale, the cell phone becomes a proposition that's very hard to ignore as a game platform."

While not all handsets are equipped to play games, it is estimated that, in the U.S. alone - where there are currently 173 million cell phone subscribers -- there are 35 million to 45 million game-enabled, next-generation handsets, and that number is expected to triple by 2006.

"People tend to upgrade their phones every 12-18 months because of the new features that come with the latest models, such as video, cameras, and Internet capability," says Jeff Nuzzi, director of global marketing for Calabasas Hills, Calif.-based THQ Wireless.

2005 is expected to be a huge year for mobile gaming due to two technological advances: the introduction of 3-D graphics in the first quarter, and the launch of so-called 3G high-bandwidth networks by all the large cell phone carriers.

"That will mean really fast, DSL-quality data transfer rates," observes Jamdat's Lasky. "It won't have a profound impact on gaming because bandwidth isn't really the driving factor for us, but because it does impact video, music, and the like, it'll mean that you'll see new handsets with increased storage capabilities, larger screens, and faster processors. And all of that will make for a much more robust gaming experience in general. It'll give us just a fantastic set of handsets for us to work with, and that's the most important thing for us -- to have access to great handsets."

But with growth comes growing pains, and industry observers identify several challenges for mobile game publishers and developers, the primary one being the proliferation of handsets. A first version of a game will play on perhaps only two or three handsets; then that game needs to be ported to all the other existing game-capable handsets. It's like filming a TV show and then having to modify it for every single make and model of TV set in existence.

"It might cost us $50,000 to $150,000 to build that first version," says Lasky. "But then you must consider, for example, that you need a different version for a Verizon model of a BREW handset that is being sold in France. All told, you might have 500 different executables of a single game. It's hard to say what a single $100,000 game would cost in all those versions, but it might be double or triple the cost in order to fully port it."

Another hurdle will be transitioning development studios from 2-D games to 3-D.

"Development houses have built entire businesses on 2-D development," says Qualcomm's Yuen. "From a skills standpoint, will they have the right people to build games when they transition to 3-D? Some companies are buying up other developers even now to acquire that talent."

3-D games will certainly be more costly to develop.

"A few years ago, one person could build a simple 2-D game for $10,000," notes Yuen. "Now you're seeing budgets that are $50,000, $100,000, and sometimes several hundred thousand dollars if a game is complex and, for example, involves multiplayer. It's the exact same thing you're seeing in the rest of the video games industry where production values are boosting budgets."

But, in the rest of the video game industry, a $100,000 budget would be quite a bargain, what with console games sometimes costing $10 million to develop and, perhaps, another $10 million to market.

Why all the fuss over mobile game budgets that are significantly less?

The simple answer is that the retail price of a console game is often $50, 10 times that of a mobile game which average $4 or $5 each. Even so, says Jamdat's Lasky, the return on investment can be impressive when you consider how many units are often sold, that there are no manufacturing or replication costs, that there is no physical inventory to warehouse, that there are no licensing fees to pay to the console hardware manufacturers.

The year-to-year revenue growth that mobile gaming is experiencing is something unheard of in the console and PC games worlds. While U.S. video game sales inched up from $6 billion in 2001 to $6.9 billion in 2002 to $7 billion in 2003, according to the Entertainment Software Association, U.S. mobile game revenues are expected to soar from $345 million this year to $590 million in 2005 to $1.5 billion in 2008, predicts Schelley Olhava, a video games analyst at research firm IDC.

"I'm not sure the numbers for this year or next will stun anyone," says Qualcomm's Yuen. "I mean, $345 million isn't $10 billion like the video games industry in general. But the year-over-year growth is pretty phenomenal."

"There are multiple reasons for the growth," says IDC's Olhava, "including the proliferation of handsets capable of playing better, more advanced games. There has been a huge focus on quality games over quantity."

"In 2004, you saw a lot of developers just taking a brand and throwing in onto the phone," notes Qualcomm's Yuen. "It's like back in the '90s when publishers were trying to make games out of Hollywood movies with no regard for the quality of the game. But to make a good mobile game, you need to consider the restrictions of the phone, particularly the size of the screen. You need to determine what is the essence of the property, whether it is a TV show or a movie. What makes it good and how can you give the mobile gamer a related experience, perhaps with the same story or characters, but with gameplay that's appropriate to the platform."

He cites Jamdat's version of "Lord Of The Rings" as a satisfying port of the Electronic Arts game based on the movie.

"I can tell you that it didn't look anything like the EA game. It didn't depend on huge graphics, but it involved going on a quest, and it turned out pretty well. It did what you can do on a phone and captured the essence of the movie. And it was built in conjunction with New Line Cinema and became part of an integrated marketing campaign for the movie."

Mobile developers are also aiming to take advantage of the tremendous youth audience for cell phones. According to the Yankee Group, half of all children between ages 11 and 17 will have their own cell phone by year-end 2004. Which is inspiring companies like THQ Wireless to build games not only from film licenses in general but from films that attract young moviegoers. It recently launched the "SpongeBob SquarePants Movie Game" for mobile phones which has become a top seller for THQ on Verizon.

"2005 will see a proliferation of mobile games based on big movies that will be released at the same time as the movies," says THQ Wireless' Nuzzi. "The traditional categories and genres that you see in PC and console gaming are taking shape in the mobile gaming world as well."

As for the next two to three years, it's very likely that there will be serious competition between the quality of games on phones and that available on handheld gaming units, like Nintendo's and Sony's, according to Qualcomm's Yuen.

"I remember when the traditional game publishers used to say that because the gaming experience you get on a phone was so much less than what you get on a handheld, they didn't want to bother with mobile gaming yet," Yuen notes. "But two to three years from now, those publishers won't be able to ignore the phone market. If they're launching a big title at that time, the phone market won't be an afterthought; they'll want to release it on wireless, too. Wireless will become the next big platform, and you heard it here."