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`MOBILE GAMING: A Framework for Evaluating the Industry 2000-2005
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`JUSSI-PEKKA PARTANEN
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`Copyright (C) 2001 Gaptime Century, Ltd.
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`MOBILE GAMING: A FRAMEWORK FOR EVALUATING THE INDUSTRY 2000-2005
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`Abstract (English)
`
`Author:
`
`Jussi-Pekka Partanen, Gaptime Century Ltd.
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`Report title:
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`Mobile Gaming:A Framework for Evaluating the Industry 2000-2005
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`Date:
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`15.06.2001
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`Pages: 110
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`A mobile game is a commercial product that is distributed to the customer using
`mobile operator’s network. The game is an interactive product; many kinds of
`entertainment services are not covered by this report, such as joke or comics services
`or the popular ring tone and logo services. What distinguishes mobile games from
`other kinds of entertainment services is that the interactivity creates so-called
`stickiness for the service. The games may be addictive and offer something more than
`“disposable” fun, as operator logos do.
`
`The target of this study is to give an introduction to the mobile gaming industry
`and build a framework for analysing the success of mobile game products and
`companies. Currently the mobile gaming industry is in the introduction phase. Many
`start-up companies are developing different games and technologies and believe that
`they will be the winners when the market moves from introduction to the growth
`stage. At this point the company must have the critical mass in order to flourish,
`otherwise the companies with bigger better partnering networks and marketing and
`sales forces are eating the smaller one.
`
`The framework depends on the following methods: the industry and mobile game
`life cycle model, value distribution in the value delivery network and external company
`analysis. In the study these methods will be applied to the industry segments taking
`factors such as technological development and mobile connection penetration in the
`target group of mobile games into account.
`
`The key findings of the study are that the players in the mobile gaming industry
`see the future scenarios very differently: some believe in text-based games and some
`believe that premium 3D-games will take over the market very soon. Very few
`companies have made definite strategies that they would be pursuing; it seems
`rather, that the industry is currently lacking persistence and changes the focus
`whenever a new technology is introduced. The framework introduced by this study can
`be helpful either for the companies entering the market or for the existing companies.
`It presents questions and problems that the management of a company has to tackle,
`if it wants to be successful in the industry.
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`Keywords:
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`Mobile gaming, wireless gaming
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`MOBILE GAMING: A FRAMEWORK FOR EVALUATING THE INDUSTRY 2000-2005
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`About the author
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`Mr. Jussi-Pekka Partanen works as managing consultant conducting
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`research on mobile B-to-C services, especially in entertainment services and
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`mobile gaming. He holds a master’s degree in computer science from
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`Helsinki University of Technology specializing
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`in telecommunications
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`venturing.
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`
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`Gaptime Century, Ltd. is a consulting company, that offers software
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`engineering and consulting services for companies related to IT and
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`telecommunications industry. It is doing extensive research on various
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`subjects to be able to apply the most recent industry knowledge in the
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`projects.
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`
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`In Espoo, 6.6.2001
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`
`
`Jussi-Pekka Partanen
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`Gaptime Century, Ltd.
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`jussi-pekka.partanen@gaptime.com
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`+358 40 563 1296
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`MOBILE GAMING: A FRAMEWORK FOR EVALUATING THE INDUSTRY 2000-2005
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`ABSTRACT (ENGLISH)................................................................................................................................ 2
`
`ABOUT THE AUTHOR ................................................................................................................................. 3
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`LIST OF FIGURES......................................................................................................................................... 8
`
`1
`
`INTRODUCTION.................................................................................................................................. 10
`
`BACKGROUND.................................................................................................................................. 10
`1.1
`RESEARCH PROBLEM........................................................................................................................ 10
`1.2
`OBJECTIVES OF THE RESEARCH........................................................................................................ 11
`1.3
`1.3.1
`Building the framework............................................................................................................ 11
`1.4
`SCOPE OF THE RESEARCH................................................................................................................. 12
`1.5
`RESEARCH METHODOLOGY.............................................................................................................. 12
`1.6
`FRAMEWORK.................................................................................................................................... 12
`1.6.1
`Value delivery network method................................................................................................ 13
`1.6.2
`External analysis of companies ............................................................................................... 14
`1.6.3
`The life-cycle model ................................................................................................................. 15
`1.7
`STRUCTURE OF THE STUDY .............................................................................................................. 16
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`2 MOBILE GAMING............................................................................................................................... 17
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`DEFINITIONS..................................................................................................................................... 17
`2.1
`2.2 MOBILE TERMINAL TYPES................................................................................................................ 18
`2.3
`GAME TYPES .................................................................................................................................... 19
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`3 CURRENT MARKET SITUATION ................................................................................................... 20
`
`INDUSTRY STRUCTURE .................................................................................................................... 20
`3.1
`3.1.1
`Value chain .............................................................................................................................. 20
`3.2
`BUSINESS LOGICS............................................................................................................................. 21
`3.2.1
`Revenue model and value distribution..................................................................................... 21
`3.2.2
`Content providers..................................................................................................................... 21
`3.2.3
`Service providers ..................................................................................................................... 22
`3.2.4
`Transmission providers............................................................................................................ 22
`3.3
`CURRENT TECHNOLOGIES ................................................................................................................ 22
`3.3.1
`Network Technologies.............................................................................................................. 22
`3.3.2
`Service Technologies ............................................................................................................... 23
`3.3.3
`Middleware Platforms ............................................................................................................. 24
`3.3.4
`Operating Systems ................................................................................................................... 24
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`MOBILE GAMING: A FRAMEWORK FOR EVALUATING THE INDUSTRY 2000-2005
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`Game technology ..................................................................................................................... 24
`3.3.5
`3.4
`PLAYERS IN THE INDUSTRY.............................................................................................................. 25
`3.4.1
`Content providers..................................................................................................................... 25
`3.4.2
`Service providers ..................................................................................................................... 25
`3.4.3
`Transmission providers............................................................................................................ 26
`3.4.4
`Handset manufacturers............................................................................................................ 26
`3.4.5
`Middleware software developers ............................................................................................. 26
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`4
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`INDUSTRY EVOLUTION ................................................................................................................... 28
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`TRENDS IN MOBILE GAMING ............................................................................................................ 28
`4.1
`4.1.1
`Java.......................................................................................................................................... 28
`4.1.2
`Ubiquitous gaming................................................................................................................... 29
`4.1.3
`Community model .................................................................................................................... 29
`4.1.4
`Cross media gaming ................................................................................................................ 31
`4.1.5
`Industry dualism....................................................................................................................... 31
`4.2 MARKET EVOLUTION ....................................................................................................................... 32
`4.2.1
`Market lifecycle........................................................................................................................ 32
`4.2.2
`Product lifecycles..................................................................................................................... 34
`4.2.3
`Value Delivery Network........................................................................................................... 35
`4.2.4
`Revenue and pricing model...................................................................................................... 36
`4.2.5
`Mobile connections penetration............................................................................................... 37
`4.2.6
`Customer base.......................................................................................................................... 37
`4.2.7
`Target group users................................................................................................................... 38
`4.2.8
`Money spent on mobile games ................................................................................................. 41
`4.2.9
`Market size and growth rate .................................................................................................... 42
`4.3 MARKET SIZE COMPARISON ............................................................................................................. 44
`4.4
`EMERGING TECHNOLOGIES .............................................................................................................. 46
`4.4.1
`Network Technologies.............................................................................................................. 46
`4.4.2
`Service Technologies ............................................................................................................... 46
`4.4.3
`Middleware Platforms ............................................................................................................. 47
`4.4.4
`Operating Systems ................................................................................................................... 50
`4.4.5
`Game technology ..................................................................................................................... 50
`4.4.6
`Mobile terminals ...................................................................................................................... 52
`4.5
`EXTERNAL ANALYSIS: THREATS, OPPORTUNITIES AND CHALLENGES IN THE INDUSTRY................ 53
`4.5.1
`Content providers..................................................................................................................... 53
`4.5.2
`Service providers ..................................................................................................................... 55
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`MOBILE GAMING: A FRAMEWORK FOR EVALUATING THE INDUSTRY 2000-2005
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`4.5.3
`4.5.4
`
`Transmission providers............................................................................................................ 59
`Terminals vendors.................................................................................................................... 59
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`5 APPLYING THE FRAMEWORK ...................................................................................................... 61
`
`ENTERING THE MARKET................................................................................................................... 61
`5.1
`5.1.1
`Content providers..................................................................................................................... 61
`5.1.2
`Service providers ..................................................................................................................... 62
`5.1.3
`Transmission providers............................................................................................................ 63
`5.2
`AVOIDING THE TRAPS ...................................................................................................................... 63
`5.2.1
`Zero revenue trap..................................................................................................................... 63
`5.2.2
`The pioneer trap....................................................................................................................... 64
`5.2.3
`Overkill trap............................................................................................................................. 64
`5.2.4
`Marketing trap ......................................................................................................................... 66
`5.2.5
`Technology trap ....................................................................................................................... 66
`5.3
`CREATING THE KILLER APPLICATION............................................................................................... 66
`5.3.1
`Product..................................................................................................................................... 66
`5.3.2
`Price......................................................................................................................................... 67
`5.3.3
`Place ........................................................................................................................................ 68
`5.3.4
`Promotion ................................................................................................................................ 68
`5.4
`FUTURE WINNERS AND LOSERS........................................................................................................ 69
`5.4.1
`Content providers..................................................................................................................... 69
`5.4.2
`Service providers ..................................................................................................................... 69
`5.4.3
`Transmission providers............................................................................................................ 70
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`6 DISCUSSION......................................................................................................................................... 71
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`7
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`SUMMARY ............................................................................................................................................ 73
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`8 REFERENCES....................................................................................................................................... 75
`
`8.1
`8.2
`8.3
`
`LITERATURE AND RESEARCH REPORTS............................................................................................ 75
`INTERVIEWS ..................................................................................................................................... 75
`ARTICLES, PRESS RELEASES AND PRESENTATIONS.......................................................................... 76
`
`APPENDICES................................................................................................................................................ 81
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`APPENDIX I : PER COUNTRY MARKET SIZE FORECASTS............................................................................... 81
`Finland..................................................................................................................................................... 82
`Germany................................................................................................................................................... 84
`UK............................................................................................................................................................ 86
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`France...................................................................................................................................................... 88
`Italy .......................................................................................................................................................... 90
`SPAIN............................................................................................................................................................ 92
`APPENDIX II : CURRENT MOBILE GAMING INDUSTRY COMPANIES.............................................................. 94
`Content providers .................................................................................................................................... 94
`Service providers ..................................................................................................................................... 99
`Transmission providers.......................................................................................................................... 104
`Handset manufacturers.......................................................................................................................... 105
`Middleware solution developers............................................................................................................ 108
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`List of figures
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`FIGURE 1 - MOBILE GAMING INDUSTRY, CURRENT VALUE CHAIN.............................................................. 20
`FIGURE 2 - SERVICE TECHNOLOGIES POSITIONED IN THE LIFE-CYCLE MODEL ........................................... 32
`FIGURE 3 - MOBILE GAMING INDUSTRY EVOLUTION .................................................................................. 33
`FIGURE 4 - A SINGLE GAME LIFE-CYCLE..................................................................................................... 34
`FIGURE 5 - THE FUTURE VALUE DELIVERY NETWORK OF MOBILE GAMING INDUSTRY .............................. 35
`FIGURE 6 - MOBILE PENETRATION, TARGET GROUP AND ACTIVE USERS IN EUROPE................................. 37
`FIGURE 7 - CUSTOMER BASES OF SERVICE TECHNOLOGIES ........................................................................ 38
`FIGURE 8 - TARGET GROUP USERS IN EUROPE ............................................................................................ 39
`FIGURE 9 - PLACES WHERE PEOPLE PLAY GAMES ....................................................................................... 40
`FIGURE 10 - MONTHLY ARPU IN EUROPE.................................................................................................... 41
`FIGURE 11 - MOBILE GAMING INDUSTRY REVENUE FORECAST MODEL........................................................ 42
`FIGURE 12 - MARKET SIZE FORECAST........................................................................................................... 43
`FIGURE 13 - MARKET SIZE COMPARISON ...................................................................................................... 45
`FIGURE 14 - MARKET SIZES 2000-2005......................................................................................................... 45
`FIGURE 15 - MESSAGING TECHNOLOGIES COMPARISON ............................................................................... 47
`FIGURE 16 - PDA & SMARTPHONE MARKET SHARES ................................................................................... 53
`FIGURE 17 - VALUE AND COST OF COMPLEXITY ........................................................................................... 65
`FIGURE 18 - MODELS OF EXPERIENCED USER PLEASURE IN MOBILE GAMING .............................................. 65
`FIGURE 19 - MOBILE PENETRATION, TARGET GROUP AND ACTIVE USERS IN FINLAND................................ 82
`FIGURE 20 - SERVICE TECHNOLOGIES IN FINLAND ....................................................................................... 83
`FIGURE 21 - MOBILE GAMING MARKET SIZE IN FINLAND ............................................................................ 83
`FIGURE 22 - MOBILE PENETRATION, TARGET GROUP AND ACTIVE USERS IN GERMANY.............................. 84
`FIGURE 23 - TARGET GROUP SIZE IN GERMANY........................................................................................... 85
`FIGURE 24 - MOBILE GAMING MARKET SIZE IN GERMANY.......................................................................... 85
`FIGURE 25 - MOBILE PENETRATION, TARGET GROUP AND ACTIVE USERS IN UNITED KINGDOM................. 86
`FIGURE 26 - TARGET GROUP SIZE IN UNITED KINGDOM............................................................................... 87
`FIGURE 27 - MOBILE GAMING MARKET SIZE IN UNITED KINGDOM .............................................................. 87
`FIGURE 28 - MOBILE PENETRATION, TARGET GROUP AND ACTIVE USERS IN FRANCE ................................. 88
`FIGURE 29 - TARGET GROUP SIZE IN FRANCE ............................................................................................... 89
`FIGURE 30 - MOBILE GAMING MARKET SIZE IN FRANCE............................................................................... 89
`FIGURE 31 - MOBILE PENETRATION, TARGET GROUP AND ACTIVE USERS IN ITALY..................................... 90
`FIGURE 32 - TARGET GROUP SIZE IN ITALY................................................................................................... 91
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`FIGURE 33 - MOBILE GAMING MARKET SIZE IN ITALY.................................................................................. 91
`FIGURE 34 - MOBILE PENETRATION, TARGET GROUP AND ACTIVE USERS IN ITALY..................................... 92
`FIGURE 35 - TARGET GROUP SIZE IN SPAIN................................................................................................... 93
`FIGURE 36 - MOBILE GAMING MARKET SIZE IN SPAIN.................................................................................. 93
`FIGURE 37 - STATUS OF UMTS LICENSING IN WESTERN EUROPE.............................................................. 104
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`MOBILE GAMING: A FRAMEWORK FOR EVALUATING THE INDUSTRY 2000-2005
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`1 Introduction
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`1.1 Background
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`This report introduces the current situation in the mobile gaming industry
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`and takes a look in the near future. It states the opportunities for different
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`parts of the mobile gaming industry value chain and finally by using the
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`developed framework it proposes concrete actions that can be performed by
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`the industry companies.
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`The old personal computer and console based industry is facing the
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`challenge of new ways of offering their content, but also new companies
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`such as mobile service providers and mobile content providers seem to be
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`interested in this market. The market itself isn’t fully developed yet, and the
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`technologies are developing all the time. At the moment, there are a few
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`games offered for the mobile terminals. Due to the technical limitations, the
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`games are mostly of poor quality and rather expensive to play. Due to the
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`development of mobile phones, but also other hand held devices, the
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`consumer group attracted by mobile gaming will grow larger and larger.
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`1.2 Research problem
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`The mobile gaming industry has been introduced to the financing companies
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`and to consumers. It has gained very much attention, because of the
`lucrative market forecasts done by many market research companies3 24.
`Currently it is very hard to value the companies in the mobile gaming
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`industry. The traditional industry methods cannot be applied successfully,
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`for example return on investment (ROI) figures are negative and hard to be
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`predicted because of several unknown factors of the industry. This raises
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`questions: How to value the companies’ strategies? Do we have to buy the
`
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`3 Durlacher. UMTS Report: Investment perspective. 2000.
`24 DigiTrends.net. Wireless Games Worth $6 Billion by 2005.
`http://www.digitrends.net/mna/index_11031.html
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`MOBILE GAMING: A FRAMEWORK FOR EVALUATING THE INDUSTRY 2000-2005
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`numbers provided by the research companies; how are those numbers
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`generated?
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`
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`In order to solve the problem a framework for valuating the companies in
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`mobile gaming industry must be defined. The framework in this study will
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`base more on qualitative than on quantitative analysis.
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`
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`The framework takes the following three elements of the companies as
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`parameters:
`•= Current situation – Current number of employees, level of funding
`and stage in product development in the company
`•= Progress – The current progress of making the company profitable;
`the evolution of the cash flow
`•= Target – Which market is the company targeting (SMS, WAP or
`Java)?
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`
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`By applying the parameters to the framework it is possible to see, if the
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`company is entering the opportunity window with correct momentum, or is
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`it missing it completely.
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`1.3 Objectives of the research
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`1.3.1 Building the framework
`
`The primary objective of this study is to define a framework for evaluating
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`the potential of mobile gaming industry companies. In order to know the
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`different factors affecting the framework, the following sections must be
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`covered
`•= Market analysis - The primary objective is to define the mobile
`gaming value chain and to divide the companies to the corresponding
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`parts of the value chain. The value chain companies are analysed:
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`challenges, opportunities and threats that companies in different parts
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`of the value are facing are listed. Also the market size and mobile
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`penetration forecasts are made.
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`•= Key technologies - The secondary objective of the research is to list
`the current technologies and find the emerging technologies affecting
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`the industry. One has to understand the different possibilities and
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`restrictions of the different technologies, to be able to analyse the
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`future market. In the research different future technologies are
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`presented, and winners and losers are picked among them.
`•= Industry driving companies - Today the mobile gaming industry
`has the characteristics of new developing market. The number of
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`players is big and constantly growing. The average size of companies
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`is small, and the market is very fragmented. When the market starts
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`to mature, the amount of companies decreases, and finally few big
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`players will dominate the industry.
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`1.4 Scope of the research
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`The research will focus on mobile gaming industry in European countries. To
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`some extent the results may be used also for other geographical areas or
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`market segments, such as Japan or USA, or other forms of B2C mobile
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`services.
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`The forecasts in this report will be done until 2005. Year 2000 is included in
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`the diagrams, because it shows the latest situation, about which information
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`is available.
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`1.5 Research methodology
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`Interviews with executives of the leading mobile gaming industry companies
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`are made to see different aspects of the relationships between players in
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`the industry. Literature study, publications, articles etc. in the Internet and
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`in magazines, will be the main source of collecting information about the
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`market and the industry.
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`1.6 Framework
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`The methods or tools - value delivery network, external analysis and life
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`cycle modelling - are used to define the framework. The framework isn’t
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`supposed to give any absolute answers about the companies in the
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`industry; rather, it is impossible because of many unknown elements in the
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`industry. The qualitative analysis will make it possible to do benchmarking
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`between the companies, without knowing the absolute figures.
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`Theoretically, the framework presented by this study is used to evaluate the
`transition of the mobile gaming industry companies7 from the present to the
`future mobile gaming market. In order to do that, the present situation, and
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`the future scenarios must be known.
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`1.6.1 Value delivery network method
`
`Michael Porter defines the value chain as a tool for identifying ways to
`create more customer value for the specified product7. He divides the value-
`creating activities into five primary and four support activities.
`
`
`
`Primary activities:
`•=
`Inbound logistics – bringing materials into the business
`•= Operations – converting the material into final products
`•= Outbound logistics – shipping out the final products
`•= Marketing and sales
`•= Service
`Support activities:
`•= Firm infrastructure
`•= Human resource management
`•= Technology development
`•= Procurement
`According to Kotler, the competition is between networks, not companies.
`The company with a better network will be the winner6. The value network -
`is a group of companies, who are related in making and delivering the
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`product to the customer. Each stage in the network adds value to the
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`product, and the final value of the product is a sum of the network.
`
`
`7 Porter, M. E.. Competitive Advantage: Creating and Sustaining Superior
`Performance. Free Press. 1998.
`6 Kotler, P. Marketing Management, the Millennium Edition. Prentice Hall. pp.44-46
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