A $60 billion market over the next five years
A brand new and increasingly popular category of business, Mobile Gaming, has taken the market by storm. Three interrelated components of the converged wireless world have given rise to its exponential growth and rapidly increasing popularity:
- Increased availability of wireless broadband on cellular and Wi-Fi
- Abundance of reasonably priced smartphones and tablets
- Easy accessibility to app stores that expand the functionality of mobile devices
Mobile Market Developments
Mobile gaming is a global phenomenon but because it is leading the world in 4G, LTE and smartphone penetration, the U.S.market is taking off more rapidly, as shown by the following developments:
- Forecasts indicate that 4.3 billion smartphones and 1.2 billion tablets will be sold globally over the next 5 years. These devices have transformed daily habits, enabling mobile entertainment – and gaming in particular – to become an integral part of everyday life.
- ComScore saw gaming usage increase by 77% in 2011 in the U.S. where 31% of mobile users play games on their devices, and 27% in the 5 largest European countries. Gaming is the number one entertainment activity for tablet users in the U.S.
P.J. McNeally, of Digital World Research, concluded: “Gaming is now a ‘need to have’ category, not a ‘nice to have’ category for mobile devices, whether they be tablets or phones.”
Shifting Business Models
The impact of these developments is that the industry’s value chain and the way that games are sold are being forced to change with the adoption of the new “freemium” business model in the mobile environment. The “freemium” model provides the initial game for free but the user is then charged for subsequent in-game purchases. Currently incremental revenue is only generated by about 5 -10% of active game players and this will have to increase if existing games companies are to survive.
The impact of value chain shifts can be seen in the plight of Nintendo where the console market has been severely impacted by the “freemium” model. Consumers find it difficult to justify paying for a stand-alone gaming device, plus games, when they can download these for free on their smartphones or tablets and then play them on their TV’s using HDMI cables.
What does the Future Hold?
For the mobile consumer, the online “word-of-mouth effect” combined with the growing power of social networking will be a significant driver of viral game growth and in-game purchases.
In the mobile gaming category, businesses boundaries will continue to blur as value chains adapt to the converged space of ICT, telecoms and consumer electronics – coined the “Crossover Era” by Gamesbeat. As devices become more sophisticated, games incorporate more advanced features and gamers continue to view mobile entertainment as a “must have”, this market segment will without doubt continue to grow rapidly, evolving into a $60+ billion market over the next five years.
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Article first published as Mobile Gaming â€“ Everything to Play For on Technorati.
Steve Bell, President, KeySo Global www.keysoglobal.com