Game on

Mobile and on-line video games are big business. It is time for telecom operators to get involved.

Tags: Game Power 7 (www.gamepower7.com)GamesJuniper ResearchTurk Telekom (www.www.turktelekom.com.tr)
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Game on Fadi Mujahid, CEO, Game Power 7, sees huge potential for online gaming in the Middle East.
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By  Roger Field Published  March 9, 2011

The attention attracted by Sony Ericsson’s Xperia Play smartphone at Mobile World Congress last month was testimony to the rapid growth of the mobile gaming sector.

The device, which features a slide out gaming control and is also known as the ‘PlayStation Phone’, is just the latest indicator of the increasing convergence between gaming and the telecoms sector.

Operators, handset makers and application developers are now all keen to profit from a sector that is predicted to generate revenues of more than $11 billion by 2015, almost double the $6 billion what it generated in 2009, according to a report from Juniper Research.

Indeed, according to Juniper Research, the mobile games industry has experienced a “renaissance” in the past two years as increased adoption of smartphones with greater processing power has led to a surge in demand for games, with titles such as Angry Birds from Finnish producer Rovio, proving particularly popular through channels such as Apple’s App Store and Android Market, as well as smaller platforms including Getjar and Movi.

Indeed, by the end of 2010, Angry Birds had attracted more than 50 million downloads since its launch just over a year ago, in December 2009. For Daniel Ashdown, research analyst, Juniper Research, the growth of Apple’s App store and Android Market has been instrumental in the expansion of the mobile gaming sector.

“You have got two platforms for really high-end smart phone games and we are predicting quite big growth over the next few years. I think it is in a really healthy position,” he says.

In terms of profiting from downloads of the games, Ashdown also thinks that the application stores have probably gained most so far, although he says that game developers including Electronic Arts, and smaller players such as Firemints and Rovio, have also benefited from the increased exposure from the Apple and Android stores.

Ashdown attributes some of the success of the Apple and Android stores to the fact that they charge the publishers 30% of the download fee, compared with a fee closer to 50% charged by operators a few years ago.

He adds that the Android Market in particular has created a “cross-platform environment” where developers can reach a large number of consumers using handsets from Motorola, Samsung, Sony Ericsson, and HTC.

But while some analysts suggest that telcos have been overtaken by Apple and Google in the race to profit from mobile and online games, others in the industry are convinced that the gaming sector – including mobile and online games – remains in its infancy and continues to hold huge opportunities for telecom operators.

Fadi Mujahid, general manager of Gamepower7, a Dubai-based producer and publisher of online games, says that while there are no official statistics about the size in the Arab world’s games sector, it holds huge potential for growth.

“The latest statistics indicate that there are 64 million internet users in the Arab world, and at least 15% of those are potential users of online gaming,” he says.

He also thinks that operators are well positioned to benefit from the industry. “Telecom operators are the owners of the media through which mobile and online gaming are being serviced,” he says.

“It is logical for them to leverage on this infrastructure that they have built to offer further services that create more loyalty among customers, and attract further income,” he says.

Mujahid points to many operators in Europe and East Asia as being successful in tapping the gaming sector by positioning themselves to become among the largest online game publishers in the world. One operator that is particularly active in the Middle East’s game sector is Turk Telekom, which acquired Turkey’s biggest game developer, Sobee, in 2007.


Online games

Mevlüt Dinc, CEO of Sobee, describes game content as “the most important entertainment medium”, surpassing more traditional forms such as music and cinema.
He also points to online games, as opposed to just mobile games, as holding particular potential for telcos.

“Especially by seeing the success of the Korean and Chinese online game markets, we can clearly say that the online gaming is the most lucrative sector in the game business,” he says.

“Online games are easier to launch with no physical distribution needs, they have much longer shelf live – typically around five years or so. Dinc adds that the “free-to-play” format of most online games also attracts bigger communities of players which leads to a “continuous interaction” between the players and the game, which in turn gives a continuous opportunity for monetisation.

With these benefits, it is not surprising that the online gaming industry expects to experience a compound annual growth rate of 17%, according to figures quoted by Dinc.

“Online gaming is expected to grow 3.5 times more than the traditional telecom business in the next five years,” he says. “It is expected that over 50% of the games will be online by 2013.”

Mujahid adds that according to online gaming research by DFC Intelligence, the total overall number of online gamers worldwide is expected to reach 540 million by 2015, up from 183 million in 2004 and 389 million in 2009.

“Even console gaming is shifting toward the online mode as all recent releases of console hardware devices offer the option to play online,” Mujahid says.

Far from seeing operators on the fringes of the sector, Dinc says that operators have become heavily involved in the sector in recent years.

“In the last few years most operators have started investing in gaming; some providing hosting, some involved directly in publishing,” he says.

“Especially the mobile games have been very successful. The games attract a wide audience now and most of the players are young and they represent the consumer profile all the brands are targeting.”

Turk Telekom, Turkey’s incumbent telco, is a prime example of an operator that has embraced games as a means of generating revenues and increasing customer retention. Sobee’s leading game, I Can Football (ICF), was in development for three years before its launch in Turkey last November. It is the world’s first and fastest server based online 11 vs 11 soccer game, allowing up to 22 people in different locations to play a game together.

The game allows people to create their own teams with friends, organise tournaments and allows for spectators to watch games being played.

“Sobee is trying to grow the market and its share in this market by fully benefiting from Turk Telekom and Oger Telecom’s network and resources,” Dinc says.

“I Can Football is doing very well in the market and has already reached over 800,000 registered users, most of them with mobile phone membership activation.”

ICF is a free-to-play game with monthly membership subscriptions, while in-game item sales are generating “a decent revenue stream”, according to Dinc.

“We have recently opened a virtual store within the game with micro and credit card payment systems; daily sales of items have already reached thousands.”

ICF has also been launched in Saudi Arabia by STC Group, which owns 35% of Oger Telecom. Oger is also looking to publish the game in “many other countries” in the near future, Dinc says.

Aside from driving revenues, online games bring other benefits for operators, including improved customer retention and opportunities for cross-selling and up-selling, according to Dinc.

“Nowadays, the operators are trying to create digital ecosystems to retain their subscribers while trying to increase their revenue and profit per subscriber,” he says.

Going mobile

While Dinc sees huge potential for online games, he is also optimistic that operators can benefit from mobile games. And he points out that it is not an area where telcos can afford to fall behind.

“The popularity of mobile games has increased in the 2000s, as over $3 billion worth of games were sold in 2007 internationally, and projected annual growth of over 40%.

“Mobile games tend to be small in scope and often rely on good game play over flashy graphics, due to the lack of processing power of the client devices,” he says.

“While the mobile gaming market is already reaching a multi-billion dollar economy, most mobile operators are already benefiting from this trend. I believe the multiplayer aspect of the mobile gaming is the trigger of its growth and with 3G and 4G this will improve,” Dinc says.

He adds that once live multiplayer mobile gaming reaches a “certain maturity”, the industry is likely to really start to experience a significant increase in the size and value. “We firmly believe that the telecom operators have a great chance in front of them to generate significant revenue if they can successfully establish a walled garden business model around their online and mobile platforms,” Dinc says.

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