Wireless Entertainment: The State of Play

Making Money

Docomo's success isn't entirely down to cultural issues. The company is involved in all aspects of the wireless gaming market from manufacturing the actual cell phones, offering entertainment, self-produced content (albeit based on many lucrative licenses), operating the network, and doing the billing. The positives of having very few middle-men in the process is an blatantly obvious one: NTT Docomo pockets most of the profits. In Europe and the United States, you have the operator, content provider, developer and possible technology partner involved, all wanting their share.

Another obvious fact is that there is a tremendous amount of support from developers towards wireless gaming right now. Almost every developer has dipped it's toes into the market in some way. It doesn't cost all that much to develop, at least for now and the market predictions are tremendous.

For game (and entertainment) content producers, working with well established operators can be a tad difficult at first. Neither has much experience working with the other. While the relationship is different than a developer-publishers, some say it could be far worse.

Depending on the kind of game or service you developer for an operator or content provider, payment differs. If you've produced the kind of content that the operator will have available for consumers for longer periods of time, it's only reasonable to expect that you as the developer get a slice of the generated revenue every month. The problem is, of course, that operators aren't very open to such a proposition as they are used to paying once for the content and that's it.

Offering long-term wireless services -- be it games or something else -- requires constant monitoring, stable servers and continuous updating of the product. For a developer this is a very costly hurdle. The amount of hardware and software required to run such features is better left to the operator to handle. The safest and best business model for developers seems to be the normal development deal, get funded by an operator or service provider for the software you are creating for them. However, when you do that it'll be the operator/content provider who will get the revenue steam. In the future this will probably change to the afore-mentioned model of getting a slice of the consumer sales. With WAP, you have to connect to the network every time you use the service, but with the arrival of GPRS and UMTS the connection will be constant and new revenue models will be required. By then developers will definitely need their share of the constant revenue operators will get.

Getting the consumer to pay could be handled as it's done now in Europe: via the operator whose connection you are using. But with the developer, separate content provider, brand-holder, manufacturer and whatnot stepping in, a different method is required. Using your credit card could be a solution, and a web-based credit system seems to be in the cards for next-generation wireless commerce. Company Enition has been working on such a system. Known as Nettoll Mobile, the consumer downloads content and pays for it via virtual credit. The value of the credit is based on the agreements between the content provider and the operator. The amount the consumer ends up paying will be based on the downloaded amount, so basically the longer it takes to download, the more you pay. However, it's difficult to see such a system to catch on very quickly.

Show me the money!
We know that Docomo's making huge profits, and everyone wants a slice of that. WAP has mostly bombed in Europe and 3G is still at least a year away. Despite that, the predictions regarding the wireless market are lucrative to say the least. According to some rather dubious estimates, by the year 2005 the value of the EU and US wireless market could be up to $6 billion, with nearly 198 million users. The figure is highly questionable but even if the market reaches half of that, we are talking about a very lucrative opportunity which no one wants to miss.

There's no doubt that to reach that kind of money, there needs to be some pretty good killer apps and services for the consumers. Outside Japan the wireless market is still relatively small, but there are companies out there making a lot of money already.

What is successful right now is SMS, services that use the text-messaging functions. People are sending tons of messages to each other every hour. SMS is tremendous business already and it can be used in a variety of ways.

In Finland, a cable television company came up with the idea of SMS based real-time chat, basically bringing IRC to television at premium rates. The hook is that there's a host in a studio visible in a small window besides the chat area who. The host responds to messages and can handily act as a censor on the more "dirty" messages. The chat consists more of exclamations and taking the shots at the host, but the interactivity (it's possible to alter your message colors, have an alias, and the like) is working. The first month the service was introduced, it generated over $90,000 in revenue with users being as hooked on the service just as some are on IRC. The fact that a single message costs a whopping 90 cents to send hasn't stopped tens of thousands from becoming frequent users.

The attraction is understandable. Some come in to chat with other frequent chatters and talk to the host while others send in derogatory comments about the stupidity of such activity --all the while the service provider gets a sizable chunk of the money generated by the sent messages.

There's a massive untapped market out there, even after Europe and US are conquered. In China, for example, piracy in wireless gaming should be near impossible (so it should take about six months to be cracked then right?). Combine relatively low development costs and low levels of piracy and you've got another reason that wireless gaming sounds inviting, as long as you get the consumer to pay for the services in an easy manner.

Inventing

Some companies, such as G-Cluster, are taking advantage of PDAs and wireless comms in an interesting way. Using iPaq PDA's as terminals and it's own proprietary technology and WLAN, the company offers near high-end PC quality gaming on what it calls G-Screens. Basically a server housed nearby runs most of the code which is then transmitted via WLAN (though it could be done just as well via 3G) to the G-Screen. The plan is to rent such equipment at restaurants and airports. The consumer isn't limited to just iPaq PDA's, any next-gen wireless device, be it a phone or a PDA, will be able to run the software. Payment for now is happening via a credit-card reader.

With the advent of G3 and GPRS devices, cell phones and PDA's will be getting closer in terms of specs and functions. Thus easily portable code will be extremely important for development teams. Java will help, but some start-ups have got better ideas.

One such start-up which has been receiving plenty of attention is Fathammer with it's X-Forge technology. Basically, the technology can be seen as the Renderware of the wireless market, it allows developers to quickly port their games to various mobile devices and operating systems as long as the games are being developed on the flexible X-Forge platform. Billing and client-side technologies are included within the package and with industry luminaries such as RJ Mical working for the company, the prospects for Fathammer are very good.

The Tricky Bit: Convergence

Convergence was the keyword on everyone's lips a while ago, but the slow speed of the new emerging technologies and networks (UMTS, GPRS, 3G) has lessened the hoopla. Maybe we can now come up with just what convergence means...various wireless devices communicating with each other allowing users to enjoy a variety of games and entertainment regardless of the device used...maybe.

Many thanks to the various speakers, including Ian Baverstock and Chris Wright, at Game Developers Conference Europe for tackling the subject of Wireless Gaming in ways which were most helpful in compiling this feature.