Games are supposed to be fun, but for China’s mobile game makers, they are often anything but. Game producers must live in the shadow of the state-controlled mobile phone operators, primarily China Mobile. Minute movements from this telecom behemoth can have a huge impact on small players.
“Everyone in the country has got a mobile phone in their hand, so it’s a massive market,” said Paul Waide, who tracks the mobile market at research house JLM Pacific Epoch. “But unfortunately there’s a big gatekeeper who wants to take all your money.”
China’s mobile phone user base is the world’s largest, reaching 501.7 million subscribers in July. Many of these are youths who enjoy online gaming.
Within the category of mobile content known as wireless value-added services (WVAS), mobile gaming is becoming increasingly important. Waide estimates that games running on the Java platform, the most popular game platform, are the top WVAS content, after mobile web browsing and basic services like SMS.
But profits from this growth sector have been elusive.
While WVAS accounted for about 25%, or US$6.53 billion, of China Mobile’s revenues for the last two quarters, most of it came from basic services. Revenues for the mobile game industry, however, were about US$7-8 million last quarter, according to Waide.
Under the thumb
So what’s holding up mobile gaming?
To begin with, it’s difficult for publishers to get games to customers. The most popular way to download mobile content is through the carriers’ portals. If a game isn’t listed on the front page of the portal, its chances of being downloaded fall dramatically.
“The entire process of getting your game up on China Mobile’s portal is difficult,” said Ranjit Singh, who runs mobile gaming company Fugumobile.
This is exacerbated by a regulatory crunch on mobile content. In the last year, China Mobile has tightened restrictions on content providers, stipulating minimum free-trial durations and creating elaborate confirmation systems that have frustrated users. These measures, ostensibly there to protect users from fraud, have slashed the already thin profit margins of content providers.
“That killed the industry,” Waide said.
Then there are the phones themselves. Each handset has such different specifications – from the software it runs to the number of pixels its screen can display – that it’s impossible to produce a one-size-fits-all game. Instead, games have to be tailored for the dozens of combinations of handsets and software platforms, which drives up costs.
The industry is still trying to sort out what standards to adopt.
In August, Nokia launched a new partnership with Sina’s popular mobile portal. It was designed to promote Nokia’s Snap Mobile game platform, which makes multiplayer gaming easier.
“We’re trying to harmonize the market, provide industry standards – this is the bottleneck right now,” said Erik Wernevi, Snap Mobile’s marketing manager.
Yet Nokia itself has two games platforms – Snap for simpler, multiplayer games and Ngage for more technologically demanding titles. Developers must also account for platforms like Brew, Symbian and Windows Mobile.
Some entrepreneurs see the distribution bottleneck as an opportunity. One startup, Duo Guo, launched about nine months ago, is setting up a chain of interactive kiosks around Shanghai where users can transfer games, ringtones and other content to their phones easily.
With four kiosks already in place, it hopes to reach 50 by the end of December and 250 by the end of 2008.
“There’s a discrepancy between people who have phones – everybody – and people who have the internet – not everybody,” said Jonathan Serbin, co-founder and CEO of DuoGuo. “There’s a compelling business here.”
For now, game makers whose main market is China are still scraping to get by. Some are, wisely, diversifying their revenue streams. For example, Greatelsoft, creator of some of the most popular locally produced mobile games, is profitable because sells content to the likes of Korea and Taiwan, according to its chief executive, Chen Gang.
It is still early days for mobile gaming in China. A telecoms restructuring is expected next year and there are signs of a growing interest in gaming among the carriers. China Mobile, for one, has revamped its mobile games portal.
Then there is the bane of China’s telecom industry, 3G, which would give mobile game providers a much-needed boost in bandwidth and competitiveness.
Game makers are happy to buy into the idea that there is much to look forward to.
“The future is still bright,” Ranjit said. “The only direction mobile gaming in China can go is up.”