mobile gaming: excitement on the move

Mobile Gaming: Excitement on the Move

S T R A T E G Y W H I T E P A P E R

Mobile gaming is an exciting and rapidlygrowing activity that is currently being facilitatedby various technologies and business models.For the consumer, the abundance of affordableterminals possessing colour screens andoperating systems that allow game downloadingopens up a whole new world of mobile gamingexcitement. With countries in Asia such as Japan and Koreaalready leading the world with a staggeringadoption of mobile gaming, the futureworldwide looks extremely promising. Successcan be achieved through the provisioning of agame service utilising different technologies andbusiness models. Alcatel has the solutions formobile network operators to realise thispotential.

Mobile gaming is one of the fastest growing and most exciting businessopportunities for mobile service providers.

Introduction Mobile gaming is a nascent technology, but one that is

currently experiencing rapid growth as a result of therecent introduction of mobile terminals with color screensand operating systems that support the downloading ofgames. However, what exactly is mobile gaming? Surely ithas been possible for a long time to play games on small,portable “mobile” handheld gaming consoles?

In order to understand the different gamingtechnologies, we first separate wireless gamingtechnologies from fixed technologies. The latter typicallyinclude games played on Personal Computers (PC),television set top boxes, and dedicated gaming consoles,such as Microsoft’s Xbox and Sony’s PlayStation. Wirelessgaming refers primarily to games played on mobilenetworked or portable handsets (see Table 1).

Differences between mobile and fixed gamingThere are three main differences between mobile

gaming and fixed gaming:

• Mobile network operators inherently have betteraccess to and control over their subscribers.Consequently, they are in an ideal position toprovide network gaming services, such as locationand subscriber presence, that enhance theimportant community aspects of gaming.

• Extra revenue can be generated by a mobilenetwork operator from the traffic involved both indownloading and playing the game, as opposed toreceiving just a flat fee.

• The increasing importance of downloadable gamesmeans that mobile network operators are playing a

more important role indistributing such games by, forexample, providing a client-serverconnection to download Javaarchive and descriptor files.

Wireless GamingTechnologies

Mobile-networked handsets, suchas mobile phones, smartphones, andPersonal Digital Assistants (PDA),usually include a mobile networkconnection. Portable devices, on theother hand, do not have a networkconnection, but may be connected toother devices via an ad hoc network,such as a Bluetooth or WirelessLocal Area Network (WLAN), givingthe user multi-player capability. Theportable gaming market isdominated by Nintendo, which has a14 year history in this market. Thecompany has a large installed base,but is experiencing slow growth. It isa market with a narrow demographicprofile focus, being young andsophisticated. Table 2 summarizesthe portable device market [1].

A. Moreau, J. C. Sanchez, H. Niu

MOBILE GAMING: EXCITEMENT ON THE MOVE

2 | Alcatel Telecommunications Review - 4th Quarter 2003/1st Quarter 2004

Downloadedmulti- playeronline games,e.g. TibiaME

Downloaded Network hosted

Not downloaded

Mobile-Networked

Streaming Message basedHandset hosted

Portable

Mul

ti-Pl

ayer

Sing

le p

laye

r

Onlin

e

Mul

ti-Pl

ayer

Sing

le p

laye

r

Off

line

Network hostedstreaming multi-player games, e.g. Picofun soccer

Network hosted message based multi-player games, e.g. Atomic Dove

Embedded multi-player online games, e.g. Pathway to Glory

Downloaded single player online games, e.g. Ultima Online

Downloaded games played on ad-hoc network, e.g. MotoGP

Network hosted streaming single player games, e.g. face to face animation

Network hosted message based games played alone, e.g. Wireless Pets

Embedded single player online games, e.g. Galaxa

Embedded games played on ad-hoc network, e.g. Splinter Cell

Portable multi- player games played on ad-hoc network, e.g. GameBoy Advance (with Bluetooth) range

Downloaded games played alone, e.g. Tetris

Embeddedgames played alone, e.g. Snake

Portable games played alone, e.g. GameBoy range

Tab. 1 Wireless gaming technologies

The mobile-networked gaming market, on the otherhand, has a mass market demographic profile of all ages,and is currently growing strongly from a small installedbase. Figure 1 reflects the worldwide growth potentialfor gaming revenues in terms of the revenues generatedfrom airtime charges, service subscriptions and downloadpurchases [2].

The markets for portable and mobile-networked gamingare expected to develop separately for at least the nextfive years.

There are several possibilities for games played on amobile-networked device:

• Game can be downloaded over the operator’snetwork, or embedded as part of the device’spreloaded software.

• Online or offline, with online games requiring anetwork connection during play.

• Single player games, or multi-player gamesinvolving players from other mobile access devices,or even players from the fixed access gamingworld. Multi-player games can also be played offlinevia an ad hoc network, such as Bluetooth or WLAN.

• Games can be hosted on a server to providestreaming games with enhanced audio and visual

content, or message based for simple ShortMessage Service (SMS) types of game.

Game genres include action, adventure, classic,educational, First Person Shooters (FPS), flightsimulation, racing, real-time strategy, Role Playing Games(RPG), shoot-em-ups, space simulations, sports andstrategy.

Successful Gaming MarketsWhile mobile-networked gaming exists in the advanced

mobile markets, like Western Europe, it has grownmassively in two distinct Asian markets.

Korea and Japan are currently considered as the mostadvanced markets for mobile application usage, and usershave adopted mobile-networked games as one of theirtop five applications. The Korean mobile-networkedgaming market reached US$ 85 million (100 billion Won)in 2002, including airtime charges, service subscriptionsand download purchases. This represented an increasefrom 4.4% in 2001 to 6.9% of the total mobile-networkedgaming market [3]. Estimates for 2003 and 2007 areUS$ 180 million and US$ 470 million, respectively [4].

In China, the world’s largest single mobile servicemarket, the three most popular SMS applications aregaming, ringtone and character downloads, and news andinformation subscriptions. In 2002, these servicescontributed about 4% of total mobile revenue,representing approximately 15 billion sent messages.

The success of SMS games may be attributed to theirlower prices and minimal handset requirements.Nevertheless, the Chinese mobile-networked gamingmarket is shifting from SMS games to richer games basedon Java and Qualcomm’s Binary Runtime Environmentfor Wireless (BREW) technologies. BREW is usedprimarily on Code Division Multiple Access (CDMA)networks.

Market Factors Driving GamingClassical fixed game developers who have considerable

expertise in the traditional games industry are againoffering the most attractive content. Using the improvedcapabilities of today’s handsets and networks, gamesdevelopers can now reproduce the experience playershave become used to on fixed consoles and computers.Namco is claiming to have performed the most ambitiousmobile game adaptation from its best selling PlayStationcar racing game “Ridge Racer”; J-phone users can enjoythe same game play and full 3D motion on their mobiledevices.

The success of mobile-networked games in Korea andJapan can be attributed to the strong gaming culture inthese two countries. At the same time, this success is alsoin line with the national usage share of mobileapplications. For example, downloadable applications,such as mobile karaoke, are proving a real success with


Alcatel Telecommunications Review - 4th Quarter 2003/1st Quarter 2004 | 3

Machine Date released Units (mil.)Nintendo Game Boy (including Color) Apr-89 119.0Nintendo Game Boy Advance Mar-01 33.8Sega Game Gear Oct-90 12.0Atari Lynx Jun-89 5.0Bandai WonderSwan Dec-00 2.0Neo Geo Pocket Fall 1998 0.4Game Park GP32 Nov-01 0.1

Tab. 2 Total sales in the portable device market(Source: Games Analyst)

$5,000

$m

Multi-platform/networkedM pnetworked

p

DownloadsMessaging basedSIM/embedded

$4,000

$3,000

$2,000

$1,000

$02002 2003 2004 2005 2006 2007

Fig. 1 Projected mobile-networked gamingrevenues up to 2007 (Source: ARC Group)

Asian people, who are fond of singing their favorite songsin front of a screen. Historically, the Japanese have alwaysbeen enthusiastic about arcade and console games.

In the meantime, Korea has also developed a strongenthusiasm for online PC games. It is the same experiencedactors in this established industry that have created the“extension to mobile”, leveraging existing market factors,such as user demand, branding, license recognition and anestablished non-mobile gaming environment.

The successful launch of mobile data networks byoperators in northern Asia has also contributed to thesuccess of gaming, which is only one of the manypossibilities offered by mobiles. While developers in othercountries have to face the challenge of adapting games foreach type of device on the market, phone subsidizing andbranding in Japan and Korea have helped to ease bothgames development and service adoption by users.

Operators in Korea and Japan have exerted a lot ofinfluence on the interfaces and outputs of mobile devices,and have provided manufacturers with strict definitions ofthe specifications they will accept. This has considerablyeased the job of the games developer in these markets. Inthe more fragmented General Packet Radio Service(GPRS) handset market, a developer or operator is facedwith the need to customize the application according tothe implementations of the standard by different handsetmakers.

Unlike Korea and Japan, Chinese operators have almostno control over handsets, and are not able to subsidizehandsets significantly because of the low AverageRevenue Per User (ARPU). However, mobile-networkedgaming is still taking off for other reasons:

• Huge mobile user base: 240 million in mid 2003.• Social context which means that people have long

commuting times during which they can playgames.

• Large number of innovative service providers andambitious operators.

Technical trends, such as migration to the UniversalMobile Telecommunications System (UMTS), CDMA, Javaand BREW, have also played a role.

Revenue-sharing models that provide developers with ahigh share of the revenues have also been a key factor inencouraging experienced gaming companies to extendinto the mobile arena.

Mobile-networked Gaming Economics: Value Chain

Mobile-networked gaming represents a significantbusiness opportunity for all the players involved.However, the associated business models vary dependingon the games.

Figure 2 outlines the value chain related to deliveringgames that are downloaded to mobile terminals. While thevalue chain is fairly straightforward, the business modeland actors involved will depend on which player “owns”the user (i.e. who provides access to game services,billing and customer service).

Aside from the Mobile Service Provider (MSP), who isthe traditional supplier of services to mobile users, atleast two other types of “retailers” have emerged in thegaming arena:

• Games developers, such as Game Loft and THQ, areleveraging their established branding via the web tocomplement their existing indirect marketingchannels, and are selling directly to the gamingcommunity.

• Entertainment portals, such as Zingy,myphonegames.co.uk, and Kiwee, have emerged.These are primarily “e-tailers”, aggregating a rangeof existing games (licensed from the developers),which they then distribute to users via the fixed ormobile Internet. Their core competencies are inthe area of branding (i.e. creating brandrecognition and association) and assuringcustomer service.



MSPsBilling Co.Game ASPEntertainment Portal

LicenseContent

DevelopGames

AnimateCommunity

ServiceAccess

ServiceBilling

CustomerService

HandsetSupply

Supply Platform

Aggregate Operate

Game Developers

SW ClientSupply

Fig. 2 Mobile-networked gaming value chain

In the absence of widespread e/m-commercefacilitators, such as PayPal, both of these playerscurrently rely on existing credit card companies ortelecommunication operators (fixed and mobile, usingpremium charge numbers or premium SMS) to bill forservices.

However, the mobile operator is well placed to play abroader role in the mobile-networked gaming value chain.By combining their established customer relationship(including service access, billing and customer service)with a back-end operating role (games aggregation,platform operation and, in some cases, the animation orstimulation of extra revenues through additional featuresand services), they can reap the rewards of havinggreater control over the value chain. In this case, themain operating expenses are related to the payment forthird-party games, licensed once again from developers.Vodafone (via its joint venture Vizzavi), Sonera (viasubsidiary Zed) and SK Telecom (South Korea) areexamples of this type of advanced mobile operator.

However, some MSPs are unwilling to take on anoperating role, preferring to outsource the service tospecialized games Application Service Providers (ASP).While the games ASP aggregates and operates the gamingservice, its core competency has become the animation ofthe gaming business through targeted campaigns (usingcustomer data mining), posting of high scores, unlockingnew game levels and other techniques to incite furtherinterest in game playing and thereby generate increasedrevenue. In-Fusio and Zed are typical games serviceproviders.

Revenue SharingWhen the mobile operator outsources its gaming

operations to a specialist games ASP, it will need todevelop a revenue-sharing model that is equitable for all

the players involved while reflecting their cost structures.Figure 3 illustrates a typical revenue sharing scenariobetween the mobile operator and games provider fordownloading a game (game price $3) and unlocking thenext level for further game play (price $1).

As the mobile-networked gaming market continues todevelop, driven by richer and more diverse games and awider range of compatible terminals, the businessopportunities will multiply.

Mobile-networked Gaming EvolutionIf mobile operators are to continue to add value to this

service, and avoid simply becoming a data transport pipe,they will need to provide service enhancements linkingthe gaming experience with the user’s personal serviceenvironment. The following domains have the potentialfor further gaming evolution:

• Flexible billing options:- Differentiated service charging: the ability to

charge for game play based on session time,validity period, etc, with different rates accordingto the time of day, date and player profile.

- Provision of playing bonuses and rewards: freegame levels, bonus calling minutes, etc.

• Gamer communities and communication:- Defining and managing gamer groups: subscribe

to a closed game community, complete withforums and newsletters accessible via theInternet.

- Presence information for communities: see whichmembers of your game community are physicallyavailable to play the game, and seamlessly invitethem to participate at the click of a button.

- Enabling communication between players: allowsgamers to chat before, during and after a game

using a variety of integratedcommunication means, such asSMS, Multimedia MessagingService (MMS) and instantmessaging. This adds a personalaspect to multi-player gaming.• Location awareness:- Location–dependent presence:

allows players to find nearbygamers, providing a moreexciting and interactive gamesession.

- Location-aware games: integrateplayer’s local environment withthe game. Such features providea new dimension to the gamingexperience.

Providing these types of featuresrequires increased cooperation



Game Download

Game Download

45%

55%

Price for UserOperator’s RevenueGame Provider’s Revenue

= $ 3.00= $ 1.65 = $ 1.35

Unlocking Game LevelPrice for User $ 0.15 (SMS send)+ $ 0.85

Operator’s RevenueGame Provider’s Revenue

= $ 1.00 (premium SMS service)

= $ 0.575 (0.15 + 0.425)= $ 0.425

Hosting8%

37%

28%

50%

50%27%

Content Provider

Operator Shareof Premium Fee

Airtime

ContentProvider/Hoster

Operator

Unlocking new level(Using premium SMS)

Fig. 3 Typical revenue sharing model

between developers, network solution suppliers andservice operators to develop games that implement therequired integration between application and networkenvironment. However, if they are to be widely accepted,enhancements like these need to offer real value forgamers, to be user friendly, and to be based on businessmodels that are fair for all those involved.

This will be made possible by various platformscovering aspects like service access control, billing andcustomer care, communication services (i.e. SMS, MMS,instant messaging, and instant voice), and onlinecommunities with presence or even location information[5,6]. Alcatel’s application platforms support all thesedomains; as a result, Alcatel is currently playing a leadingrole in this field.

Alcatel’s Current InitiativesAlcatel is actively involved in the mobile-networked

gaming arena through a number of initiatives:

• 3GSM World Congress, Cannes, 2001: Alcatelprovided the world’s first demonstration of a two-player, real-time interactive online game over aUMTS network using “Galleon”, a pirate action game.

• CeBit, Hanover, 2002: Alcatel demonstrated“Scalextric”, a real-time interactive virtual/real carracing game (see Figure 4) played over a UMTSnetwork which provided the necessary real-timemultiplayer interactivity and quick response times.

• Worldwide, 2002: Alcatel teamed up with In-Fusioto provide a pre-packaged, ready for market,downloadable gaming service on the Alcatel 535and 735 handsets. Coupling In-Fusio’s extensivegames catalog and know-how with the ease of useand style of Alcatel’s mobile phones has enabledAlcatel to make a bold entry into the expandingworld of downloadable gaming (see Figure 5).

• Western Europe, Asia Pacific, Americas since

2002: With its 3rd Generation Reality Centre (3GRC)program, Alcatel has created a live andcomprehensive end-to-end environment (2.5G,Enhanced Data rate for GSM Evolution or EDGE,3G) for the development, validation and testing ofadvanced mobile applications and data services,including games. External partners, including localcontent and applications providers, as well as otherhandset suppliers, are invited to contribute. In thegaming domain, the 3GRC is used for interoperabilitytesting, ensuring and validating that gaming serviceswork as expected on terminals from differentvendors. In certain cases, it is used for prototyping(e.g. with games developer BeTomorrow) newmobile-enabled games. Finally, through thepartnership program, Alcatel is able to tap into theinnovation of local gaming content and applicationdevelopers. Such centers are already operational in

Adelaide (Australia),Shanghai (China),Taipei (Taiwan),Kuala Lumpur(Malaysia), Milan(Italy), Lisbon(Portugal), Paris(France), Malmö(Sweden), Rijswijk(Netherlands), andStüttgart (Germany).

Other centers are planned in the near future forTokyo (Japan), Seoul (South Korea), London (UK),Sao Paulo (Brazil) and Plano (USA).

• Europe, 2003: In conjunction with BeTomorrow,Alcatel has implemented a number of online andoffline games developed and optimized specificallyfor UMTS terminals. This was done within thescope of a 3G trial (providing the required real-timemultiplayer interactivity) with leading internationalmobile operator Orange [5]. Games include BrickSmasher (an offline shooting game), Stacker (anon/offline strategy puzzle), and Super Tank (anonline 3D graphics combat/action game), as shownin Figure 6.



Real Car Track Virtual Car Track

Fig. 4 Alcatel’s Scalextric demonstration at CeBit:(Left) real car track, and (right) virtual car track

Fig. 5 Game playing on an Alcatel One Touch 735

Brick Smasher Stacker Super Tank

Fig. 6 Alcatel/BeTomorrow games optimized for UMTS terminals

• Worldwide, 2004: As part of its new mobile phonerange with the 536 and 736 handsets, Alcatel isensuring an exciting gaming experience bysupporting the Java Mobile Information DeviceProfile (MIDP) 2.0. These capabilities will enableusers to play a wider range of games with rich 3Dcolor graphics and increased interactivity. Coupledwith other mobile services that Alcatel isdeveloping [6], such as MMS, instant messaging,push-to-talk, presence, and location, and supportedby our extensive portfolio of flexible chargingproducts, mobile operators will benefit by beingable to offer a wider range of games titles, allowingthem to address broader market segments andhelping to ensure profitability.

Conclusion Mobile-networked gaming has quickly become a key

business focus for mobile operators worldwide. Variousbusiness models exist, each of which provides distinctadvantages for the operator and the other key playersinvolved.

Numerous technologies can help deliver a profitablegaming service. With this in mind, Alcatel is currentlyoffering mobile network operators solutions that willenable them to realize their current businessopportunities, while actively developing solutions that willaddress the challenges of tomorrow’s mobile-networkedgaming market. These solutions include flexible chargingand billing options, support for messaging services andpresence information to support communities, as well aslocation-aware games facilities.

Innovative programs like the 3GRC are bringing gamingcontent and application developers into an end-to-endsolution that can be created and tested in a live environment.

Alcatel’s advanced terminals are also helping to deliver aricher and more enjoyable gaming experience for users, whileensuring compatibility with ongoing market developments.

Through selected strategic partnerships and field trials,Alcatel is ensuring that these solutions help drive thepopularity and global acceptance of mobile-networkedgaming, while ensuring that these services are profitablefor the mobile operator and other key players.

References [1] “Games Analyst”, volume 2, no 13, 11th July 2003.[2] “Mobile Games - Expanding Roles and Revenue

Opportunities”, Worldwide Market Analysis & StrategicOutlook 2002-2007, ARC Group, November 2002.

[3] “Mobile Gaming Market Structure”, iPark Beijing, China-Korea Value Added Service Seminar, 20th June 2003.

[4] “Mobile Gaming Forecast in Korea”, Marketing ResearchInstitute, Chinese Ministry for the Information Industry, 8thAugust 2003.

[5] S. Wolfe, S. Robinson: “Offering the Town … Orange 3GServices!”, Alcatel Telecommunications Review, 4th Quarter2003 /1st Quarter 2004, pp 31-33 (this issue).

[6] J. Tessot: “Instant Messaging”, Alcatel TelecommunicationsReview, 4th Quarter 2003 / 1st Quarter 2004, pp 34-38(this issue).



André Moreau is a research engineer in the MobileStrategy Project of the Network Strategy Group,Antwerp, Belgium ([email protected])

Juan Carlos Sanchez is Senior Business Consultantwithin Solutions Marketing, Mobile Services Division,Vélizy, France. ([email protected])

Huarong Niu is Application Domain Manager,Network Strategy Group, Shanghai, China([email protected])

Abbreviations

2.5G 2nd and a half Generation mobile / GPRS3G 3rd Generation mobile / UMTS

3GRC 3G Reality CenterARPU Average Revenue Per User

ASP Application Service ProviderBREW Binary Runtime Environment for WirelessCDMA Code Division Multiple AccessEDGE Enhanced Data rate for GSM evolution

FPS First Person ShooterGPRS General Packet Radio ServiceGSM Global System for Mobile communication

IM Instant MessagingMIDP Mobile Information Device Profile

MII f Information IndustryMMS Multimedia Messaging ServiceMSP Mobile Service Provider

PC Personal ComputerPDC Personal Digital CellularRPG Role Playing GameSIM Subscriber Identification Module

SMS Short Message ServiceSP Service Provider

UMTS Universal Mobile Telecommunications SystemWIPI Wireless Internet Protocol for Interoperability

WLAN Wireless Local Area Network



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