Wireless operators need to be gamers, analyst says

The dramatic growth in the video games market presents tremendous opportunities for wireless operators to be the first mover in creating the iTunes of mobile gaming, according to CSMG, the strategy division of management consulting services provider TMNG Global. Gaming has been one of the most resilient forms of mobile entertainment, said Rich Nespola, chairman and chief executive officer of TMNG Global, but service providers must act quickly or risk losing the opportunity to a third party that will.

“To dislodge an incumbent who provides an excellent service is extremely difficult,” Nespola said. “The longer they wait to address this market, which is seeing phenomenal growth even in a recessionary environment, the more they miss that first-mover advantage or open window right now.”

In a report released today, Playing Games: A Revolution In Interactive Entertainment, CSMG indentified increased network access, faster broadband speeds, next-generation consoles and more capable mobile devices as the drivers of this mobile opportunity. Overall United States gaming software sales reached $20 billion in 2008, up from $9.4 billion in 2005. With a 24.6% compound annual growth rate forecasted for 2007 through 2012, mobile games represent the fastest growing segment.

Despite the revenue opportunity, service providers have remained hands off on mobile gaming, said Armaghan Farooq, manager at CSMG, who developed the study. They outsource it to third-party game aggregators to manage it much like Apple does for music via iTunes and, in doing so, miss the opportunity to drive their own revenues from it. Service providers can’t approach games the way they do music, he said. Unlike music, gaming is interactive and can go beyond filling time to potentially being a dominant form of entertainment if it is treated as such.

The study, which surveyed more than 20 North American participants, including cable companies and mobile operators, found that the demographic for gaming has also grown significantly. Once the domain of teenage males, the average age of a gamer has increased to 33 years and female gamers make up almost 50% across many types of games. The expansion of casual games, simpler user interfaces and the proliferation of innovative business models have been the lead drivers of this change at the same time that smartphone adoption and more sophisticated operating systems are encouraging a large developer community to get their games out to a much broader audience.