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Why Do Venture Capitalists Love Mobile Gaming?

simoniker posted more than 10 years ago | from the hot-button dept.

Games 30

Thanks to the San Jose Biz Journal for its article discussing the boom in funding for mobile phone game creators and publishers. The story notes that venture capitalists "made six gaming investments totaling $50 million in all of 2003. In the second quarter of 2004 alone, there were five [largely mobile gaming] deals totaling $86 million." Apparently: "Java-enabled handset sales tripled in 2003 to 95.5 million units and sales of Qualcomm's Brew platform reached 11.6 million in 2003, up from 3.5 million the prior year." Although "mobile gaming is young enough that it's cheap to produce a lot of games and see which ones stick", do you think these large investments are going to pay off?

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Elevator effect (3, Funny)

Lumpish Scholar (17107) | more than 10 years ago | (#9938394)

Could you describe such a "business opportunity" to people if you only had ten seconds with them in an elevator? Probably, especially if the VC in question was playing a mobile phone game at the time.

Simple. (3, Insightful)

Cerberus9 (466562) | more than 10 years ago | (#9938412)

They want to fund games that will run only on the newest phones with extra ram and ultra-colour display and why not a microdrive. Then, while you were out buying that phone, they'll come up with an even better game that needs the resources of an even more expensive phone which, while unfortunately incompatible with your current one, can be yours for a low initial fee and a three year contract.

Re:Simple. (2)

saden1 (581102) | more than 10 years ago | (#9938975)

Also, $4.99 is pretty hard to justify for mobile phone game. Some ot the "good" games cost even more.

Re:Simple. (2)

zors (665805) | more than 10 years ago | (#9941012)

I dont know, i paid 6 bucks for tetris, and haven't looked back yet. Granted, i am a tetris freak. its practically the reason i bought a GBA, that and mario kart. So they're probably marketing it more towards me and my ilk than anyone else.

Re:Simple. (2, Informative)

Anonymous Coward | more than 10 years ago | (#9939034)

(Posted as AC cos I'm in the business)

Unfortunately for Joe End-user this ideas's slightly incorrect. The networks regularly come to us for our new game and want it to run on XYZ new handsets, where X is a decent piece of kit and Y and Z are devices that could barely outthink a wristwatch.
They just want to have something new to sell with whatever they've got 50,000 units of rotting in a warehouse. Technical specs rarely appear to enter into the marketing picture.

Hmmmm (0)

Anonymous Coward | more than 10 years ago | (#9938418)

No.

Same reason they like XML and web-based interfaces (0)

Anonymous Coward | more than 10 years ago | (#9938431)

Because it can make them a shit load of money and fast.

Don't play (4, Insightful)

Tomahawk (1343) | more than 10 years ago | (#9938564)

Personally I don't play mobile phone games very much. There are a few problems I have:

1) when I would want to play one would be where there would be other people around (like on the bus), and there is rarely an option to turn off sound;
2) the screen is very small, and if the sunlight catches it wrong you can't see it very well;
3) the keys on a mobile phone are normally just not good enough for playing a complex game, or ever some simple ones.

I don't know how most other people feel about this, but personally I don't think I would back mobile phone game creators based on my own gaming experiences and preferences.

Then again, I'm not everyone else...

T.

Re:Don't play (1)

Ceyan (668082) | more than 10 years ago | (#9942517)

And do those factors apply any differently to lets say... a Gameboy?

Re:Don't play (2, Informative)

cluke (30394) | more than 10 years ago | (#9942923)

Yes.

1) The Gameboy has a headphone socket (or failing that, a volume knob)
2) Its screen (while not great) is bigger than your average mobile phone's, which makes all the difference for games.
3) It has controls especially designed for games

Many of these VC's are unlikely to get a return. (5, Insightful)

Anonymous Coward | more than 10 years ago | (#9938641)

(Posted as AC cos I'm in the business)

They see market penetration of handsets, and also see a fairly open market. (Open as in "not locked down by any one supplier") They immedially see $-signs and jump in like a mad thing.

Problem is, in order to get the attention (for the most part) these VC's want licensed games in exchange for their money - see easier sales and greater returns that way. Which is fine, but getting a license (usually) costs money from the original purchaser. How much would it cost to buy... Sonic, to pick an example? Up go the operating costs.
Then these games have to hit a wide variety of different handsets in a short timescale to a very high quality (often with restrictions mandated by the license owner). That requires alot of staff.
Between the two of those, it means the burn rate is _huge_. Many of these companies appear to be securing VC simply in order to keep operating.

Then you have the final coup de grace - the market (apparently) requires price differentiation between standard titles and branded "premium" titles - talking 10 to 15 Euros for a single title, and guys, that's just not sustainable as a business model. Piracy's through the roof as there's very little DRM on the titles, and they're astoundingly easy to re-distribute (given footprints circa 100k). You get coverage but not sales.

This is why (in my biased opinion) branded games are going to be a swift route to Chapter 11 for some producers and the VCs that fund them - the impulse-buy market needs lower prices and that's not feasable given the costs inherent in producing a branded game.

For what it's worth, I understand that some of our stuff sells for just over the price of a ringtone, and sells well. Impulse-buy works, people.

Re:Many of these VC's are unlikely to get a return (0)

Anonymous Coward | more than 10 years ago | (#9939439)

(Posted as AC cos I'm in the business)

Quick question: Are some phones "locked down" so you can't put your own Java Apps on them? What phones do you test on? I have a Java game I wrote as an applet and I want to convert it to J2ME, but it seems like the different phones have different versions of java running, and some are locked down. Any advice on doing all of this? :)

Re:Many of these VC's are unlikely to get a return (1)

lonenut (165873) | more than 10 years ago | (#9941014)

(Posted as non-AC cos' I just left the business)

Google for "Over the air" provisioning (or OTA). Most existing J2ME phones support this approach to application provisioning, at least the subset of J2ME phones that I have experience with.

Basically if you can run an HTTP server, you can provision java apps to most J2ME phones.

Re:Many of these VC's are unlikely to get a return (0)

Anonymous Coward | more than 10 years ago | (#9941731)

(Posted as AC cos I'm in the business)
As other responder said, google for OTA.
However, here's the fun parts:
Some networks keep their WAP users in a walled garden - no outside server access available, even down to disabling other access numbers in the phone (3G networks, I'm looking at you).
You also have the issue of international handset support (if you want to do things properly). Some of the more... er... interesting, shall we say, handsets that we've had to support have been available purely on foreign networks with incompatable wireless infrastructures. In those cases you have to hope for a cable/IR method of MIDlet provision or a friend in that country who can test stuff for you.
And let me tell you, transoceanic debugging sucks.

We test on anything and everything we can get our hands on. Phones are not homogenious, even across groupings in a single manufacturer - bugs across different firmware versions can turn a perfect title into a malfunctioning mess.

There's only two main versions of J2ME running, that's not much of a worry, as v1.0 MIDlets will normally just about run on v2.0. The killer is all the extensions for useful stuff, and the different ways they can be used. Oftentimes emulators/stub classes etc are difficult or impossible to come by.

Advice? Whee.
If you want to do this seriously... don't bother. You have to cover alot of handsets with alot of titles for the carriers to notice you and be willing to take your product, unless you're going to aim for an aggregator/reseller and then you'll be another single-game provider among thousands - your game will have to be stellar to do well.
If, however, you just want to do this for fun, go in with your eyes open. I don't know much about applets, but Java!=J2ME.
J2ME has:
No floats.
Very limited MIDlet footprint.
Practically no 'net connectivity. (Most implementations/networks suck greviously)
No image scaling.
No sound support out of the box. MIDP2.0 and extension classes provide for this.
Limited heap memory.
Very slow processors. Usable power on some of the phones is laughable.
Just experiment, is the best I can say. Grab the J2ME Wireless Toolkit, and a couple of the Nokia emulators, and prod away.

Good luck.

Boredom (3, Insightful)

kniLnamiJ-neB (754894) | more than 10 years ago | (#9938701)

Speaking as someone who sells cellular phones and service, I'd have to say that the reason it's such a good market is because people get bored easily. If I can make a version of tetris or pong for a cell phone, people won't buy the phone to play it... but if I charge $1.99 to download it, enough people will have a phone in their pocket and be bored that I will make money. People don't buy phones to play games, they buy them and THEN play the games when they're bored.

There's a one word explanation for the VC interest (2, Interesting)

GodsMadClown (180543) | more than 10 years ago | (#9938796)

China.

Re:There's a one word explanation for the VC inter (0)

Anonymous Coward | more than 10 years ago | (#9938855)

Which is another reason the VC decisions will fail.
Insufficient information to base the decision on:

Basically, there's one mobile carrier in China. All content has to go through them, and they're _very_ demanding. Moreso than any other provider. Plus AFAIK the gates are now shut for new content so anyone getting VC in hopes of new business there is SOOL.

They love it (2, Insightful)

jayhawk88 (160512) | more than 10 years ago | (#9938881)

...because the upside on something like this is almost unlimited.

What would you give for the opportunity to get some ground-floor money in on the Sony Walkman, or Nintendo Gameboy, or even any number of those cheesey game/watch things Radio Shack was selling by the truckload a few years ago? Mobile devices are one of those items that, if it hits, EVERYBODY gets one.

probably (3, Insightful)

tekunokurato (531385) | more than 10 years ago | (#9938884)

Well, the natural, obvious answer is that some will pay off, some won't. Venture capitalists don't make bets thinking that every one will pay off, you have to understand. A majority of these will pay off, and the overall market will expand and probably make the average payoff high enough to meet that hurdle that VCs expect on their multi-year investments. For some VCs that's a relatively small failure rate and 3-4x on their average deal. For late-stage VCs, it's an extremely low failure rate and 1.2x on their average deal. But think of it this way--if the aggregate investment in mobile game companies (not counting cash they themselves generate, but including cash non-mobile game companies pour into mobile development) adds up to a few hundred million after a few years and the market expands to $5 billion, then the payoff will probably meet VC hurdle rates (depending on the revenue multiple for sales, i.e. whether the sale of these companies leads to 1x revenue or 3x revenue). Need I remind you that the ringtone market alone was estimated at $3 billion last year?

Mobile gaming to me equals = (2, Insightful)

binaryspiral (784263) | more than 10 years ago | (#9938908)

Mobile gaming to me equals = GBA

Using a device that is suited for gaming with games that are actually fun to play and not just low res rehash games chopped down far enough to allow the Java engine o' the day to play it on a screen the size of my watch.

This is simply one more way for a cell phone company to sell you one more "service" or "improved phone".

I'm not buying.

It's 1985 all over again (5, Insightful)

FlimFlamboyant (804293) | more than 10 years ago | (#9939050)

When it came to the old consoles, games were relatively easy to produce; not because they were easy to code (it was basically all assembly language back then), but because they were so small.

Eventually, games were almost *too* easy to produce, as the market was flooded with such garbage that it nearly destroyed the videogame industry.

Now with the advent of these fairly simplistic (in terms of capability) mobile gaming devices, once again we have the danger of history repeating itself. Not that I think the whole industry will collapse; certainly not. But with all this venture capital flying around, it's beginning to look like the .com thing in 2000 all over again; too many people investing in too many products with little or no real value.

Crude Joke... (0)

Anonymous Coward | more than 10 years ago | (#9939613)

Why Do Venture Capitalists Love Mobile Gaming?

They like to play with themselves anytime, anyplace, anywhere.

A few reasons (3, Insightful)

ALeavitt (636946) | more than 10 years ago | (#9940044)

In addition to the insane market penetration (just about everyone has a cell phone nowadays) mobile games are a lot easier and cheaper to produce than new console or computer games. Bump-mapping, anti-aliasing, trilinear mipmapping? Hell no, it's only a phone! They can just remake an old Nintendo game with updated graphics and sell it. Just look at the high costs of producing state of the art games vs. the number of copies sold, and then take a look at the cost to produce a Columns clone vs. the number of people who will be playing it on the subway.

Greed. (2, Insightful)

LordZardoz (155141) | more than 10 years ago | (#9940766)

They see a cheap investment with a huge potential payoff.

Mobile games are stupidly easy to make with modern tools since the target platform is about as complicated as a home console was back in 1985. The problems in making games suitible for such a target have been well documented and mostly solved. And while you cannot make an Xbox team with one or two people working out of a garage, you can do just that with a mobile game.

END COMMUNICATION

VCs don't play games, therefore... (0)

Anonymous Coward | more than 10 years ago | (#9942173)

They won't know any better that's it's a dead-end market.

can you bill me ... later (0)

Anonymous Coward | more than 10 years ago | (#9942394)

As soon ppl receive their bills they'll throw their cells away and this investors will be left alone in the dust.

no (2, Insightful)

Pidder (736678) | more than 10 years ago | (#9943171)

do you think these large investments are going to pay off?

No it wont. The phone is just not suited for games. Most of the games I've tried are clearly not worth the $5-6 they would cost if I had bought them. The graphics are by far worse than the original now 10+ years old Game Boy and the game concepts are very basic. The only thing that phone games have going for them is that they are most often very simple designs that can be programmed by a single non-professional programmer. It could be a starting point for the future game developer.. or something. But even that is unsure...

Re:no (2, Insightful)

S3D (745318) | more than 10 years ago | (#9945233)

The phone is just not suited for games.
The phone is not suited for games which are not designed for phone. If the game is not some twio week knock off from old console title, but specifically designed for phone resolution, controls and an enviroment in which the game played, the game could be a lot of fun. Think about games using camera, bluetooth or games which could be played in two minutes breaks etc. Thre is a lot of possibilites here, but all of them requie a lot of research and hard work, not a very simple designs that can be programmed by a single non-professional programmer

Re:no (1)

Pidder (736678) | more than 10 years ago | (#9946561)

From the games I've played it's my opinion that the very simple designs work the best. Take Tetris for example. A very simple game in the sense that I could very well be done by a single person but very addictive and _by far_ the best game I've played on any phone. A bluetooth-enabled tetris clone is probably the ultimate phone game in my book (I don't know if one is out there or not).

Think about games using camera, bluetooth or games which could be played in two minutes breaks etc.

I agree completely. The phone is not for long adventure games or anything else that takes longer than a break or a short busride to complete. But a two minute game, isn't that something that will take a short time to program once the design is finalized? (compared to a big console title).

Going to pay off? (1)

Mike Hawk (687615) | more than 10 years ago | (#9944766)

Jamdat is already profitable and growing all the time. That's more than can be said of alot of companies; for example, VA Software.

Instead of stories questioning already viable profitable companies, maybe slashdot should look within and question itself. Not EVERY technology company is drowning, only ones with rediculous stock tickers like LNUX.
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