In this Industry Report

By 2008 the global mobile games market had stagnated. Growth in the operator distributed mobile games market, which peaked at over 50 per cent in 2004 and 2005, had fallen to 10 per cent, and is expected to drop to just 7 per cent in 2009. Device fragmentation, and the top publishers' dominance over operators' portals, had created an ecosystem in which it was difficult for all but the biggest players to generate significant income.

In July 2008 Apple launched its App Store, for which games quickly proved popular. With over 1bn applications downloaded in the first 10 months and 70 per cent of revenues going to publishers/ developers, the iPhone platform and the App Store business model and retail channel have proved that there is a significant market for mobile games outside of operators' portals.

As this business model challenges the relationship between operators and publishers, and smartphones, that can provide advanced gaming capabilities, grow in popularity, more players will try to emulate Apple's success. Two platforms that have the potential to boost the mobile games market outside operators' portals are Nokia's N-Gage, and Google's Android. Though neither of these has yet got the necessary combination of ingredients to be a true rival to the iPhone/App Store combination in the mobile games market.

Despite the growth of new platforms, it is the Java games market that will continue to provide the biggest revenues. As more small publishers, that have been unable to achieve significant revenues with network operators, leave this space, the top publishers will be presented with the chance to increase their dominance of this market.

This report includes:

• Historical analysis of the operator distributed mobile games market
• Assessment of the iPhone's and App Store's strengths and weaknesses
• Analysis of the potential challengers to the iPhone: N-Gage and Android
• Discussion of operators', platform providers' and device manufacturers' plans to respond to the App Store's success
• Analysis of the impact of new platforms on the top three publishers and how they respond
• Country profiles of the major Western markets.

Key Findings

• Apple's App Store is already having a significant impact on the mobile games market. Games for the iPhone generated globally over $100m revenues in H2 2008 and it took 10% of the North American mobile games market.
• As device manufacturers, operators and platform providers launch their own stores, seeking to emulate the success of the App Store, Screen Digest expects more mobile games publishers to abandon or reduce development of Java games for operators' portals.
• Despite growth in revenues in 2008, the impact of new platforms meant that the top three mobile games publishers failed to increase their market share.
• While many players will try to mimic the success of Apple's App Store, as yet, none has the necessary ingredients to match Apple. Platform specific and on-device application stores have the greatest chance of success in the mobile games market.
• Although the application store business model and high-end platforms are attractive to publishers (better share of revenues, more receptive audience, control over pricing and ability to innovate), the operator distributed Java games market will, in the short-to-medium term, remain the largest market.
• Of the top three publishers, Gameloft has best positioned itself to take advantage of the boost new platforms have given the market, though EA Mobile, with its catalogue of popular licensed and parent company games, has the necessary titles to match this success.

Executive Summary

Mobile games revisited
Fragmentation: Java not the answer
Stagnation: growth slows
Consolidation: acquisitions and operator
deals drive top publishers
And then there was Apple

The App Store success story: 1 billion and counting
Hardware:Touch screen proves popular
Touch screen
Accelerometer
Memory

Retail: Apple makes buying games easy
Billing
Flat rate data
A more open market
Consumer choice
Marketing
Pricing
User feedback

Development: the return of the indie developer?
Consumer popularity
Single OS
Marketing
Margins
Apple owns the ecosystem

iPhone OS 3.0: another Apple revolution?
Subscriptions
Micro-transactions
Peer-to-Peer Connectivity
Social networks

Challenges: the iPhone's limitations and rivals
Price pressure
More competition for publishers
Approvals
Licensing
Limited addressable market
Camera and video
Tied to the PC and Mac
N-Gage and Android: rivals to the iPhone?

N-Gage: Suffering an identity crisis?
The original N-Gage
The N-Gage platform – 2nd Version
Development, retail and billing
Handset coverage
Integration with Ovi and Symbian

Android: New platform has potential, but
does Google care?
Open Source: Google's strategy
Retail
Handset coverage
Fragmentation

Everybody wants an app store
Operators
Other application stores

Industry assessment: impact on the top 3
publishers
Growth fails to improve market share
Top publishers' response
The top three publishers' strategies for new platforms:
Gameloft
Glu Mobile
EA Mobile
Other publishers

The App Store effect: Screen Digests' view

Country Profiles
France
Germany
Italy
Spain
UK
US
Canada

Glossary

Tables and Charts

Mobile games revisited
Global mobile games revenue shares
Top three publishers' share of industry revenues

The App Store success story: 1 billion
and counting
App Store application downloads
UK App Store: March 2009 - breakdown of available apps
The operator value chain
The App Store value chain
iPhone quarterly shipments and forecast
Estimated iPhone and N-Gage game revenues H2 2008
Smartphone quarterly OS shipments and forecasts

N-Gage: Suffering an identity crisis?
N-Series quarterly shipments
Registered N-Gage profiles
N-Gage games publishers
Symbian OS quarterly shipments and forecast

Android: New platform has potential, but
does Google care?
Android quarterly shipments and forecast

Everybody wants an app store…
H2 2008: Top publishers' games releases
Selected application stores

Country Profiles
Share of top games' on operators' portals
Share of top 50 paid App Store games
App Store: Top 50 games by publisher (2 or more games)
Operator games download services
Industry share of revenues, total annual downloads (from network operators)

Companies mentioned

Apple
China Mobile
Deutsche Telekom - T-Mobile
Digital Chocolate
Electronic Arts - EA Mobile
Fishlabs
France Telecom - Orange
Gameloft
Glu Mobile
Google
Handango
Handmark
Nokia
Research in Motion
Samsung
Telefonica - O2
THQ - THQ Wireless
Vodafone
Microsoft
Namco Bandai
Palm
Pangea Software