iPhone, iPhone, iPhone! Right now, you hear and read about almost nothing other than the unbelievable successes of Apple with the iPhone and the App Store, and every competitor is measured against this. Over 500 million applications have been downloaded since the launch of the App Store a little more than half a year ago. More than 20,000 applications are now available – most of them games. Gameloft, the second largest mobile games publisher, has announced that Apple is by far their largest customer. In addition, one has to consider that Vodafone, the world’s largest mobile network operator with over 300 million users, has at least 10 times more potential customer than Apple with their iPhone and iPod touch users together. Current analyses impressively record the high acceptance of applications among iPhone users: according to ComScore, at least one third of iPhone users in the USA have downloaded a mobile game. For normal mobile phones, the share is a mere 3.8% in average.[full]

Mobile Games Forum 2009: It’s all about iPhone and App Store

It’s no wonder that at the Mobile Games Forum in London two weeks ago every discussion centred on iPhone games and the App Store. Even the keynote speech by Suresh Sudera, Head of Games at Vodafone, used Apple’s success as a model. As essential problems for developers, Suresh named the extreme fragmentation of mobile phones (umpteen hundred versions of a mobile game are required to market it worldwide on as many devices as possible), low margins (depending on the contract, the developer receives 25-50 % of the end customer price), and insufficient marketing (limited essentially to advertising within the network operator’s WAP portal).

Interestingly, our blog at the beginning of the year – which announced that we would focus on iPhone games and other smartphone platforms and that we would not be developing new games for sale via network operators for exactly the reasons mentioned above – caused quite a stir. It is significant that even the top publisher THQ, with unbelievably strong brands such as Star Wars, Indiana Jones, and Worms, has now headed in the same direction after severe losses.

Are iPhone Games and App Store really so much better?

But why is Apple so successful with games for the iPhone and iPod touch? Is Apple that good or are all the others that bad? Indeed, Apple triggered a revolution with the iPhone and the App Store. The iPhone is by far the most powerful device for mobile games and even partly outperforms the PSP from Sony. The biggest advantage of the App Store is certainly the seamless connection to the iPhone. Every user connects with the service as a matter of course. Because this takes place via data cable with the PC (side loading) or directly via WiFi, there are, of course, no connection fees, which is the case for most network operators, if a user does not have an appropriate data rate. The iPhone is even better positioned for use on the go, because Apple has ensured that the device is only offered together with a data flat rate. Thus, customers never stumble into a cost trap with their iPhone.

3:0 for Apple.

During use over the data cable or WiFi, it is immediately apparent that browsing through the applications is significantly faster and more intuitive than on a WAP portal. The amount of information for every application is also outstanding, with an extensive description, five high-resolution screenshots, and, last but not least, user evaluations and recommendations. Standard WAP portals offer only a brief text, screenshots only as an exception, and evaluations and recommendations such as at Amazon are usually sought in vain. One laudable exception here is the mobile games portal for Vodafone Germany, for which surfing within the portal is also free.

Vodafone scores their first goal, 3:1.

Thanks to the direct business relations without a middle man and the ability to be able to make daily analyses of downloads by country and to update applications and marketing materials every day, the success or failure of games and any marketing measures can be immediately evaluated. As a game provider, we are thus able to react very quickly to customer demands and market changes and constantly improve our offer.

BAM! Shortly before the end of the first half, Apple scores again against the network operators and sends them to the dressing rooms at 4:1.

Lots of light – lots of shadows?

Currently, the only, but also serious, disadvantage to the App Store is the glut of applications. With 20,000 applications, one quickly becomes spoilt for choice, and hundreds are added daily. Despite the recently added categories and user evaluations, it is difficult to find the good games.

That also affects providers. If your titles aren’t in the Top 25, you will generate relatively few downloads. As a result, the number of fun applications and very simple games is very large, and there is a ruinous price war, because providers themselves are allowed to set the price point. Ultimately, this leads in turn to the disadvantage of the user, because elaborate and really good applications (games) have a hard time asserting themselves. That makes the development of high-quality games or very special applications (games?) for a particular target group extremely risky. But there are already rumours that Apple is establishing a premium category for a few publishers. Likewise a defect which Vodafone Germany has identified and they have already successfully launched a premium category.

Vodafone closes in, 4:2.

Comparing all of these advantages with the situation of selling mobile games through network operators, where, as developers, we receive a mere 25-50 % of the end customer price, must support hundreds of different mobile phone models, and have to work with countless partners, Apple’s business model is by far the fairest, most flexible, fastest, and thus also the most profitable. And ultimately, that leads, in turn, to better applications to the advantage of the end user.

Apple sweeps Vodafone and friends from the pitch, 5:2.

Do other mobile phone manufacturers even have a chance?

Let’s put it this way, every half-hearted attempt to close the gap with the iPhone is doomed to failure. Apple’s iPhone was a wake-up call for the entire industry, and other manufacturers who fail to go all out now will be left in the dust. Among the so-called smartphones, Apple is already far out in front and will certainly not rest on their laurels, but will open up other target groups.

However, it must be remembered that a large part of their success comes from the fact that Apple has limited itself to the high-end segment. The margins here are high and only one product had to be developed. That saves on development and marketing costs. The other mobile phone developers will certainly thin out their portfolios considerably and bring significantly fewer models onto the market in 2009. In any case, the other providers will also have to directly offer a high-quality range of applications and services. It is no longer enough just to offer a mobile phone with a camera and MP3 player. There have already been relevant announcements.

What are Nokia, Sony Ericsson, Android, and Microsoft doing?

Nokia has expressly declared that they will generate a significant part of their sales through extra internet services and are already well positioned with OVI and the integrated game offer N-Gage. Similarly to the iPhone, games from Nokia can first be downloaded to the PC and then copied to the mobile phone, which saves on transfer costs over the mobile network. A solid DRM system provides the relevant copy protection. Extensive community features, such as on-line high scores and user evaluations for games round out the offer from Nokia. The strategy of only allowing access to selected publishers with high-quality games and pre-installing their mobile games on umpteen million devices as a try & buy version could make a critical difference from the App Store. In addition, Nokia leads in the area of growth markets, i.e. Brazil, Russia, India, and China, and, with telephones which may not be as powerful as the iPhone, but are cheaper, offer the game consoles for the mobile gamers of tomorrow.

Apple and Nokia go into halftime 2:2.

With PlayNow, Sony Ericsson also has their own portal for mobile content which is directly accessible from the mobile phone. However, the offer is more comprehensive than consistently high-quality, and the information on the individual games is as meagre as with most network operator WAP portals. Since there is no evaluation system, customers have to buy a pig in a poke. Community features or the option of side loading are also lacking and providers of high-quality games are missing an effective copy protection (in general, not effective for Java games). Sony Ericsson needs to improve in every area if entry into the high-end field is not going to be missed. The latest announcements regarding focus on high-end handsets give reason to hope that something will happen here.

But even with all these deficits, it should not be underestimated that Sony Ericsson is far ahead of their competition in the area of Java and, with their positioning and proximity to the parent company Sony, they are much closer to the subject of games than their competitors. Sony Ericsson is correspondingly popular with mobile gamers in Europe (mMetrics), Russia, and large parts of Asia. In itself a good basis from which the development into the smartphone field and the expansion or restructuring of PlayNow could be extremely successful.

Sony Ericsson trails Apple 2:1 at the half, but could still surprise with a new attack and a changed defence in the second half.

Google’s Android platform with its Marketplace has similar approach to Apple’s strategy. The publisher receives 70 % and takes over marketing themselves. However, Android is ultimately a Java platform, which offers no protection against software piracy. The first mobile phone with the Android operating system, the G1, with its performance data and especially the design and manufacturing quality, cannot keep pace with the iPhone. An important aspect particularly for gamers. In addition, Google is only known for searching and finding information and its free additional services, such as Google Maps. Google earns money exclusively with advertising. But the sale of mobile content simply does not fit in this strategy – even if Google apparently want to generously pass this income to publishers and network operators. Therefore, it is more than doubtful if users are prepared to pay for games and other applications in a Google environment they expect to be free. Even more doubtful is if potential users are prepared to let Google permanently peer over their shoulders in everything they do on their phone: the activation of the G1 requires a Googlemail account via which the entire usage behaviour can be followed by Google.

With its unfortunate line-up, Android had a bad start in the first half and will have some catching up to do at 0:2. Whether the team from the Internet search giant will find the right means of deciding the game in their favour is more than an open question.

Involved in the smartphone business for years, Microsoft has made a good name for themselves with business customers thanks to Windows Mobile and strong partners like HTC and Sony Ericsson (!) as well as an excellent connection to the Office environment. However, Windows Mobile has not been able to establish itself as a mobile game platform due to the lack of an App Store and missing end customer marketing. Even at Handango, one of the largest on-line providers of Windows Mobile applications, Windows Mobile-based games have rather a niche existence – despite the high-quality games which are far superior to Java games thanks to the native Windows Mobile operating system.

With the already announced Skymarket, about which little is known, Microsoft may be able to close this gap quickly. That Microsoft is able to conquer even relatively unrelated markets late in the game has been impressively demonstrated not least by the astonishing success of the Xbox360 over the presumed top dog Sony and their Playstation 3.

Trailing 1:3 at home. In the first half, Microsoft has been slow to get into the smartphone game and it has taken a while for the communication between the players from different clubs to agree. But it wouldn’t be the first match that the software giant has turned around in the second half or even overtime with massive pressure thanks to their immense reserves. We expect just about anything from this team.

Conclusion

2009 promises to be an extremely exciting second round in the field of mobile games. The victory in the download business will probably be determined among the mobile phone manufacturers. Even if Vodafone and T-Mobile (USA) appear to have recognized the writing on the wall and announced or even implemented extensive improvements, there will hardly be any fundamental change. There is too much fragmentation in mobile telephones and too many problems with the business model with middlemen and different management in the various regions underlying the sale of applications via network operators. In other words: We don’t see a global App Store coming on mobile network operators.

Among the device manufacturers, or rather the platform operators with Microsoft and Google on board, Apple is clearly in the lead. But the iPhone is not the best mobile phone for everyone to play games on. Nokia still sells several times as many devices and even Sony Ericsson, together with their proximity to Sony and possibly with an alliance with Microsoft, is certainly in a position to secure a large chunk of the mobile games business. Heads-up for Mobile World Congress in Barcelona next week as for sure we will hear some announcements from the usual suspects.

In this context not the players for once, we have fortified ourselves with beer and sausages after the exhausting first round and now eagerly await further developments and, of course, the results of the game.

Game on!