A lot of talk continues to be made about the overwhelming success of the global gaming market, with multi-billion dollar revenues that now outpace traditional entertainment moneymakers such as movie box office receipts. This growth is thrown into sharper focus now as we stand on the edge of a full-blown console war between Microsoft, Sony and Nintendo as each launches its respective interpretation of the definitive next generation home entertainment system.
But if these platforms are arguably the leading edge of the global gaming market, can we really in all fairness call it a global market? Approximately 80 percent of overall spending on video game hardware and software takes place in the United States, Europe and Japan, with only minuscule amounts coming from the rest of the world.
The next gen offerings from Microsoft, Sony and Nintendo will continue to push the envelope when it comes to video game performance and they all have features that would allow them to be the centerpiece of the digital living room. However, they also face issues that severely limit their global appeal, including expensive price points for the consoles and games, distribution issues in non-traditional markets, and piracy.
The GEC – A Global Platform
Because of these overarching issues that affect several large markets, some believe that the future of the global gaming market lies with a wireless device due to its near ubiquitous accessibility. Consider that by the end of 2006, 2.5 billion people or 38 percent of the world’s population will own a cell phone. Taken a step further, I believe the forthcoming tidal wave of advances in the wireless device and its network will soon allow it to become a “good enough” gaming console in regions such as India, China, Latin America and Russia. Together, these emerging markets represent an enormous untapped consumer gaming market that eclipses that of developed countries.
According to Goldman Sachs, in the next decade, more than 800 million people in China, India, Russia, and Brazil will qualify as middle class – that’s more than the combined population of the United States, Western Europe, and Japan. These consumers aspire to own American brands and other high-quality imports. The advanced technology of wireless devices as a good enough console (or GEC) will allow it to function as the gaming/multimedia hub of homes in these emerging markets, and more broadly, as a good enough computing platform as well.
We already have PlayStation 1 quality games on phones today and gigahertz processors will be coming to market within the next 12 months. An advanced phone in a developed nation today like Japan or Korea will be the phone consumers receive tomorrow for free when signing up for mobile service in India or Russia. This continual higher resetting of the minimum baseline of technology in phones is what will fundamentally drive these devices to become the mass market computer of the future, as well as a viable GEC in emerging markets.
India is a prime example of the potential for the GEC, as it is demographically representative of many other emerging markets that are alluring to the video game industry, but which also presents many obstacles. It is estimated that in India, a country of more than one billion people, there is an installed base of only 200,000 video game consoles. Due to high import duties (up to 40 percent) for console hardware and software, much of this hardware is sold through black market retailers and virtually all of the software is pirated (played on “chipped” consoles with disabled DRM). The situation is similarly bleak for PC gaming.
Though there are an estimated 50 million PCs in India, only four million of these are in households and only one million are believed to be used for gaming. Furthermore, with a robust market for pirated software, an estimated 80 percent of these one million gaming PCs use illegally copied software. So essentially India is a market of over one billion people with only 200,000 PCs playing game software that has been purchased through legal channels, and only 200,000 video game consoles, most of which are sourced from the black market.
But India is also like other emerging regions in that it has quickly embraced the wireless device. India is now the world’s fastest growing wireless market behind China with customers signing up for mobile service at the rate of 5 million per month. In recent years, enough mobile devices have been activated in India to allow wireless to easily surpass wireline telephone service.
This has provided a critical foothold for mobile gaming, so much so that mobile gaming already supersedes console and PC gaming by a factor of two. With this momentum in place, it’s up to the wireless industry to ensure that the GEC device, not consoles from the big three, becomes the consumer gaming/multimedia hub in the digital living rooms of emerging markets. Because it addresses the critical issues of affordability, distribution and piracy, the GEC device has the potential to introduce interactive entertainment to people that otherwise could not purchase dedicated gaming platforms.
The Emerging Market Digital Living Room
In emerging markets, the GEC device has the ability to become the primary home consumer entertainment device mainly due to its affordability. Device manufacturers have attracted a broader range of customers in these regions by continually lowering the prices of mobile phones while at the same time offering more technology and increasing multimedia functionality.
This is done by applying technology used for years in developed regions to provide new content/services (i.e., ring tones and rudimentary games) while selling a large volume of devices. I believe that in the coming years this technology transfer will allow for the development and commercialization of the GEC device as a digital media center, which will enable the secure wireless over the air (OTA) delivery of music/radio, video, and other premium multimedia content into homes in emerging markets.
With the integration of TV-out support into wireless chipsets, the opportunity exists to enable the GEC device as a home entertainment and media system on a larger TV display. In addition, forthcoming USB controller support in wireless devices will allow a keyboard, mouse, external hard drive and other peripherals to be attached to the GEC device, allowing users to access and experience the Internet while completing PC computing-like tasks. And of course, a more traditional video game controller can also be connected via USB.
In this manner the phone has essentially shattered its small size, prohibitive interface and usability limitations. As these technologies continue to be applied, incorporating multimedia/computing functionality into a device used for a variety of meaningful purposes, the handset cost can be justified across communication, entertainment, productivity, information and other uses. This is especially relevant when one considers that the GEC device is in fact a wireless phone that can be used by its owner during the day for personal and business activities, and then brought home to be used by the family as the primary entertainment hub in the evenings.
Wireless Digital Distribution
The distribution factor is also essential to the concept of a GEC device. In emerging markets, video game cultures generally do not exist with any preconceived beliefs regarding how games should be purchased, sold, distributed, played and enjoyed. These are “green field” regions and nobody expects that they can go to their closest store to purchase a console and the latest titles, then go home and plug it all into their widescreen HD TV, 7.1 home theater system, and start playing. With the cell phone often being the first major technology device exposed to people in emerging markets, it’s only natural that their first experience with gaming will likely come via this device. In fact, by many estimates the vast majority of people in India have experienced gaming for the first time on their wireless device.
This is further amplified when one considers that phones generally come for free when signing up for mobile service with an operator. Furthermore, just because there will be console-like quality and performance available in a GEC doesn’t necessarily mean only traditional console gaming genres such as sports, action, racing, and fighting will be successful in these markets. Casual gaming can flourish as well as has been proven on the web and by the launch of Xbox Live/Arcade by Microsoft. Consumers in emerging markets will be free to choose whatever types of games they want to play.
Once people in emerging markets have experienced mobile gaming and found they like it, they will want to purchase more games. In developed regions of the world, people already enjoy 3G wireless networks that allow for the quick and easy download of richer more advanced 3D games to the mobile device. As these networks roll out in emerging markets, these same high-speed 3G networks (and someday 4G) will provide a wireless over-the-air (OTA) digital distribution pipe that can deliver games to the GEC device.
This delivery will take place in a secure manner, thus providing the added benefit of addressing the multi-billion dollar packaged software piracy issue currently faced by publishers in emerging markets. This will in turn encourage even more publishers and developers in the United States, Europe and Japan to finally enter these emerging markets and provide this under-served consumer base with the latest games and brands from their catalogs.
The Holy Grail – Digital Device Convergence
Emerging markets clearly present themselves as the next untapped audience for gaming that can continue to help fuel the rapid ascent of gaming in the broader entertainment space. Leveraging the continual advance of technology in wireless devices with high-speed data networks will allow for the GEC device to flourish.
If the vision of the GEC is achieved, the wireless device will become both the primary entertainment and computing platform in the emerging market digital living rooms of millions (if not eventually billions) of consumers around the world, as well as function as a standard wireless phone for daily personal and business use. In this form the GEC will be successful in achieving the holy grail of digital device convergence, a feat many say is not possible. This is my vision of mobile gaming in the year 2016.
Senior Director, Gaming Group
[This mobile editorial was produced in association with Modojo.com ahead of the launch of Gamasutra's new mobile game business site, for which more information will be available in the near future.]