Game makers face own 'survival game'

Papuc is one of a few hundred developers, wireless engineers and traditional PC game makers that just in the last few months have gone in search of gaming gold inside cell phones. All want in on the ground floor of an industry expected to generate $7 billion in revenue for U.S. cell phone carriers by 2007.

Like the pioneers of other industries, they're in for the ride of their lives.

"This is a survival game," Nokia senior manager Vesa-Pekka Kirsi said at the Game Developers Conference 2003, taking place here this week.

The industry, Kirsi said, is too young to support so many companies. Many pitching their wares at this year's GDC, one of the largest game conferences anywhere, aren't expected to survive to the next GDC conference.

Papuc, a Lithuanian also attending the show, shrugs his shoulders at Kirsi's sentiments. "I will try to show them," he said.

But executives of cell phone companies attending the conference sent a maddeningly mixed message to those who want to make games for handsets. Carriers all say games will become an important revenue source to help them recoup the billions they spent building new cell phone networks to keep up with demand for voice calls. At the same time, however, developers of cell phone games shouldn't expect much support, such as advertising budgets for their games, development work or research money.

Jerry Rocha, a marketing manager at Cingular Wireless, said most carriers are instead focusing their resources now on what they do best--selling voice-calling services--to battle a possible third year of declining cell phone sales.

"We are the 'phone' company," Rocha reminded a group of wireless game developers clamoring for more marketing support. "We have to make $4 billion"--that is, Cingular's network construction costs.

Jamdat Chief Executive Mitch Lasky said carriers aren't spending lavishly on development of cell phone games because the revenue even from blockbusters in that category isn't enough to cover the cost of a magazine ad.

Big hits, small change
A big-selling cell phone game, he said, earns about $100,000 a month. The sales are the same even in Europe and Asia, where these sorts of games have been around longer than in the United States.

"There are very few games doing those kinds of numbers. Even on hit games, with our margins, a single-page advertisement eats up the revenue," said Lasky, whose company is perhaps the biggest provider of cell phone games in North America. "We can't afford it, the revenues won't support it."

He did offer a note of encouragement: "We are about ready to pay our first royalty checks to developers." The company has been selling wireless games for at least two years.

In Japan, too--a nation crazed about wireless data--cell phone game sales have been somewhat disappointing. NTT DoCoMo has 36.9 million subscribers, who generated a relatively small amount, about $100 million, by buying cell phone games in 2002, NTT Executive Vice President Takeshi Natsuno told cell phone game developers. That's an estimated 7 percent of the carrier's revenue.

"To Nintendo, this looks small," he added.

In Korea, the biggest-selling cell phone game right now is "Tetris," which sold about 70,000 copies at $2.40 each. In Europe, a hit game in Europe generates about $150,000 in revenue.

The modest returns, however, haven't done much to scare game makers and wanna-bes away from cell phones.

Nokia's Kirsi is witness to the rush hour. He plays a role in deciding what games will go on Nokia devices, including the N-Gage gadget, which is a Game Boy-like handheld console first, cell phone second.

Many of the games he's seen are from small and unknown developers. Nokia prefers for now to use games from recognized game makers, like Sony, believing new players of cell phone games will be attracted by a brand they recognize.

Sooner or later, the software makers say, carriers will reap the rewards of games on cell phones.

"It'll be the rescue of 3G," or third-generation technology, said Brian Pearson, a senior software engineer for Ideaworks, which makes software to run cell phone games. Third-generation, or 3G, technology has largely been a misfire, despite expectations that it would be the next big thing for mobile phones.

Danh Le Ngoc, vice president of Ajile Systems, rushed to add wireless gaming to his company's offerings because he spotted the attention carriers were paying to it--the same reasons Papuc gave for bringing his company into this new field. Ajile is now working on creating a way for makers of popular game consoles, such as Nintendo, to buy their games from cell phone companies.

"The carriers need us," he said. "That's exactly why we did this."