Forecast still cloudy, turbulent for mobile gaming

This year may well mark “a turning point in the mobile gaming industry,” as Gameloft insisted last week. But for most wireless-game makers, there will be plenty more storm before the calm.
The Paris-based publisher made the claim last week as it posted $34.1 million in third-quarter revenues, marking a solid – if unspectacular – 8% increase from the year-ago period. Sales for the year so far are up 9%, Gameloft said.
At first glance, those figures contrasted starkly with Glu’s earnings report a day later. Glu generated $23.9 million but posted a whopping $56.9 million loss during the quarter as it suffered a $46.6 million charge for impairment of goodwill – essentially a write-down of two of its three reporting units.
It’s worth noting, though, that Gameloft isn’t trumpeting its net profit, only its overall sales. And we’re talking about two of the top players in the space: Gameloft is widely thought to be a close second to EA Mobile, which has dominated mobile gaming since acquiring Jamdat Mobile. Glu is solidly ranked in the top five.
Glu continues to pay the price for questionable strategies, including its dependence on licensed titles and at least one acquisition that has yet to pay off. But its struggles point to larger problems in the segment: porting costs continue to shackle mobile publishers who must address a wide swath of handsets and technologies, and licensed games – which arguably are necessary to bring first-time gamers into the fold – may be prohibitively expensive to produce.
More interestingly, the new handsets and platforms that industry players say will buoy the market may actually be hindering it – at least for now. The iPhone, Android and Nokia Corp.’s N-Gage “have actually slowed the growth from the carrier business,” Glu CEO Greg Ballard said last week, as well as “impacting our business in the short term.”
Glu – which has notably fought the surging trend of free, ad-subsidized games – has actually begun tinkering with cheap games and promotional giveaways. And the move has worked, at least to an extent, as it found success with a 99-cent version of Space Monkey through Apple’s App Store.
But hawking cut-rate games for high-tech mobile platforms is a dubious strategy itself, especially as publishers continue to try to soak gamers with high subscription fees and exorbitant one-time charges to play on a platform that pales in comparison to other mediums.
The iPhone, the G1 and all the other high-tech “prosumer” devices that are coming to market may indeed serve as the life preservers publishers desperately need. But except for the iPhone, these flashy gadgets are only beginning to hit the shelves and attract the attention of mainstream users. And the choppy waters are sure to claim more victims in the meantime.