The European mobile phone games market is coping with its first slowdown as telecoms carriers shift advertising spending to mobile television or digital music, and operators struggle to win new devotees.

The $418 million European market is still growing but the pace is slackening with some analysts blaming the slowdown on the difficulties of reaching out to a wider audience.

Operators are also increasing the pressure on games makers by cutting the number of publishers they deal with and asking for greater participation in marketing costs — both moves which are pushing smaller players out of business.

An increasing number of handset models and rising costs are also pushing many games publishers to merge.

Informa researchers forecast a rise of 53 percent in market size in 2006 — a healthy increase for many sectors but a slowdown in this early-phase industry which more than doubled annually in 2004 and 2005.

Most industry executives are more cautious than Informa, with the most ambitious putting growth forecasts at 50 percent.

“The European market will grow some 30 - 40 percent — that’s the number we hear from operators,” said Ilkka Paananen, head of European operations at U.S. firm Digital Chocolate.

“The mobile games market is not a mature market that is in decline. Instead, it’s an early-stage market that is having growing pains as it tries to break into the mass market,” said Informa analyst Chris Coffman.

Small screens and limited computing power restrict how fancy mobile phone games can be, but customers have proved eager to have them, either already on their new phones or to download.

However, mobile television and digital music — seen as potential big money spinners — could eat into this market share.

On Monday,
Nokia and Motorola said they had agreed to work together to allow users to see television broadcasts through their mobile phones.

Handset makers also see digital music as one of the key drivers for selling more expensive new phones as they try to hold up their average selling prices despite surging demand for cheap phones in emerging markets.

GROWTH PAINS

Casting another shadow over this year’s growth prospects for European games makers is the arrival of the world’s largest video games publisher Electronic Arts into the European market, where it has seized a roughly 25 percent share.

“When earlier everybody tried to just keep up with the growth, now the focus has shifted to competition against each other,” said one executive at a mobile gaming firm, who declined to be named.

In addition to EA, top players in the industry include privately-held Glu Mobile and Digital Chocolate, France’s Gameloft and U.S. firm THQ.

Slower growth is not just an issue for Europe. A year ago, Informa expected the global market to total $11.2 billion in 2010. It has now almost halved that forecast to $6.4 billion.

Kamar Shah, the head of industry marketing at Nokia, the world’s top mobile phone handset maker, says cellphone manufacturers need to make access to games easier for consumers in order to boost the market.

“Mobile gaming is still in its embryonic stage,” said Shah. “We need to expand mobile gaming from core gamers to a wider audience.”

Less than 5 percent of mobile phone users around the world have downloaded a game, industry players say.

“Europe shares a number of problems with other geographies, such as lack of customer education (and) difficulty involved when customers try to buy games,” said Informa’s Coffman.

Games makers say Europe, with its many operators, is a tougher market than the more unified United States. Cumbersome infrastructure for downloading content and billing has also hindered market spread, although growth has still mostly been strong.

“The only market not growing fast is Germany,” said Digital Chocolate’s Paananen, noting that operators expected the German market to grow 5-10 percent this year.

A spokesman for Deutsche Telekom’s mobile phone unit T-Mobile said it was concentrating on music and mobile TV rather than games as it saw more potential in the former.

He said people were used to playing games in high resolution on their computers or on game consoles and that games for mobile phones were of a poorer quality.

Nonetheless, the company will continue to sell games.

“It has an importance and it is a part of our download section,” the spokesman said.

This entry was posted on Tuesday, September 12th, 2006 at 6:56 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.