Online gaming is bigger than ever thanks to Facebook and mobile devices like Apple’s iPhone.
To be sure, both have opened up gaming opportunities to a huge amount of new users, helping to expand the industry exponentially. Although the huge user base is quite positive for gaming companies, it’s important to remember the competition is fierce.
“It’s [really] an ugly scene,” Alexandre de Rochefort, chief financial officer of mobile video game specialist Gameloft told the ReutersGlobal Technology Summit in Paris.
“The smartphone market is not a goldmine for developers. It’s a bit like playing the lottery.”
After reminding hopeful game developers that the industry is no cakewalk, executives noted developing and distributing games has become easier thanks to companies like Amazon who rent out computing space to test games for the likes of Facebook and the App Store.
UK-based media firm Screen Digest states the mobile gaming market has grown from $2.2 billion in 2007 to $3.7 billion in 2010, with estimates putting growth at around a staggering $7.8 billion by 2014.
“Since Apple launched its App Store, the mobile gaming market has undergone a transformation,” explained Screen Digest analyst Jack Kent.
“Before, less than 5 percent were paying to access mobile games, in Europe at least … since then consumers are a lot more willing to pay for content and particularly games.”
As expected, changes in the industry have sparked deals amongst big gaming corporations like Electronic Arts (EA) and privately held smaller companies such as Zynga of Farmville fame.
Screen Digest reported 26 mobile gaming-related acquisitions within the last year, up from 12 in 2009 and 11 from the first quarter of this year. With $200 million in venture capital funds floating around last quarter alone, mobile gaming certainly has a hot niche in the market.
“We used to stay away from games,” Neil Rimer, Index co-founder and partner, told the summit. “It was really like the movie industry where you had to come up with this basic idea for a game and then spend 5 to 15 million euros ($7 to $21 million) and two years building the thing,” he said.
“Sometimes it would work. Many times it would bomb and you were out 15 million bucks.”
Although it all sounds like rainbows and unicorns for app developers, it’s important to keep in mind that there are certain barriers to entry that make success in the mobile gaming market difficult. Even Rovio Mobile, maker of the uber-popular Angry Birds game, developed 51 titles before hitting the jackpot with Angry Birds.