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Mobile gaming still eludes a troubled industry

  • Published at 05:06 am June 10th, 2013
Mobile gaming still eludes a troubled industry

To get a sense of how investors view the promise of mobile gaming, one need look no further than Japan’s GungHo Online Entertainment. With just one game under its belt, its stock has risen tenfold since October and its market cap almost equals that of decades-old Nintendo.

From veterans like Electronic Arts to rising stars such as “Clash of Clans” maker Supercell, the $66 billion video game industry is scrambling to devise games and experimenting with ways to appeal to a generation of players that spends more time on mobile devices than on computers or consoles.

Most are having scant success in an industry peppered with one-hit wonders like OMGPOP and where even established players like Zynga are faltering, industry sources say.

“It’s sort of like all the chess pieces have been thrown in the air, and the industry has not yet landed on what the chess board looks like,” said Owen Mahoney, CFO of Japanese online gaming giant Nexon Co Ltd, which has in the past year bought two companies to accelerate its mobile foray.

In recent years, the model has been to offer games for free, then encourage players to spend real money on in-game purchases - a system perfected by Zynga in its online games. But its rapid decline in just the past year illustrates the challenge of hooking new players, and loosening gamers’ purse strings.

The company that shot to fame on the back of Facebook games like “Farmville” bought OMGPOP, developers of the mobile sensation “Draw Something” - for $180 million. After months of losing users that once peaked to 14.5 million players over a year ago, Zynga last week shut its New York-based studio, effectively laying off the OMGPOP team.

Industry executives say mobile gamers today are spoiled for choice as the industry has exploded. In 2007, when Apple Inc launched the iPhone, there were but a handful of developers. Today, there are hundreds, whose apps sell across the globe on Apple and Google Inc’s Android devices.

“You see these rocket ships in the industry that explode on the scene with a casual game that’s easy to develop with not much money and they gain users quickly. But users get bored or angry because they can’t progress without paying more money,” Nexon’s Mahoney told Reuters in an interview.