Certain wireless gaming forecasts have predicted that this market will be worth nearly $17 billion, approaching the value of the Hollywood movie industry.  Don't believe the hype, says Ovum, an analyst and consulting company in their report "Wireless Games: Playing to Win," authored by Rob Gear and Roope Mokka. According to Ovum, consumers will be willing to pay only where they perceive value and, given those parameter, the company predicts the wireless gaming market will be worth around $4 billion by 2006, an amount significantly lower than some industry expectations. 
 
Ovum notes that the growing confidence in this field can be measured by the number of start-ups entering the space, the 'land grab' between gaming companies, handset vendors and operators and the creation of the 'The Gaming Interoperability Forum' by Motorola, Siemens, Ericsson and Nokia to help simplify the process of developing and getting revenue from cross-platform games. However, Ovum says that both technical and cultural barriers must be overcome before the market really takes off - and this requires a shift in mindset.

According to the Ovum analysts, this is not about wireless internet. And it is not about bringing mobility to the high-spend, hardcore gamers. Instead the real potential lies in bringing games to a mass market - social players who use it to kill time or play against friends, but who won't pay over the odds against other forms of entertainment.

It is no surprise that companies want to take advantage of what is supposedly a thriving market. The Playstation agreement forged between Sony and Vodafone earlier this year and Nokia's move to develop mobile gaming for WAP phones are evidence that gaming will be one of the most compelling forms of wireless entertainment.

Rob Gear, Analyst at Ovum, explains:

"The huge success of I-mode in Japan, where two thirds of use is for entertainment shows the potential that can be achieved here.  We will have handsets with GPRS, as well as color screens and Java compatibility.  Consequently, there is a 'gold rush' mentality and we are witnessing players rushing eagerly into this space, hoping to cash in on its profits. The logic is highly seductive - the gaming and wireless markets are both large and lucrative, so put them together and you get something even bigger and better."

Ovum reports that even though mobile phone companies believe gaming services will help them recoup their huge investment in 3G licenses, the reality will not be so provident in the short-term.  Reaping benefits will depend on delivering to the customer's needs. 

Gear continues:

"Operators will be playing a whole different ball-game.  They will be up against adversaries with years of experience in the gaming field, hefty R&D budgets and existing relationships with their client base.  Brand recognition will be paramount to any mass market success.  At present what is on offer is limited and the experience is poor due to bad marketing and ineffective methods of billing. 

Wireless gaming may promise long airtime usage; however, this promise is also the primary shortcoming of the business model.  Bandwidth does not come cheap, and if efficient, transparent billing mechanisms are not installed someone will have to pay."

Traditionally, the key driver of interactive games has been the under-25 age group who are time-rich, but, cash-poor. One solution is to target the more affluent 'middle youth' market. However, even this segment has its drawbacks.  They are cash-rich, but time-poor. Consequently, Ovum predicts, 68%-85% of people will never play a wireless game. 

Ovum further believes that many users will never pay more than 50c a month, with dedicated gamers averaging only $10 given the compelling substitutes on offer.  This player will belong to a niche group, constituting less than 2% of the market and will be expensive to support.

 "Market entrants must take heed and realize that wireless will not compete with consoles," concludes Gear.  "Exploiting existing brands and communities by building games around them is the way for collecting revenues.  A community sharing a special interest - Teletubbies fans, for example - will be more eager to communicate with each other than randomly chosen users of non-branded games."

In sum, Ovum predicts that by 2006 there will be 53 million social gamers world-wide.  60% of these will be evenly distributed between Asia-Pacific and Europe. Wireless gaming will be a billion dollar market by 2004, rising to $4.3 billion by 2006.