Electronic Arts Inc. announced last Thursday it had agreed to buy JAMDAT Mobile Inc. for a total of about $680 million. Electronic Arts said this deal would accelerate its aim to expand globally in mobile, with the two companies together planning to publish over 50 games for mobile phones in the first year after completion of the transaction.
The deal is expected to close in early 2006, but analyst reactions are mixed; with some suggesting that Electronic Arts may be outbid before this while others claim that EA is already overpaying by $200mln.
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Electronic Arts Inc. announced last Thursday it had agreed to buy JAMDAT Mobile Inc. for a total of about $680 million. Electronic Arts said this deal would accelerate its aim to expand globally in mobile, with the two companies together planning to publish over 50 games for mobile phones in the first year after completion of the transaction.
The deal is expected to close in early 2006, but analyst reactions are mixed; with some suggesting that Electronic Arts may be outbid before this while others claim that EA is already overpaying by $200mln.
This comes very soon after a study by Screen Digest which argues that console and PC game publishers are being eclipsed in the market by companies dedicated to mobile games. Jamdat and Gameloft were specially mentioned - the two companies accounted for almost 30% of games download revenues in the U.S. and Europe during 2004, in a market where the 'traditional' developers (such as EA) are weak, but is forecast to hit $2bn in 2005, and $8bn by 2010.
Indeed, as we've discussed, the mobile gaming market has been remarkable effervescent recently - with industry giants such as Microsoft, EA, Nokia and Sega announcing new initiatives for the coming year. The question is - is this the beginning of the end?
The video gaming industry is a behemoth: with "the worldwide interactive entertainment market" estimated at $28.5 billion in 2005 - meaning that mobile gaming forms a mere 7%. By 2010, however, the mobile gaming industry will form as massive 24% of the video gaming market (using present estimates).
Why is this a problem?
First, rabid commercialization and consequent increased expectations of consumers means that costs increase. This has happened to the video game industry - the cost of development of a next generation title is set to rise to $6-$10 million, and reports suggest that for these titles, as few as 80 games a year will turn a profit.
Second, this results in business practices which can only be regarded as unsavoury - gruelling hours for game developers, and the release of pathetic franchise updates. I suppose the bright side of these is that - at least it sometimes results in price cuts?
These two factors make it hard for independent game developers to flourish - and that is a problem because historically many new gaming paradigms have been created by game companies which are not major studios. The most famous example probably being FPSs, which first gained immense popularity in the shape of Doom. There is also some anecdotal evidence that market consolidation has not been good - EA acquired Black Box Games in 2002, and their Need for Speed franchise is now a ghost of what it once was. (Where are all the supercars!)
All is not lost, however - The ironic thing is that many of these problems are present because gaming devices have increased in complexity, allowing more realism, so perhaps the fate of the mobile gaming market is still not so dire (yet): as phones are still at a technological level where gameplay counts for more than eye-candy (because eye-candy is hard on a 200Mhz processor with no 3D acceleration). Also, because the "traditional" route for mobile games has been the internet (like - our software store!); there is less of a danger of monopolization of distribution methods.
Basically, we hope that our favourite game developer - Infinite Dreams - and other studios like it - continue to release excellent excellent games. Yay.
