Glugame

The mobile gaming industry has hit a bump on its road to growth.

Revenues for publishers declined by 9 per cent in the second quarter, compared to the first, when revenues were up 11 per cent on the fourth quarter, according to the iSuppli research firm.

Its report says the pace of growth is slowing and one of the main problems for the industry is the small number of subscribers for mobile games. It suggests the demographic could be widened if games could take advantage of phones and be more networked and multiplayer.

A week ago, shares in Glu Mobile fell 33 per cent after it predicted a fourth-quarter loss of 6 to 7 cents a share, compared to Wall Street expectations of a loss of 2 cents.

It blamed slowing business in Europe where carriers were ordering fewer games as they changed the way they managed their businesses.

Analysts said the industry was suffering from growing pains. ISuppli suggests carriers are turning to the mobile video market instead, which it says holds the most upside potential of premium content categories.

Greg Ballard, Glu’s chief executive, visited us recently. He admitted the US was trailing Japan and Korea, where companies such as Namco and Sega were moving forward with multiplayer games on more sophisticated phones.

Glu was also still very dependent on carriers – 95 per cent of its games were delivered through 160 carriers. He expects downloads to shift more to the Web over the next three to five years, as well as to sideloading at retail through memory cards that handsets can now increasingly accommodate.

Glu sees itself as the most independent of the big three mobile game players in the West – Gameloft is backed by the video game publisher Ubisoft and Electronic Arts has bought Jamdat.

David Gosen, the head of mobile publisher I-play and another recent visitor, said Glu’s flotation on the Nasdaq in March has helped the profile of the industry. He believes more user-friendly handsets, all-you-can-eat data plans and big brands entering the sector will unlock the market in a big way over the next 12 to 18 months.

ISuppli’s forecasts back him up – it expects mobile gaming revenues to nearly triple by 2011, growing to $6.6bn, for a compound annual growth rate of 23 per cent.

That makes this year’s second-quarter slump seem like only a pause in a game, before the industry leaps to the next level.

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