Flurry of Wireless Deals Aimed at Dominating Market

By CHRISTOPHER KEOUGH

Staff Reporter

Wireless games developer JAMDAT Mobile Inc., betting on an unproven U.S. market, has been moving aggressively to tie up potentially valuable software licenses.

In recent weeks, JAMDAT has struck deals with Electronic Arts Inc. and Infogrames Inc. to transfer PC and console games titles to the wireless platform. In a third deal, JAMDAT gave THQ Inc. access to JAMDAT technology so that the game developer can create wireless versions of its titles.

The moves are part of a strategy it expects will put it in a position to dominate the market should American mobile phone users embrace games.

While he refused to reveal the value of the license deals, JAMDAT Chief Executive Mitch Lasky cited the healthy Asian market for wireless games, saying that the migration of wireless gaming was imminent.

“The next 12 months are the defining moment for data services in the wireless world,” Lasky said. “If we’re having this conversation 12 months from now we’re in pretty good shape.”

According to a research report by London market research firm Datamonitor, the international market for wireless gaming would be worth $17.5 billion by 2006 and involve 500 million gamers one of few growth segments in a wireless market that is reaching saturation.

Lasky said between 40 million and 50 million wireless users in Japan play games, while the wireless gamers in the United States number less than 10 million.

That number is expected to grow with the rollout of next-generation technologies that allow users to download games to handsets rather than play them from a provider’s server. That means less expense because it requires less airtime.

“Our thinking is the next generation handsets will look more like the games (consumers) are used to playing on GameBoy,” Lasky said.

JAMDAT generates revenues by selling games to mobile phone users, either through a per-play arrangement, which Lasky said could cost around $2 per game, or through an agreement with the wireless carrier to split proceeds based on air time used by gamers.

The company also expects to make money by licensing proprietary technology to developers who want to build games for the wireless platform.

Games will make up 60 percent of its revenues, Lasky said.

The company, formed two years ago, still is operating on $14 million in venture capital raised from eCompanies Wireless (largely supported by Sprint PCS), New York-based Apax Partners Inc. and strategic investors Intel Capital, Sun Microsystems Inc. and Qualcomm.

With the licensing deals already signed Lasky said others have been completed but not yet announced JAMDAT expects a sharp spike in revenues. “This year is going to be a many-times-better year than last year,” Lasky said. “This is the year it starts going nonlinear.”

The company will plow revenues back into licensing fees, reducing dependence on investors and further development of technology.

Despite what he sees as the promise of the market, Lasky has no illusions that mobile phones are going to replace PCs and consoles. “We’ve always viewed wireless entertainment as something that fills a crevice in your day where you hadn’t thought to be entertained before,” said Lasky, an attorney and former executive with Activision and Walt Disney Co.

The company is not alone in the aggressive pursuit of the wireless gaming market. Sony Pictures Digital has created a wireless services group to develop entertainment applications and games featuring Sony properties. Disney, through Sprint PCS, delivers wireless games based on Disney and ESPN properties and this month announced a deal to create ESPN-related applications for Qualcomm’s new wireless platform. There is no distribution deal for the games at this point, according to Disney spokeswoman Kim Kerscher.

The efforts appear too early for U.S. wireless consumers.

“There might be some appeal to having free games like Tetris available,” said P.J. McNealy, research director for GartnerG2, the research arm of Gartner Inc. “People aren’t going to spend their air time charges playing games.”

That’s different from Asia, the top market for wireless and wireless gaming services. In McNealy’s estimation, the difference is Asian carriers have a captive audience of commuters on public transportation. “Most people in the U.S. drive in every day,” he said. “Handheld gaming and driving, ideally, don’t mix.”