Betting big on entertaining small

Mobile entertainment can be a lucrative market, as long as there is a clear regulatory framework and smart marketing tactics in place, say industry players.

Once a chunky piece of hardware that could only make calls, the mobile phone now allows users to take print-quality pictures, play games and make payments. It is clear that mobile entertainment is here to stay, and can herald the beginning of a highly lucrative market.
"Games, gambling and girls are the '3 Gs' which will propel mobile data usage over the coming years."
-- Nick Ingelbrecht

According to Gartner, sales of mobile phones will reach a billion a year by 2009, where one in three of all phones will be sold in Asian countries. Estimates from research house Informa Telecoms and Media also state that the global market for mobile entertainment could reach US$42.8 billion by 2010.

Nick Ingelbrecht, Gartner's principal analyst, estimates that by 2009, the revenues for the mobile entertainment market in the Asia-Pacific region (excluding Japan) could reach almost US$8 billion, making up between 30 and 35 percent of the worldwide figures. This would reflect an increase from the estimated US$3.4 billion revenues to be generated by the end of 2005, he said.

"Games, gambling and girls are the '3 Gs' which will propel mobile data usage over the coming years," Ingelbrecht wrote, in an e-mail interview with ZDNet Asia. "Clearly, demand will be driven by the priorities and values of people who use data services, so you have to look at some fairly basic underlying motivators among consumers."

For example, using Maslow's hierarchy of needs, some of these basic motivators cou greed, sex, and possibly the fear of losing, Ingelbrecht explained. Maslow's hierarchy is a hypothesis in psychology which theorizes that humans seek to satisfy a host of basic needs prioritized in a pyramid.

With the mobile entertainment market poised to yield such promising returns, it is not surprising that many industry players have jumped onto the bandwagon. One such entrant is multimedia software maker, Macromedia.

While the company has typically been associated with its desktop applications such as Studio, Macromedia is also moving steadily into the mobile device area with the June 2004 introduction of Flash Lite, a version of its Flash player which was developed specifically for mobile phones.

Already, Macromedia this year has inked contracts with handset makers Nokia, Sony Ericsson and Samsung Electronics to embed Flash Lite into their handsets, according to a company media statement. Users can now look forward to handsets with Flash-based user interface and games from these makers, Macromedia said.

In addition, the company says it is currently working with major operators across the region to develop subscription-based channels of news content, based on its FlashCast technology.

Dan Brogiel, Asia-Pacific vice president of Macromedia's mobile and devices business, said during a press briefing last week: "This is definitely a huge market for us. The idea that Nokia is the largest handset maker in the world, with a 30 percent market share, is not lost on Macromedia."

Betting on mobile
Mobile gambling has recently emerged from behind the shadows of its more illustrious peers, such as games and adult content. With the proliferation of online gambling Web sites, it is hardly surprising that one of the world's oldest forms of leisure has now transitioned to the mobile screen.

Figures from Informa put the annual revenues derived from mobile gambling as US$1.2 billion worldwide in 2005, increasing by more than 600 percent to US$7.6 billion by 2010. Of this, the Asia-Pacific region is forecast to generate US$2.7 billion in 2010, trailing just behind leader Europe, which will yield US$3.2 billion in revenues. Juniper Research however, expects Asia's consumers to contribute 39 percent--the largest slice of the pie--of the worldwide mobile gambling gross revenue by 2009.

However, players looking to penetrate into this market might have a tough time because gambling is a highly regulated activity in most countries across the globe. Mobile gambling in the Asia-Pacific region is currently still a grey area in terms of government regulations, though it is covered under a country's policy on gambling in general.

In 2002, the Hong Kong Jockey Club launched its mobile phone betting services, allowing users to bet on horse racing, football and the Mark Six lottery using SMS (short message service). The country's sole licensed betting operator, the Hong Kong Jockey Club also allows its users to perform instant fund transfers between their betting and nominated bank accounts.

The Philippine government however, just last month fined mobile phone operator Smart Communications, for providing illegal gambling services via its text messaging promotional games.

Matti Zinder, CEO of Spin3, a company that provides wireless casino systems to mobile operators and service providers, believes the key in maximizing the potential of mobile gambling in the region is in legislation, and the positioning of such services.

"Japan is definitely a huge market, as well as Southeast Asia," said Zinder, who was in Singapore recently for a mobile entertainment conference. "However, the legal system in Southeast Asia is unclear…there are no clear regulations, unlike in China where online gambling is prohibited."

Legislation, he told ZDNet Asia, would set perimeters which define the areas that mobile operators can work within, hence opening up another market for them.

Spin3 establishes several rules, with all its licensees, which include age verification and restrictions on betting amounts, where gamblers who wish to cash in their winnings are required to fax in copies of their identity papers as proof, and must adhere to a betting limit of US$2,000 a day.

Steps like these, said Zinder, would allow operators to circumvent the issues of gambling addiction and fake identities, especially if they are embedded within government regulations.

One example of clear regulations, said Zinder, is that of the United Kingdom, where legislation has been passed to regulate remote gambling. Currently, Spin3 is working with U.K bookmaker Ladbrokes, which launched its mobile gambling services earlier this year.

While Zinder admitted that the take-up rate is "far from what we want", he noted that the growth has been significant. There is no reason why the Asia-Pacific region cannot follow suit, he added.

"It really depends on how our clients market the games," he said.

According to Zinder, mobile gambling should not be marketed as an activity on its own but as part of the entire mobile entertainment suite. He drew upon the analogy of Singapore's proposed integrated resorts where the government has firmly positioned gambling as just one of several other leisure activities that will be available in the resorts, including shopping malls, restaurants, theme parks and cinemas.

"Mobile gambling should be like 'snacks', consumed for a few minutes at any one time while you are sitting in a cab or waiting for the bus," Zinder said.

However, Gartner's Ingelbrecht warned that providing mobile gambling services might not bring in huge returns for everyone.

"The potential for service providers is limited as they will probably only be able to charge for the traffic, and that will generate only modest revenues," he said. "(There) are also legal issues, security considerations such as cost and complexity, and commercial arrangements involving banks, mobile service providers and contents providers to think about."