Mobile gaming for now remains the killer app that still hasn't knocked 'em dead, but market growth and maturity might be on the way if the wireless industry can overcome some key hurdles. The less-than-ubiquitous availability of game-capable handsets, a high-cost game title licensing structure and a previous lack of innovative marketing and pricing strategies may have thus far limited a mobile market segment that many observers long have viewed as a sure thing.

Clint Wheelock, vice president of wireless research at The NPD Group, said in a recent interview with Telephony's Wireless Review that about half of all mobile handsets currently in use are capable of accepting mobile game downloads. That very positive percentage still leaves room for growth. "As that increases--and it will continue to increase rapidly--consumer awareness and the addressable market will grow, and the adoption curve will follow."

Meanwhile, the entire mobile gaming business model also needs to mature. In "Mobile Games: Who's Playing?" NPD's market research report from earlier this year, a survey of about 8500 teens and adults revealed that about 27% play games on their wireless handsets, a figure up from 20% the previous year. However, about two-thirds of those users prefer to play free games or those that were downloaded to the handset prior to purchase, while only one-third of those respondents actually purchased game downloads or game subscription services.

For many users, game prices still may be too high to encourage frequent downloads. Wheelock said those who download games pay an average of $5.31 per game, but the prospective mobile game buyers have indicated a price preference closer to $2.25 per game. Carriers have attempted to "spread the rates out" through monthly subscription services, Wheelock said, "but that's not really working. People just don't want to pay that much [around $7 per month, with a potential premium range of $8-$11] for a gaming subscription."

Still, Wheelock said that he doesn't think carriers will be lowering prices any time soon. In part, the pricing to end users may be a function of a high-cost licensing structure between carriers and developers of mobile games. Particularly, when game titles have links to movies, sports figures or other entertainment franchises, the game developers or studios that own the content can position the titles at the center of multi-million-dollar licensing partnerships. "Licensing deal costs are skyrocketing," Wheelock said. "Media companies have realized that this is a real market now, and everybody wants a piece of the pie."

He added, "That's part of what makes pricing so hard to manage. There is a lot of pressure on carriers, and really no guarantee of the quality of a particular title in a mobile gaming format."

But, such are the difficulties encountered in many emerging and maturing markets. On a more positive note, Wheelock said carriers are getting more aggressive and more experienced in their marketing of mobile games. "Before with gaming, there was a lot of throwing things against the wall to see what stuck," he said. "Carriers are more experienced with their merchandising tactics now. They are more focused and better understand the segments they are trying to reach."

In particular, Wheelock said Sprint "has taken the market more seriously than others" early on, and "understands all aspects of the gaming market very well. Cingular and T-Mobile have a lot of good experience behind them. Verizon Wireless came on a little bit later, but is now putting richly capable handsets out there that will improve the gaming experience."