Tim Harrison, Vodafone - Part One

Well, I suppose we started doing games with SMS and WAP - the first carriers that were remotely useful for building a games proposition - but the main effort for Vodafone in games, really, has been Vodafone Live. Vodafone Live has been the multimedia service that games are sat within as a key part of that overall proposition. That's really what's driven the growth of the games service; we did WAP and SMS games for maybe 12 to 18 months before that, that kind of time frame, but really it was only when we started getting Java on handsets that we started seeing anything going in a mass-market way.

The rise of games has also very much coincided with an increasing sophistication in handsets and an increasing interest in the potential from the VC community. We've gone from a situation at the beginning where we were very reliant on Japanese game manufacturers, to a situation where the European and American industries have completely shot forward and now they're really driving the bulk of our business.

Effectively, we have one content division and we have that split into three verticals, if you like. We have the Games vertical, we have a Music vertical and we have an Entertainment and Sport vertical. Obviously, with the launch of the 3G services, Entertainment and Sport is very much about video as well - and obviously there's a video element to music, too.

So games sits as a unique strand within the overall content development team and the overall content business. That's pretty much mirrored at a local level as well; at a local level in the larger markets you tend to have a dedicated category manager who would be the games manager. In smaller markets, maybe that's shared across two or three different content areas.

It's certainly a very distinct strand within our overall entertainment offering and it is structured in such a way. Of course, the challenge for an operating company comes because although you have that in a vertical content area, it's actually spread horizontally across much of the rest of the business. Getting a good, effective games service is very much also reliant on, within the group, the marketing function, the terminals function, the platform function... All these other functions. So really, we have direct lines reporting in a content sense and then a horizontal structure in the other sense.

No, I don't think we do. I think one of the challenges, actually, and one of the signs of an immature industry, is the fact that you tend to read reports on what the size of the market is and they differ wildly - from just under a billion all the way through to multiple billions in terms of a worldwide market, and obviously Europe is a sub-set of that.

Very few operators, if any - I think probably only one or two operators out there have actually shared the figures about the download numbers they do. So it's quite challenging for us in terms of raw and absolute numbers to actually identify exactly what kind of share of the market we have. We have our own ideas, of course, and certainly from what content providers tell us, we have a fairly clear picture which we use internally to understand what share of the market we have. But in terms of official numbers, those aren't really in existence.

I think Vodafone is pretty share price sensitive, and we've always had a sensitivity to numbers. Once we do start sharing numbers, there is the feeling that they have to be reported time and time again - the same way, time after time.

I think the way that the industry has been measured over the past few years is the fact that an awful lot of investment has been pumped into it, and the numbers we tend to dwell upon are the numbers of enabled handsets out there. The market potential for Java-enabled handsets is huge - pretty much every handset that's now sold has a game playing facility. We're seeing penetration rates in terms of handsets of above 100 per cent in many of the major markets - that's European industry-wide, that's not a Vodafone specific number.

Really, what we've all focused on as an industry is the potential and the upside. Inside, in terms of information that we haven't shared, we've actually seen the numbers that we're doing, we've seen what the potential is. We launched Vodafone Live in October of 2002, and we're still here with games. They're a core part of our multimedia proposition, and that's probably the best indication of our faith in the market. It's been heavily hyped for the last several years - we're still doing it, we're still committed to it, and the upside is still very much there.

Yes, I do. I think any large traditional console game manufacturing and publishing company shouldn't underestimate that mobile is quite a unique and quite a distinct platform. I think those companies that succeed will be those that effectively use the best of the knowledge that they've learned in the overall games industry - the dynamics of how that works, most particularly in terms of demographic segments and how the industry has grown from being effectively a garage or bedroom industry to being a multi-billion pound entertainment business. I think there are some very very useful parallels for those companies in grounding their mobile strategy.

However, in many ways the mobile customer is a different customer. I think that just to transfer one's existing strategy on console or on PC over to the mobile platform will prove to be a mistake. I think there are some very powerful brands in the traditional gaming world that we see on mobile coming up time and time again Customers on mobile want familiarity - they want to have trust in a product, and that's trust in a product from a brand perspective, but also in terms of a publisher that they recognise and trust, and some tie-in between something they might have bought for their PC and something they can buy for their phone.

That works very very well, but the mobile platform, as I say, is a very very different and unique platform, with different challenges and a different customer. So just to summarise that - the entry of these major players into the market is very important, because it demonstrates an increasing maturity in the industry. It will drive quality upwards, it will drive further consolidation - because of the size of marketing budgets that will be opened up, because of the size of development budgets that will be opened up. However, it will not necessarily drive the industry down the gaming route. I think it's important to the industry that we recognise that the mobile gamer wants something different than the console gamer. The big guys who succeed in this market will be the ones who fully recognise that.

The key differences, I guess... It's less about the age, because at the end of the day the guy buying the nice new handset, and the person engaging with multimedia content, will tend to fall into what we call the "yaff" age group, which is the pleasure-seeking, 18-24, core entertainment product market, which is one that's targeted by anyone with any kind of entertainment or content product. I think where it differs is the method of consumption and the commitment to the platform.

A mobile customer buying their new phone, they might buy it because they can play cool games on it - they're more likely to buy it because it looks great, because it comes with a great tariff, oh, and they can play cool games, watch videos and put their MP3s on there. Because it's a convergent platform, there are a whole host of different reasons why people buy it - so the most fundamental thing is that you're not appealing to a customer who has gone out and bought a PS2 or an Xbox because they love games. Now, that customer might have bought a PS2 or an Xbox because they can also watch DVDs on it and they can also plug it into their stereo and listen to CDs on it - however, the core usage by a very very long way is gaming. With a mobile phone, you're trying to appeal to a customer for whom gaming is of interest, but it's not the core reason why they bought the device. That's the first reason.

The second reason, really, is the method of play. It's long been quoted in the industry that there are several things you take out when you leave the house. It tends to be your wallet or your credit cards, your door keys, your mobile phone. It's a device that people do genuinely carry anywhere, so in that sense it doesn't even compete with some of the portable handheld consoles like the PSP and the DS, which are portable gaming consoles. This is a mobile communication platform with a rich media capability.

So the customer you're dealing with will want to consume their content in different ways - chiefly while they're on the move, as a boredom-buster. They want things to be quick, easy, spontaneous. They will put less investment in terms of discovering the product and less investment in terms of playing the product, in the sense that it won't be the same long, immersive period of play that you might find with a console. It'll be short snatches - episodic gameplay, maybe spread over a period of months.

Well, ironically, what we're seeing from some research we did recently is that the spontaneous recall of some of the brands that have succeeded on mobile are really very traditional types of games which you've found on other platforms. I think it's really the way that a game is designed - there are certain things you can do on a mobile that make it that much easier to play. Simple stuff like, when we started off, you'd find a situation where you wouldn't actually be able to pause a game. You had to get to the end of a level. You couldn't turn the volume off on some of these games - lots of different things about gameplay and game design that clearly meant that doing the traditional arcade port didn't actually work. It had to be amended slightly.

I think that arcade games, one of the reasons they've proved very popular is because the arcade game was designed for short snatches of play. The whole way its billing mechanism worked - ten pence for three goes - it was designed to sit there, maybe in a specialist arcade, but also in the fish and chip shop while you were waiting to get your food, also in the hotel lobby while you were waiting to check out or whatever. These were games that were designed with that short, episodic gameplay in mind and that is, I think, one of the reasons why arcade classics have done well.

It's also why games like Tetris, classic puzzle games... We have games like Monopoly which has just done very well, games like Trivial Pursuit, Who Wants To Be A Millionaire. These are all pieces of content from other platforms, but intrinsically there's something about them which is short, snappy, episodic and can be consumed in small chunks, rather than some kind of massively multiplayer game which has to be invested in and focused on.

Yes. I think both will coexist, there's no question about that. There are definitely very keen gamers who like to experience some of the same brands on their mobile phones. I think really that is a market where you will start to see over the years to come - months to come, in some cases - the extension of that world into the mobile. What we're dealing with at the moment is a market where you have a self-contained world in a standalone game. As handsets continue to improve, with 3G bearers obviously a significant factor here, form factors begin to improve, and most specifically the compatibility of the network and the handset, you will start to get a situation where you are able to interact with a game that might first and foremost be a PC game, but has an element that can be interacted with via a mobile platform.

I think the two things will very much coincide - but I think it's just the same thing as PC games, you have the whole range from the hugely hardcore World of Warcraft type connected game, all the way through to the Solitaire card game which comes embedded with Windows when you buy the PC. Somewhere in the middle is the web-based casual stuff. So I think that just as the mobile platform at the moment has grown up focusing on one particular segment, which I would say is the standalone, simple, one-thumb stuff, as its capability increases you will find that it will cover the whole broad range of genre types and game appeal.