Only one out of ten mobile games titles becomes profitable, due to the high development costs and the greedy publishers and operators. Consequently, not even the best mobile games make a profit.

Fishlabs express some of the frustration that most indie-developers feel:

Fishlabs led the international charts for the best mobile games in 2008. Not bad for a small company with just 30 employees. Naturally, we were tremendously pleased with all of this recognition and are very proud of it.
Unfortunately, none of this guarantees that high quality and innovation will earn back the expenses of the costly production of such mobile games on the open market, to say nothing of making a profit – the purpose of every professional company.

In consequence, Fishlabs are offering a free trial of their games – a model that has been unsuccessful many times before.

Some key players are doing well, however. Moconews reported that Gameloft’s revenues increased by 15% in 2008. I talked with the Danish business developer from Gameloft, a while back. With the typical French nonchalance, he explained to me that Gameloft’s business strategy basically was to make exclusive deals with the operators; a strategy that had been very successful.

Indie developers don’t have a chance to push the operators in the same way, so they go to Gameloft and ask them to distribute their games… Gameloft snatch 25% for merely passing the games to the operators. After the operators take their 40-50%, the developers are left with a few pennies that makes it impossible to run a rentable business.

So with this tremendously strong market position, you may wonder how I can stipulate that Gameloft will fall and the indie-developers will rise. This is caused by 3 factors that are (almost) out of Gameloft’s hands:

1. The Socio-cultural Factor

Games are becoming social. The stereotypical lonesome gamer that sits alone playing is being replaced by gaming as a social expression, where the game play and the impressive graphics are of less importance. In social games, you want to showcase your artistic skills, technical skills, or knowledge to your friends, family, and co-workers. We see this on Facebook where social games are exploding and taking huge bites of the casual games market (or are social games the new generation of casual games?). Mobile games are going in the same direction but Gameloft is still missing this point. Gameloft’s best attempt to socialize their games is high scores, which shows a fundamental lack of capability to think innovative.

2. The Structural Factor

The bigger Alpha Male is dissatisfied. I have talked with American, European, and Asian operators and they all have the same outcry – the earnings in their games sections aren’t good enough. TeliaSonera has tried different models in collaboration with Gameloft, inter alia offering the games as a free trial version where you only pay for the full game. None of the models have worked, so the operators are desperately looking for new, innovative models that can boost data traffic and revenues. Indie-developers are providing great new takes on the mobile games business that are already catching the eyes of the operators. A good example is Cellufun.

3. The Technological Factor

Iphone applications are exploding. And unfortunately, Gameloft doesn’t have the same strain on the Iphone App Store as they’ve had on the operators. In consequence, they have to compete on the same premises as the indie-developers.

As William Blake said, the foundation of every empire is art and science. As indicated, the structural, socio-cultural, and technological progress is eroding Gameloft’s foundation, and this allows the indie-developers to contribute with their great ideas, which in the end will provide higher value for the end users. I don’t want Gameloft to go bankrupt but I do think they have been part of what has held the mobile games market back. The emerging openness on the mobile content market has already created an exciting dynamic where new innovative ideas can flourish. The Iphone App Store is the first step in the right direction.