Games: The Biggest Opportunity Carriers are Ignoring

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Games: The Biggest Opportunity Carriers are Ignoring

Carriers are losing control over core network services such as voice and text which is in-turn making them dumb-pipe providers. While wireless is still a profitable business, the presence of companies like T-Mobile and Sprint in the US makes it more difficult than ever for carriers like AT&T and Verizon to keep their higher than industry-average margins. Just this week in fact, Sprint said it will unlock all its phones in less than 12 months. Add to that the bring-your-own-device mentality that T-Mobile has brought from Europe to the US and you can see why the 2-year contract; a mainstay in the US carrier market is slowly disappearing as customers migrate to options like AT&T’s Next plan. These moves mean it becomes easier for customers to switch frequently to another provider if the offer is enticing enough.

So much change and so little time to absorb it all… Especially when you consider WhatsApp recently stated it has over 500 million users. This is not a good development for any carrier counting on SMS revenue.

I’ve written a great deal about how carriers can react to the state of the market by partnering with companies like GENBAND to become a VoIP provider or Metaswitch to power a social network but yet another alternative is to partner with an app company. One in particular is Pele King of Football, (Google Play) which I wrote about briefly some weeks back.

The new app has been out for two weeks and has had over 300,000 downloads and is incredibly addictive. I am not sure it is in the Angry Birds category yet but I have found myself lost in the game as I try to score goals through quick-moving defenders and a goalie. What distinguishes this game from many others is the tie in to Soccer, the world’s most popular sport and Pele, the world’s most famous soccer player. Sure, you may think no one young knows who Pele is but Josh Blitz CEO - Cosi Productions LLC, the company behind the game says you would be surprised at how many kids know the great Pele whose real name is Edson Arantes do Nascimento.

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As you play the game in fact you are peppered with facts about Pele’s life and get to see exclusive video content about the champion.

Pele pictured from actual video interview embedded in the game
pele-interview.pngBlitz went on to tell me the company is working to partner with carriers who are looking for an association with Pele and the World Cup. The game has all sorts of mini-contests included in it enabling players to win things like tickets to the World Cup. This got me thinking… Carriers are missing out on the app world – the most exciting part of mobile according to some. I’m just saying, King Digital Entertainment has a market cap far north of $5 billion. They make one game, Candy Crush that you may know about or have played.

Zynga was early to the world of Facebook games and was fortunate enough to be able to use the social network as a free marketing vehicle which enabled it to have an IPO where its shares were soon valued at almost $15 per share. Even as of today, when the shares are at $4.35 the company’s market cap is a staggering $3.81 billion dollars.

Let’s think this through for a second. Carriers are in an all-out battle to make profit in what is obviously a pricing war and Zynga shows us a game can get a $10 billion increase in market cap thanks to 3rd-party marketing through a network – in this case social.

Did you that digest that?

Carriers are storehouses of value that may never be tapped – because they are busy being carriers and don’t think like entrepreneurs. You can’t blame them, they have massive infrastructure, towers, unions, FCC regulations, and more lawyers than most companies have paper clips. But I tell you, the best way for AT&T, Verizon, Sprint, etc. to unlock value is to figure out how to get involved in the app and specifically gaming market.

If we use the Pele game as an example, I could see this being a two-way relationship. On the one hand, they partner with the game which offers all sorts of things you can win. But the carrier could throw in incentives for playing such as a bucket of free SMS minutes, a free month of service, $10 worth of international calling, 10% off your next device purchase, etc. In addition, they could take an equity stake in games like this and then promote them like crazy.

Amazon is going to come out with a phone and they will likely subsidize the device. Content and services will be the way phone service is paid for. What will this do to carrier margins? It could be highly problematic for the service providers who aren’t chosen by Amazon.

So carriers, I am telling you, start exploring your options. Try out this game now – if you like it, give the company call. Alternatively pick any game vendor out there that is new and exciting and reach out.

Yes, it stinks to be in a business that is commoditized where the smaller players have to drop prices to gain share and the leaders have to follow suit. Alternatively, we talk often of the ecosystem Apple and Google enjoy. You know what? Carriers have ecosystems too. They just don’t seem to realize they have them and haven’t figured out how to maximize the revenue they could generate. Getting more involved with gaming seems to be a logical way to explore your options.

Live shots of Pele from promotional event for the new game

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