SAN JOSE--Paul Palmieri, Business Development Director at Verizon Wireless, gave an upbeat keynote speech today at GDC Mobile. GDC Mobile Chairman Robert Tercek introduced Palmieri with a telling quote: "revenues from paid downloads to cellular phones are projected to reach $260 million in 2004." Palmieri followed up by telling the audience how Verizon--and its content providers--would grab a piece of that market.

Palmieri began with a gentle jab at CMP Media, the research arm of the company that organizes GDC. "Two years ago, their report on wireless games described Verizon as 'very low potential.' Well, by the end of 2003, our network had over 5 million paid downloads per month, making us the largest seller of mobile content outside of Japan and Korea." Palmieri didn't say how many of those downloads were games and how many were other types of content like ringtones, but the number does go a long way toward confirming the viability of the fee-for-download business model in the US.

He followed this observation with some comments about Verizon's efforts to maintain its game deck (the lineup of games subscribers see displayed on their phones). Comparing the process to managing a retail store, Palmieri noted that effective management leads to more revenue for suppliers, or game publishers, as well as the retailer. A retailer that offers better products is able to attract more profitable customers, and Palmieri believes the same dynamic is at work in Verizon's mobile game business. As a result, Verizon ranks its game offerings based on sales: popular games rise to the top, where they are easier for customers to find.

Then he delved a little deeper into the economics of purchasing and producing games. "Our target for playability is one hour, and the default price for games is $5. That means that our mobile games have about the same price per minute as a movie." Verizon's results indicate that this is a price point that consumers readily accept--as long as quality is maintained. Just like the PC and console software markets, licensed properties tend to sell better than unlicensed counterparts, but only at the same prices--attempts to charge a premium for branded content have been unsuccessful.

Though the market is proven, success is not a given. Producing good mobile games is still a challenge--one that Palmieri noted requires "enormous investment in capital and human resources." Ports of console games, or even GBA games, are often unsuccessful, as the devices are so different. As Palmieri put it, "input is a challenge." Moreover, phones are optimized to save power, not to play games, and as a result, "many of the most coveted developers are ones who are drawing on their experiences programming for the Commodore 64."

Still, in the end, Palmieri believes this is a market with unfettered potential. "[Verizon has sold games to] millions of non-gamers that don't own a game console and never will, a market the game industry has always wanted to get at." He's open to games from small developers, and his comment that "we believe vision will come from small developers" drew a round of applause.

He followed up by noting that developers pitching Verizon for inclusion on its network needed to prepare for hardware evolution by "proactively supporting upcoming handset models and creating a clear strategy on porting." Verizon is demanding, he indicated: it wants high quality, a commitment to the mobile game space, and innovative applications, but Palmieri notes that it's worth it, promising "if you make the right product, you will definitely be financially rewarded."