Start-Up Could Breathe Second Life Into Mobile-Gaming

Updated from 10:23 a.m. EDT

A three-month-old start-up is trying to shake up the mobile phone game industry.

Vollee, a Redwood City, Calif.-based company, claims it has come up with video-streaming technology that can move a PC or console game from a publisher's portfolio to mobile subscribers quickly and at a fraction of what it costs now.

Currently it can take up to a million dollars for a company to create a Java-based mobile phone game. Martin Dunsby, CEO of Vollee, said his company can cut those costs by more than 90%. "At the same time, we can bring console quality games and online experiences to mobile games."

Vollee has already found support among some big game makers, including Second Life's Linden Lab and Activision(ATVI - Cramer's Take - Stockpickr).

Vollee may be just the tonic needed to get the mobile games industry moving again. Thus far, the industry has been held back by an unexpected slowdown in consumer demand for mobile games last year, the cost and time taken to bring complex games to the market, the unappealing game play on phones and the lack of strong support from cell phone carriers.

After growing rapidly in 2006, the mobile games industry hit a bump in the second quarter of 2007, when revenue for mobile games publishers fell 9%, according to iSuppli, a market research firm. Despite what it termed a "short-term setback," iSuppli expects mobile games revenue to nearly triple by 2011 to $6.6 billion from $2.3 billion in 2006.

In North America, EA(ERTS - Cramer's Take - Stockpickr) Mobile has led the market followed by Gameloft and Glu Mobile(GLUU - Cramer's Take - Stockpickr).

This year, game publishers are hoping to hit fewer speed bumps. At its recent analyst meet, EA said it wants to double its mobile phone games business. For fiscal year 2009, EA expects revenue from its mobile business to grow to $150 million in fiscal 2009 from $36 million in fiscal 2007.

What companies like EA may not have considered is how a company like Vollee can change the costs in the industry.

Most video game companies write a traditional Java-based application for a range of phones. Vollee takes a different approach. "We strip the video and audio out of the PC games and rearrange it to fit the mobile form factor and then shrink it down for streaming," says Dunsby.

Vollee's secret sauce is how it adapts games to mobile phones. "We don't have to code all of that stuff on the handset," says Dunsby. "We don't have to write a chat and rendering graphics application specifically for the mobile phones."

Instead Vollee streams the video feed to the handset. And because Vollee doesn't tinker with the source code, it can bring games to phones easier and faster, says Dunsby.

The idea of streaming videos instead of offering it for downloads is also different from how the mobile phone games industry currently operates.