By making Xbox titles available on the Windows Phone 7 operating system, Microsoft (Nasdaq: MSFT) may be looking to recreate the success Apple (Nasdaq: AAPL) has had in the area of mobile gaming.

Microsoft recently announced that it's linking its Xbox Live service with its Windows Phone 7 operating system by making a number of games available on its mobile phones. Microsoft said popular titles such as the Halo series, Guitar Hero and Crackdown 2 will have mobile companions on all Windows 7 phones. All in all, there will be 60 games available at the start, with more to come later.

"We're really approaching this as we would a console, so we have to deliver the breadth of games and the quality people expect from Xbox," Kevin Unangst, senior director of PC and mobile gaming, said in a statement.

The move comes amid a wave of change in the video game industry. Overall console sales, both portable and traditional, are down as are software revenues. In July, NPD Group reported software sales fell eight percent last month year over year. Console sales, driven by the Xbox 360, were actually up 12 percent year over year. However, overall year sales in 2010 for consoles are down 13 percent compared to 2009.

The rise of mobile games, on smartphones in particular, is undoubtedly one reason for the change. Apple has been the leader in this category with the iPhone and iPod touch devices. Phones running on Google (Nasdaq: GOOG) Android have also gotten into the gaming mix lately as well. Michael Pachter, analyst at Wedbush Securities, says because of the overwhelming amount of games available on these phones, the industry has grown significantly.

"It's big, if you count free games, as far as the number offered and downloaded, it's equal in size to package sales. There are so many handsets out there and you don't need that many per handset. It has to be in the range of 100 million downloads," Pachter said.

"If you were going to upgrade from a flip phone to a smartphone, what would be the main reason? The killer app is games on the smartphone. They are the system seller." 

Microsoft's own research indicated 80 percent of gamers in the U.S. have bought a smartphone this past year. Furthermore, research firm In-Stat says mobile gaming is already a billion-dollar industry with potential for much more. Any way you put it, it's an industry that can no longer be ignored.

"Depending on how you measure it, games are one of the biggest application categories in the smartphone space. That's one reason we're so excited about the Game hub broadly and the Xbox LIVE integration in particular," Greg Sullivan, senior product manager with the Mobile Communications Marketing Group, said in statement.

Despite its growth, analysts like Pachter do not believe mobile phone gaming will overtake traditional console gaming since they are not nearly as immersive as consoles. He does however say it poses a serious threat to portable consoles. As a result, he says it would be in the best interest of a company like Sony to turn its portable gaming system, the PSP, into a phone.

"It's definitely powerful enough to be a phone, and with their partnership with Ericsson, they could do it no problem," Pachter said.

Microsoft says Windows Phone 7 with the Xbox titles will be available in October.

International Business Times, The Global Business News Leader

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