Monday, November 30, 2009
Chinese value-added services (VAS) company Linktone (LTON) reported earnings after the US markets closed on Monday. You may notice that there's some discrepancy between the comparable Q2 2009 and Q3 2008 revenue numbers in their release and my numbers above, which are based on what most financial sites have on record. I'll reconcile these if I determine the financial sites are incorrect. Either way, China Wireless News summed it up nicely by calling the Q3 numbers "dismal". Indeed the company seems stuck in a bit of rut and it's clearly not yet seeing meaningful results from diversification into services beyond the SMS & IVR vending of graphics, tones and fortunes or their international expansion initiatives beyond China. Investors are definitely not impressed and have been punishing the stock all morning... it's been down over 20% for most of the early trading session. I think that in order for Linktone to get back in the market's good graces and provide meaningful competition to China's #1 mobile content player, KongZhong (KONG), they're really going to have to step it up in the mobile games space, broaden their offering of 3G oriented services (like their recently announced MLB video deal) and quickly prove that they can be a relevant player in new markets they're pursuing in South East Asia.
Sunday, November 29, 2009
Enhanced mobile search company GetFugu (GFGU) concedes in their latest 10-Q, filed with the SEC on 11/23/2009, that their accumulating losses and dearth of cash (less than $50k, with a burn rate of $500-$600k per month) make securing additional capital from external sources mission critical in the short-term. Failing that, these issues "raise substantial doubt about the Company’s ability to continue as a going concern." I would suggest that their prospects for obtaining those additional funds, considering their financial track record, recent investment drama, an alarming new exposé on Realtid.se and the fact that their lone product seems to have disappeared from the iTunes App Store, are about as paper-thin as expertly prepared blowfish.
UPDATE 12/1/2009: It looks like an updated version of the GetFugu Mobile Search App (v0.3.1) is now back up on iTunes, just in time to coincide with the company's oddly tardy announcement about a theatrical marketing tie-in with Summit's blockbuster film "The Twilight Saga: New Moon"... which released in the US on November 20th.
Thursday, November 19, 2009
It hasn't been a good couple of weeks for shadier side of the mobile entertainment business. On Tuesday the European Commission announced the results of an 18 month investigation into 301 mobile content websites, that were allegedly targeting kids, in "direct response to hundreds of complaints coming in from parents and consumers from many different EU countries." You know the sites, the ones that promote free ringtones, graphics or games on TV and the web, that when downloaded opt unsuspecting, undiligent consumers into expensive sleeper subscriptions. 159 of the EC investigated sites had to be "corrected" (shady) and 54 of them were completely shut down (scumbags). As a result, Italian authorities have already imposed $3mil fines on a broad range of perps, including big operators like TIM, Vodafone and Wind and web-to-mobile distributors Dada.net, Zed, H3G, Zeng, Jamba and Tutto Gratis. Congratulazioni!... but unfortunately that's tantamount to 40 lashes with a post al dente spaghetti noodle if you consider the $1bil European ringtone business that these companies dominate (Zed alone claims $870mil in annual revenue). Hopefully other countries will follow with their own, stiffer, penalties.
The European announcement comes 1 week after the approval of a settlement by a judge in Cook County Chancery Court in Chicago of a series of class-action lawsuits against mBlox, 2WayTraffic, Dada.net, UPOC, Playphone, etc. that alleged unauthorized sales and billing of mobile content. Same scam, different continent. The deal struck between the plaintiffs and defendants entitles each claimant to a $10 refund from a settlement fund capped at $63mil... now that's more like it.
The really good news is that based on rhetoric from European consumer advocates and the references within the Chicago settlement, it's clear that vigilance over this unsavory sector of our industry is elevated, and that more investigations, suits, settlements and fines are imminent. It can't happen soon enough. Companies involved with these tactics have seriously harmed the perception of mobile entertainment products in the minds of many consumers, and I'll go as far to say that they meaningfully contributed to the delay of broader adoption of mobile content in the pre-iPhone era. They've also hoodwinked other stakeholders in the ecosystem, notably content owners. These distributors regularly use premium entertainment products as a lure to create subscriber revenue streams that primarily inure to their own benefit. When I was on the content side I never once saw meaningful revenue from these distributors despite often having my publishers' content prominently featured.
Just to be clear, this isn't the first time that these distributors have been the subject of regulatory, media or legal scrutiny. Frustration with these tactics reached a boiling point in the UK in mid-2005 as memorialized in this Daily Mail article... which eventually led to some firms making disclosure and cancellation protocol changes. But clearly the punitive stick brought to bear wasn't big enough to put a stop to this bait and switch crap altogether. Hopefully this next round will be and these practices, that have been shamefully tolerated within the industry for the last 10 years, will be brought to their inevitable end sooner than later.
Wednesday, November 18, 2009
Click on the eye chart above for a clearer image of my latest version of this list. I've sorted this iteration by the product of the number of reviews and average score. Also, I've added a CatRnk column which shows in-category ranking from Mobclix. Highlighted titles are those that are either Top 100 Paid, Games or Grossing Apps on iTunes. You'll notice some new titles and some titles that I missed (oops...thanks for the feedback!) in previous versions... notably the #1 performer "The Price is Right" from Fremantle and #2 "Star Wars: The Force Unleashed" from Lucasfilm. Please keep the feedback coming. So, based on this list, who would you say is the most successful entertainment company in terms of iPhone games?
Tuesday, November 17, 2009
Mandalay Media (MNDL), the parent of mobile adult content and games companies AMV & Twistbox, reported earnings and guidance yesterday for their fiscal Q2 2010. Revenue increased more than 100% from the year ago period... but that growth is almost entirely attributable to the AMV acquisition. A look at recent consecutive quarters and company guidance to full year revenue "in excess of $40 million"... indicates the company is running super-flat. I've posted a lot about Mandalay and my lingering concerns continue to intensify. They've gotta deal with their content identity crisis. I contend that they should focus on the adult content market, which provides 87.5% of their revenue, and in which they're a major player (remember Twistbox used to be Waat Media). However, I'm not at all convinced that's the direction they're headed following the appointment of Ray Schaaf as President and their recent Hail Mary attempt to buy World Poker Tour. More immediately, they've got to deal with their deepening cash crisis... as of September 30th they've dwindled their reserves down to $2.8mil, which won't last them 6 months at current burn rates.
Activision Blizzard (ATVI) announced yesterday that they've stepped directly into the iPhone Game App publishing fray with the release of Call of Duty: World At War: ZOMBIES, based on Treyarch's uber-successful console franchise. The 3-D, multi-player, Nazi zombie killer (is zombie it's own sub-genre yet?) was built by quality UK developer Ideaworks and retails in the US for $9.99. Initial user ratings are pretty good, but there aren't enough of them yet for it to be meaningful and we'll have to wait to see what the professionals say. I think there are 2 significant things to takeaway from this release:
1) This move makes it pretty clear that Activision licensee Glu Mobile (GLUU), which just released their Call of Duty: World At War: Force Recon mobile game on other platforms, is not going to be publishing Activision titles on iPhone anytime soon. Moreover, while this may just be a toe in the water, I think it probably means that Activison Blizzard is re-ramping their mobile publishing ambitions.
2) Assuming I'm right on the point above, then its super-ironic that Activision is using the account of the mobile games publishing unit they briefly had post-merger with Vivendi Games, and summarily dismantled last year to focus on licensing. Currently, in the App Store, Call of Duty: World At War: ZOMBIES appears as a Vivendi Games Mobile title. The good news is that under that moniker COD is in great company... VGM's only other title Crash Bandicoot Nitro Kart 3D continues to rock the Top 100 more than a year after release and is one of the all-time top grossing Apps on iTunes! The bad (sad) news is that Activision's lack of foresight (or patience) resulted in their losing a high-quality global team and to the extent they are rebuilding, it will inevitably cost them much more than if they had left Vivendi Games Mobile intact.
Monday, November 16, 2009
The Mobile Hotness is a new series on Cabana Mobile in which leading mobile entertainment voices provide a quick summary (10 to 15 bullet points) of the latest trends they're seeing, and industry buzz they're hearing, in their part of the world or specific market segment. The inaugural post, which covers India, is courtesy of Samir Bangara, Chief Operating Officer of veteran, Mumbai-based, mobile and online games publisher Indiagames.
- Ringback Tones Are Crashing: After a couple of years of ringback subscription hyper-growth in India, reality is setting in as the regulators crack down on 'aggressive' sales techniques
- Pay-As-You-Go Data Access: Data access is now available to non-subscription customers giving operators a massive dollop of new data usage revenue… this move was a no-brainer, but it took awhile to implement
- Publisher’s Share Is Still Bad, Maybe Worse: As a result of this new data protocol, not only are revenue shares on content lopsided in favour of the operators (as they have been historically), but now the data usage charges are off-bounds for content publishers
- Data Subscriptions Are Stalling: Despite a rapidly growing overall subscriber base of 12-15mil per month, data subscribers aren't growing as rapidly, mainly due to limited network capacity pre-3G spectrum allocation
- 3G Will Lift Data: 3G spectrum licensing, expected in Jan 2010, is a watershed event that will enable networks, currently overloaded just on voice, to support more data traffic
- Per Second Billing Hurts Operators: Tata Docomo pioneered pay-as-you-go on a per-second basis in India and now regulators have mandated that all operators offer this option. This will hurt the incumbents, who were getting an estimated 40% of their gravy from 30 sec and 1 min pulse charging
- Finally, Rationalised SMS pricing: Despite falling tariffs for every other service SMS remained at the same level it was 5 years ago. Now, Tata Docomo is rewarding those who keep their texts brief by charging Rs.0.01 (.02¢) per character!
- Audio Cinema: UTV group has pioneered a rapidly growing service powered by OnMobile that allows users to HEAR abridged versions of 300 Bollywood titles for 30Rs (60¢) per 30mins
- New Operators = More Competition: At least 4 new operators will launch in India in 2009. Massive competition will lead to further price reductions in a market that is already at USD 4 ARPU and 1 cent a minute voice rate
- Ad-based Models Still Maturing: Ad-based ringback tones and ad-supported games have been tried and tested in India with very limited success. The model and the ecosystem of the content owner, operator and brand have yet to evolve
- Long-Term Content Opportunity in India is Huge: The outlook for mobile value-added services (VAS) in India is still very strong, but the last 2 quarters have been, and possibly the next 2 will be, very challenging for the entire GPRS data services ecosystem
- Billion Dollar Questions: (a) Given that at current growth rates, mobile subscribers in India will peak at 700-800mil in about 2-3 years and only then will operators need to focus on value-added content services to grow revenues & margins... how many incumbent publishers in India will survive until that day arrives? (b) Will the ad-based model, which intuitively seems apt for India, ever become viable and provide a real alternative to the ever diminishing wallet of the pre-paid consumer?
Friday, November 13, 2009
Wednesday, November 11, 2009
I've done a bunch of posts about Chinese mobile content kingpin KongZhong (KONG) in the past, so I'm not going to rehash what they do... but, generally you should know, I'm a big fan of this company, with the caveat that I've had lingering concerns that their success is unduly reliant on staying in the good graces of China Mobile. Based on their Q3 earnings conference call, earlier this evening, I feel confident that the company is keenly aware of this and that they're taking all the right moves to mitigate that situation. Currently, the fastest growing (246% y-o-y) sector of KongZhong's revenue mix (23.4% or $8.2mil in Q3) is coming from their catalog of 400 mobile games, which are distributed through multiple channels. Only 33% of their downloadable game revenue is billed through China Mobile, the rest comes equally from handset manufacturer and off-deck WAP channels (including their own Kong.net portal). The company is forecasting revenues of between $37-$38mil for Q4 and they believe mobile games will continue to be the revenue driver. They also mentioned that they are beginning to see real revenues from freemium (try & buy) and virtual goods billing models for games. I think these guys are firing on all cylinders, and given that they are the smartest and strongest player with the most cash ($135mil) in one of the fastest growing mobile markets in the world, I think KongZhong has the potential (within the next 3 years) to be the biggest mobile entertainment company in the world. Someone owes me a drink when that happens.
Tuesday, November 10, 2009
Check out the opening credits for Riot On!, a 2004 documentary Directed by Kim Finn and Written by John Hakalax. The film is about mobile entertainment's first colossal flame-out, Riot-E (or Riot Entertainment). The rapid rise and fall of that company basically ended the industry's first hype-cycle, early in the decade. Let me know if you've seen the film, and if so, what you thought. More importantly, let me know if you have a copy I can borrow... this DVD ain't easy to find. btw - thanks to the anonymous commenter who brought this to my attention.
Italian mobile personalization and services giant Buongiorno (BIT:BNG) announced it's Q3 2009 earnings this morning. As I expected, the company continues to experience a "pattern of slight slowdowns in mature markets" (euphemism alert) for its D2C ringtone and graphics offerings in established markets. However, they're still claiming solid growth in developing markets (especially Africa) and now report to have 8mil D2C customers worldwide. Eventually these guys are going to run out of new markets to prop up this sector and unless they can find a way to reinvent this experience to compete with modern app stores, the maintenance of this anachronistic consumer-facing business is really going to start hurting them from a real and opportunity cost standpoint. Barring an epiphany on the consumer side, I think in order to begin realizing financial growth again the company needs to focus its attention on its B2B services, including its Intelligent Mobile Marketing CRM solution for carriers and its newly re-branded B!Digital marketing consulting and services group... which just landed a deal with Real Madrid. btw - no mention here about the performance of their mobile social network "peoplesound", which I predicted would be closed by next April.
Monday, November 9, 2009
Enhanced mobile search marketing company, GetFugu (GFGU), filed an 8-K with the SEC on Friday to handle a bunch of housekeeping, the most notable item being the appointment of the company's largest shareholder (21%) and Co-Founder, Carl Freer, as President and board member. As part of the board appointment, Freer was granted 2mil options at a strike price of $0.37 (today's stock price) vesting over 3 years. Freer is (in)famous for his association with Gizmondo, the connected handheld gaming device he launched back in 2002, while Chairman of Tiger Telematics. The rise and dramatically scandalicious fall of that platform, the company, and some of the colorful characters associated with it, are the stuff of console and mobile games industry legend... giving rise to an extensive Wired article back in 2006 that, as I reported back in May, is currently being developed into a film.
The 8-K also addressed the settlement of pending litigation against the company from spurned investor SpongeTech (SPNG). It looks like GetFugu was able to make SpongeTech happy by issuing 5.25mil shares of common stock to an associated holding company, R.M. Enterprises International, in exchange for retaining the $1.75mil advance deposit it received during the investment negotiation process. GetFugu also has issued 20mil shares to two former company advisors, Amber Capital Corporation and Summit Trading Limited, to settle outstanding compensation claims. These two items lead one to believe that the company, in the wake of the commercial rollout of its app, is trying to clean up its act a bit to make it more attractive to additional investors or, potentially, an acquirer. But, if that's the case then the Freer move is a bizarre one... as you will see from several comments to my previous GetFugu posts, he's a polarizing character, to say the least.
I must say, I'm almost speechless! Clearly I'm not drinking (or smoking) what everyone else was drinking (or smoking) this morning. In this case I'll leave it to The Business Insider to tell the story (be sure to check out the Henry Blodget link!) and I'll add more commentary later when I get off the floor. I will say, congratulations are in order to AdMob and, perhaps even more so to VC Accel Partners, who already has $1bil in exits today between AdMob and Playfish... not a bad way to start the week.
It looks like the rumor I reported on back in mid-October was indeed true, and Electronic Arts (ERTS) has purchased London-based, privately held, online social gaming hotness Playfish for even more money than was initially thought. According a company press release this morning, EA paid "approximately" $275mil, plus $25mil in equity retention and $100mil in cash consideration, tied to performance milestones through the end of 2011. $400mil ain't bad for a company started just 2 years ago, by former Glu Mobile exec Kristian Segerstrale, and fueled with $17mil in venture capital just last year, to build simple, casual, addictive gaming titles like "Pet Society" and "Who Has The Biggest Brain?" for social networking platforms (mostly Facebook at this point). They're currently the #2 player behind Zynga, which an anonymous analyst recently suggested to The Business Insider, could be on track to generate $250mil this year (hmm... I'm not so sure). Playfish has only dipped it's toe into the water on the mobile side... it launched "Who Has The Biggest Brain?" on iTunes back in June... but they claim to be (and given Segerstrale's background it's no surprise) big fans of the medium. As I mentioned in my post last month, there's so much hyperbole, froth and irrational exuberance around this space it's a little hard to believe that this transaction is happening at a reasonable valuation and for some EA executives, who were around during the $680mil Jamdat acquisition in 2005, this purchase will have to be feeling (as Yogi Berra would say) like déjà vu all over again. Congratulations to Playfish, you surely gone done your investors proud!
Friday, November 6, 2009
Clearly, Android Market still represents a pretty nascent business opportunity for mobile game developers/publishers and it's mostly the purview of very small shops... some using (I'll be nice) "borrowed" IP. With a couple of notable exceptions, the bigger players are not yet committing content in any meaningful way. That's bound to change very quickly.
Check out the Mobile Entertainment article today for more insights about games revenues in the Android Market app store.
Wednesday, November 4, 2009
Artificial Life (ALIF) put out one of those classic, cryptic mobile entertainment, performance-oriented, press releases on Wednesday... trumpeting their great success on iPhone. You know, the kind of document that despite the intention of the issuer, ultimately prompts many more questions than it answers. If this business is ever going to be taken seriously there needs to be much less of this sorta hype-massaging nonsense and much more transparency about numbers. For goodness sake Artificial Life, just tell us how much money you've made on iPhone in the last year.
The biggest problem with these releases is that they selectively blend Free App and Paid App download numbers. Our friends at D'Choc are masters of this form of obfuscation. If one wasn't paying attention, and assumed Artificial Life was only talking about Paid App downloads, one might determine that they made $6mil (after Apple share) from iPhone/iPod touch Apps over the last 12 months... based on their 21 Apps being downloaded an average of 220k times each, at an average price of $1.86 (based on their current US Paid App iPhone assortment). That would be about 22% of their $27.5mil of 2008 revenue... impressive, right? Unfortunately, that's preposterous considering Glu Mobile (which has 75% more Paid Apps live currently) disclosed on their quarterly conference call yesterday that they only made 2.5% or $500k of their Q3 2009 revenue from all new distribution channels, including Apple.
You'll notice in the release that Artificial Life uses variations of "download" and "sell" interchangeably to yield maximum dramatic effect. My favorite example is, "The number of iPhone game downloads is approximately equivalent to 37.8% of the overall number of games sold by the Company so far in 2009." I think what this actually means is that the combination of all Free and Paid App downloads of Artificial Life titles on iTunes is equal to 37.8% of total paid game downloads on all platforms during the period... which is much less impressive, but much more meaningless ;-). I'm also pretty confident that Artificial Life's claim that its "best selling game was downloaded close to 1.8 million times" on iTunes includes both downloads of the Paid App and the associated free teaser App. Btw - if anyone thinks I'm wrong, please let me know.
I think there are only three valuable pieces of information to take away from this release: 1) high quality iPhone App development takes Artificial Life 3 to 4 months, 2) the US is still the biggest individual iPhone App market by far for these guys, but overall the World ex US is bigger, and 3) this industry needs to stop with all this thimblerig reporting, and embrace the disclosure of real, comparable performance metrics, so that cynics like me don't assume everyone's business is smaller than they're making it seem.
Tuesday, November 3, 2009
Ask any of my former employees at Universal Pictures... I used to anticipate Glu Mobile (GLUU) quarterly conference calls like an 8 year old kid looks forward to Christmas morning. With Glu being one of the few pure-play mobile entertainment companies publicly traded on a US exchange, with all the concomitant reporting that requires, this event provides a rare, clear lens into the health of the industry. That's exciting, right? The Q3 2009 call was no different... but I must say it was a disappointing Christmas and the patient don't look so healthy. Here's why:
- Uh.... where the heck is the new CEO? Didn't Greg Ballard announce his resignation back in July? Either no one wants this job (I haven't been asked, btw) or the board is fighting over what kinda leadership this company needs
- There was no acknowledgment that longtime, lynchpin exec (and quarterly call participant) Jill Braff left the company last month. Tacky like...
- $19.6mil in Q3 09 represents the 4th consecutive quarter of declining revenues (down 18% from Q3 08)... so much for being part of a growth business
- The company lost $4mil during the quarter and expects to lose between $13.1mil and $13.4mil in 2009
- Next generation platforms, including iPhone, Android and their experiments with social networking games only yielded $500k or about 2.5% of revenue... either iPhone hype is out of control or Glu isn't a meaningful player
- Royalty payments of $5.8mil, or 30% of revenue, in the quarter is still crazy high... this cost has gotta come down either through development of more original IP or the negotiation of better deals with content owners (did I just say that?)
- The Q4 title roadmap looks pretty good, and reviews of early titles have been pretty good, but I don't see anything that looks like a mindblasting breakout hit
- Verizon Wireless still represents 20% of Glu's business worldwide. As VZW's ecosystem opens up, and the #1 US carrier embarks on its experiment with an "app store", Glu will need to fight harder than ever to maintain share at that operator
- Only 1 analyst asked a question during the conference call (kinda sad)... have they all lost interest?
- On a positive note, the company did generate $2.7mil in cash... which they can use to lure a new CEO
According to a post this morning on GamblingOnline, the shareholders of World Poker Tour Entertainment (WPTE) voted to accept a $12.3mil purchase offer from UK online gaming powerhouse PartyGaming Plc (PRTY), through its Peerless Media subsidiary, at meeting in L.A. last Friday night. This presumably brings to an end the ambitions of Mandalay Media (MNDL), parent of mobile entertainment consumer brand Twistbox, to buy the company. Mandalay had mounted a bold (audacious), last minute bid that looked to be substantially superior ($36.5mil) from a purely financial standpoint... but apparently many WPTE shareholders felt that the match was not strategically superior. The deal should be completed at the end of the month according to the post. Given the massive discrepancy in the offers, I'm guessing this isn't the very end of the story... I'll keep you posted. If it is the end of this story, it'll be interesting to see if Mandalay diverts its acquisition ambitions elsewhere.
Monday, November 2, 2009
Click on the image above to see updates to my post from last Monday. I added Cirque du Freak: The Vampire's Assistant and America's Next Top Model by request (thanks for the feedback!), and highlighted the 7 titles that are in the Top 100 Paid Games Apps... but otherwise there isn't much change. Let me know if I'm still missing any titles or if you have anything in the queue for which I should keep an eye out.
There's a lot of giddiness out there about Augmented Reality (AR)... and (this time) I'm not talkin' about the kind you find on LA beaches or at Las Vegas nightclubs. This is the AR, experienced through an application on a mobile phone, that blends imagery of the world around you as seen through your device's camera (reality), with data about that world based on GPS, mapping software, compass, accelerometer, etc. (the augmentation). It's all very cool, very sci-fi stuff, that ostensibly has a lot of commercial potential... and companies like Nokia (who call their version Mixed Reality) have been playing with this technology (including extra-cool image recognition features) for yonks.
Media coverage of AR has really heated up in the wake of Layar B.V.'s launch of the first meaningful consumer version of this technology, Layar Reality Browser, on iPhone in early October (it's been on Android for months), followed by a Symbian launch last week. The Dutch start-up, which just got another $1mil in funding, looks at their application service as a platform (smart) on which developers can build different "layers" (basically mobile websites that sit on top of images). Users can customize these layers based on their interests, which is similar to what Google Maps is now doing with their mobile application (and funnily enough, they also call their augmentation layers). Currently Layar has over 183 layer partners, such as Yellowpages.com, Yelp, Wikipedia, real estate site Trulia, UC Santa Barbara campus map, etc. Monetization will come from advertising, sponsored layers and, presumably, affiliate deals.
The company claims, in a Venture Beat story, that its free application has been downloaded 250k times and that they have 100k unique users per week. Early consumer reviews in the App Store have been mixed, with a fair number of complaints about the App's UI design and its heavy tax on battery life. That said, most consumers seem genuinely excited about the possibilities of AR on the phones... and I tend to agree.
I think, if executed properly, AR presents a massive new opportunity for brands, content owners and venues, to leverage the unique features of the mobile medium, in order to reach consumers via opted-in, contextual marketing. AR should become a hyper-targeted, mobile specific extension of search marketing, and it definitely feels like a space that Google will eventually want to own. The ability of AR to realize this potential will, as always, come down to execution. AR application developers need consumers feel that these applications are useful and relevant in their daily lives, so that they become a regular part of their interactions with their devices, and take great care not to overwhelm them with gimmicky features or messaging that will make the applications feel trivial or overly promotional. I'm hopeful that Layar, or someone else, can pull this off artfully and I'm unabashedly super-excited to see how this space evolves in coming months.