Global Video Games Investment Review by Tim Merel IBIS Capital

Check out a comprehensive story on this presentation at PaidContent.

FYI - this slideshare presentation is best viewed Full Screen... which can be activated from the MENU button on the bottom left corner.

Wha'ppen At CTIA Spring 2010?

Hey guys, sorry for the extended hiatus... lots of traveling, lots of projects... all good stuff, except that it has meant that I've neglected the blog.

So what the heck happened at CTIA in Las Vegas last week... besides some age inappropriate behavior fueled by Vodka-Redbull? Here are some highlights, that I'll add to throughout the week as I think of more...

Stinkin' Badges. In a somewhat pathetic attempt to stay cool with the kids, CTIA created a purple-carpeted Apps World zone on the show floor, complete with a "Developers Clubhouse"... which turned out to be a good place for suits to adjust their insoles. As you can see from the exhibitors list there were very few top tier mobile content companies participating... weak sauce. But of course this has been the trend for years now at CTIA. As usual most content related meetings happened at suites in the Venetian or the Wynn... and maybe some in the maze of soul-less conference cubes in the convention center. Bottom line is that the show isn't really a content show at all, but it does provide a convenient, strategically located opportunity for mobile content types to see the carriers, technology providers and OEMs that the show is built around. For many, show badges are optional.

iPad, slates and tablets, oh my! Continuing the theme from CES, everyone was talking about these devices and the market potential they may create for content creators. Some OEMs were showing product publicly... some more secretly. I think App creators need to be a little cautious here. While I think some of these devices will become consumer phenomena, I don't believe that the consumer entertainment wallet is expanding. Dollars that flow into this segment will be be met with decreases in other areas... for instance, I think iPad owners will purchase Apps, games, books, subscriptions, etc. for their devices, but those same consumers will offset these costs by spending less on Apps for their iPhones and iPod touch devices. The biggest beneficiaries will be the e-publishers, who previously only had two viable distribution outlets, and the ad networks that have created products optimized for the platform. That said, early iPad sales buzz will surely help continue to fan the flames of hype.

WDA Keepin' It Classy. The venerable East Lansing, MI based mobile marketing and distribution agency Wireless Developer Agency (WDA) held one of their signature matchmaker dinners at Lawry's last Monday evening. CEO Konny Zsigo & crew put on a 1st class event, as usual, with free-flowing drinks, lots of great hand-picked, high level contacts to meet, a steak dinner, eye-candy, door prizes, transportation, etc. I've been attending these truly unique events since 2002 and I have to give WDA credit for facilitating introductions to many of my most important contacts and friends in this space. If you haven't been to one of these things before you should check it out, if you're given the opportunity. Basically it's a dance-card format, where attendees are matched up with contacts WDA believes would be valuable/interesting connections (they're usually right). An assigned, not-hard-on-the-eyes hostess makes sure you stay on task, and that everyone has plenty of beverages. Simple idea, well executed, super-effective, fun and useful.

Bad-Ass Android Devices. Best in show were the super-sexy Samsung Galaxy S, with its 4" super AMOLED screen (see image below), and the HTC EVO which Sprint is launching as the first US 4G handset. From a device perspective Android is kicking ass... particularly Microsoft's. The boys & girls from Redmond must seriously be regretting their decision to push of Windows Phone 7 to the end of the year about now. Speaking of competing operating systems, I'm not sure what Samsung's decision to release their coolest phone on Android, as opposed to their self-hyped, proprietary, bada smartphone platform means... but it should definitely give developers and publishers some pause about supporting bada.

Android Ecosystem. There continues to be a lot of vocal concern from content developers and publishers, particularly on the paid side, about anarchy on this platform. Google is doing nothing to manage the quality of the apps in Android Market, billing through Google Checkout is considered non-optimal at best, Google is putting all the customer service burden on publishers and they haven't mitigated OS fragmentation. Everyone is excited about the growing install base on Android, but as I've said before and as recent data about Nexus One sales reveals, Google has no track record as a merchant. This is a non-trivial matter when you're trying to sell physical or digital goods, and frankly Apple has set the benchmark. Google had better ramp up its capability in this area quickly. Meanwhile those operators who have created a curated, carrier-billed, store-within-a-store on Android Market are claiming they are outselling the broader store by multiples of 10 or more. Perhaps this is the path forward, and Google has no plans to sell direct in the longterm.

PUSH N900 Mod. Nokia wins most creative award for a display they put together highlighting contestants who participated in challenge to use modded N900s and its Maemo open source software to created unexpected innovations. This results (see example below) demonstrate how a connected smartphone really can be a remote control for both the virtual and physical world. This made me think a lot about the potential for a connectivity protocol that would give users the option to control his/her environment from a smartphone. Imagine if you were prompted to connect your phone to your hotel room when you walked in the door and you could use it control temperature, lights, shades, etc... or if when you walked into fast-food restaurant you could immediately order and pay from your device. The possibilities are endless.

Sausage Fests. I must say that ever since the music labels scaled back their participation in, and extracurricular events at, the show (you know, since the ringtone market crashed) it seems that CTIA's parties are more male-skewed than ever. I'm not exactly sure why this is, but I do know that it takes the dancing option off table at most of these events... transforming them into cocktail mixers with music loud enough to prevent you from hearing what anyone has to say. Just nod and smile. I spent one night running around with a crowd, chasing something cooler all over town. It was a fool's errand... but we had some fun trying. That said, props to Zed, DivX and whoever threw that party at Tao on Tuesday night for top parties of the week.

Off To CTIA

I'll be at CTIA in Las Vegas on March 22nd, 23rd & 24th... I'll provide a summary of my findings when I return.

Is Artificial Life More Artifishy Than Dishy?

LA-based(?) mobile games, apps and platform company Artificial Life (ALIF) claims to have had "a very positive year" in a press release announcing 2009 earnings issued Tuesday, but what they aren't telling you is that their Q4 clearly sucked. I'm still digging through their 10-K to determine what exactly transpired in Q4, but the more I dig and the more I talk to people in the industry about this company, the more there is about it that just don't seem quite right. Perhaps it's their 153 sq ft world headquarters (headcloset?) in LA, or perhaps it's their recent iPhone hyperbole which obfuscates the more probable sub-1mil paid download reality across their portfolio. It could be the queasiness I feel when I read that key elements of the company's 2010 strategy include über-buzzilicious initiatives in mobile green technology (whatever that is) and augmented reality. Or maybe it's just Artificial Life's oddball collection of promotional games, health care and real estate apps, as well as m-commerce and participation TV platforms, that no one I've ever met has ever used. Then again, it could be that despite regular claims of profitability, they seem to keep burning through cash. I know, I know it was just last May that I called these guys "the new hotness"... but whatevs, I think I was kinda digging Jamie Foxx's "Blame It" back then as well. At least I didn't make a $6.5mil investment in the company like 3M did back in October. One wonders what or who they'll be blamin' that on when ALIF dips back below $1 and encounters their next cash crisis.

btw - if anyone has any unique insights about this company please feel free to contact me... and, as always, comments, feedback and divergent opinions are welcome.

Potentially Cool Concept For Mobile Content Kiosks?

This neat SXSWi demo by Cynergy software of their vision for the news stand of the near future using a tablet/eReader, a Microsoft Surface and their slick software, got me fantasizing about the applications for mobile phone content. This would be a really interesting alternative distribution channel for apps at airports, retail stores, movie theater lobbies, carrier stores, etc. Dontchathink? It would provide an especially compelling shopping experience if consumers could first see a comprehensive video demo of an app's functionality prior to purchase. Android & BlackBerry content aggregators... get on it!

2010 Will Be Remembered As The Year of...

The results of my latest poll are in... and considering that 2 of the most popular responses show that readers believe that 2010 will be remembered as a year of "pain" and "consolidation" it's pretty clear, despite consumer smartphone exuberance, the general mood amongst those that provide content for those devices is pretty negative. I must say that this echoes the majority of sentiment (with several notable exceptions) that I heard from mobile games publishers at GDC this last week. Competition is intense, iPhone growth is not offsetting carrier declines, price erosion continues on iTunes and no other smartphone platforms are close to providing meaningful revenues yet. Basically we're going through the mobile equivalent of a console upgrade cycle... where consumers (particularly those with a propensity to buy mobile content) are rapidly moving to sexier hardware. The problem is that the content distribution channels are developing unevenly, with business models that don't necessarily play to the advantage of incumbent players. No doubt the landscape of top performing companies in mobile entertainment will look quite different a year from now than it does today.

Top 25 Companies In Mobile Entertainment

As always I welcome feedback and dialogue! Please let me know if I'm missing any companies or if you think that my numbers and/or rank order are incorrect. btw - revenue numbers for private companies, or divisions of companies, that haven't publicly disclosed numbers have been left blank intentionally (for now).

Does Moto Droid Handle Multi-Touch Better Than Nexus One?

My BlackBerry Is A Dysfunctional Alcoholic With Negligent Parents

My 1 year old BlackBerry Bold can't get off the sauce... it literally needs regular doses of isopropyl alcohol just to stay "functional." To make matters worse its recently taken to huffing Dust-Off to make it through the day. Many of you with BlackBerrys featuring trackballs (Bold 9000, Curve 8900, Tour 9630, 8800 series, etc.) know exactly what I'm talking about... though some of you may be enabling with denial or delusions that your BlackBerry can work through its issues without intervention. People, I'm here to tell you that it's not your fault that your handset's trackball isn't working... you don't have sweatier hands than everyone else and you don't have any greater propensity to eat onion rings before checking your Twitter feed. The problem is clearly a design flaw with the device. If that wasn't the case, then why would RIM be phasing out trackballs in favor of the "trackpad"? Of course, they should have realized that the trackball was a dumb idea from the outset, considering the laptop guys had gone down that road years before and abandoned it for the exact same reasons RIM now has.

When my trackball problems began, over the Holidays, I took my Bold into my local AT&T Wireless retail outlet. God I hate those places... employees must be trained to have that infuriating balance of fake-courtesy, utter uselessness and a sales sleaze factor that rivals that found in auto dealerships (haven't they learned anything about retailing from Apple?). True to form, while acknowledging that they had seen this problem many times, they informed me that my device was days out of warranty and that my options were to have it serviced by paying $60 & shipping it away for a couple weeks (very helpful) or (they encouraged) I should really buy a new device. I told them I was gonna take it up with RIM. So while I was at CES in early January I took the opportunity to visit the booth of the Canadian handset manufacturer and plead my case. RIM employees have obviously been counseled to avoid acknowledgement of the issue entirely... when I showed them that I was unable to use my device to track downwards they feigned curiosity and had no suggestions as to how I might fix the problem. When I asked about the thousands of internet posts about folks resorting to rubbing alcohol to clean their trackballs, all they said was that that would constitute a warranty violation.

The sad thing is that I've been a long time devotee, fan of and evangelist for BlackBerry ever since my company replaced my Palm Vx with a BlackBerry 950 pager 9 years ago. I've successfully encouraged many friends and family members to buy these devices. Even in the face of borderline fanatical iPhone worship amongst peers in the mobile entertainment space... I've stayed loyal to my BlackBerry. But that may be about to change. I really feel that RIM is long overdue in acknowledging this problem and that the right thing to do is to recall and replace all devices with slipping trackballs. I'm holding out hope, especially in light of the recent debacle with a highly respected auto manufacturer, that sense will soon prevail and that the company will take rapid action to keep their customers happy... and just keep their customers. In the very short term, I'm continuing to dose my device at least 3 times a day, while getting crazy proficient navigating around menus without the trackball. But my patience is running very thin, and I'm literally days and one Apple Store visit away from switching to an iPhone.

Hurray! Better Hurry With The Reinvention Thing

Chinese mobile music and wireless value-added services company Hurray! Holding (HRAY) announced unaudited Q4 and full year 2009 results today. Well, as I think we've seen across the board, it's been a dire couple of years for the music-focused mobile entertainment companies. This segment, which was the first to realize success with mobile content, is now crashing hard as ringtones fall out of fashion and full-track downloads fail to ignite any consumer excitement... anywhere. As recently as 2007 Hurray! was a $60mil company, and now it's just about half that size. In an attempt to stem the flow of red ink the company has diversified into the tried and true (?) mobile games space and is aggressively launching new titles (11 Q4 09, 12 planned for Q1) on China Mobile's portal... including the notable, but somewhat derivative-sounding "World of Legend - Magical Land". We'll see how it goes... but as it stands prospects for the company look less than awesome. Luckily for Hurray! they still have a decent cash reserve ($50mil in Q3 09) left over from the good ol' days, which buys them a little time to either right the ship or, perhaps for the cash alone, lure a buyer.