Thursday, June 10, 2010

Less Rush, More Rollercoaster for Digital Chocolate

Wow, what a difference a day makes...

Yesterday MobileGamesBlog reported that Trip Hawkins' mobile (and now social network) games publishing company Digital Chocolate had "secured several millions of dollars" in financing from Bridge Capital Holding and had upped their longtime studio chief Ilkka Paananen to President of the company (UPDATE: apparently Trip had announced this promotion back in February on his OMG Blog). The story indicated that this was an equity investment on top of the $43.8mil the company had received previously... which to my mind represented a meaningful market driven endorsement of the viability of the company and its prospects for growth. Big industry news for several reasons: 1) funding has hardly been flowing into the mobile games space; 2) insider buzz (driven in part by the company's recent, atypical, quietness in the press) is that Digital Chocolate has been struggling, like many of their mid-tier peers; 3) folks like and respect Paananen (founder of games studio Sumea in 1999, acquired by D'Choc in 2004) and his elevation seemed like a super-smart move to bolster management ranks and provide counter-balance to the venerable, but notoriously mavericky Hawkins as the company prepared for growth. All good stuff. After reading the story, I asked in a tweet (as I am wont to do),"at what valuation... anybody know?" and sent Paananen a congratulatory IM... to which he didn't respond.

Well the picture painted this morning in Mobile Entertainment's coverage of the story, and MobileGamesBlog's followup, may explain why I didn't hear back. Apparently the funding is actually a "multi-million dollar revolving line of credit" to be used for "general corporate purposes"... which sounds a lot more like a cash lifeline than an endorsement. To make matters worse, it now turns out that Paananen will not be taking a larger roll going forward, but instead will be leaving the company. I don't think either pieces of news, or how the messaging was managed, bodes particularly well for the company... and I suspect industry buzz may turn even more negative.

Of course this situation begs the question, what is the path forward for Digital Chocolate and the other key players in the struggling mid-tier of mobile gaming... specifically Glu Mobile, Hands-On & I-Play? I must say I'm pretty skeptical about them all piling into Facebook gaming... which is the popular strategy du jour. I have an idea that I'll share in an upcoming post.

1 comment:

  1. Trip was searching money for quite a while but the shocking thing is Ilkka leaving just after beeing promoted to President. He is a veteran from the old days and a good guy! Doesnt sound like good news for DC and social gaming is just another bubble with old and new competitors!

    Just checked out iplays website finding mobile games is quite hard - are they still around for mobile games? Hands-on, Glu (closed the UK office), GameHouse/Real, the whole mid-tier publishers are falling appart. PlayerX loosing his CEO Tony also some weeks back. Sounds like the market is cleaning out itself.

    Will someone new come up and collect the corps?

    Keen to see what Gameloft and EA will do - will they perhaps take some part of the mid-tier by investing some money? I personally doubt and they will not catch a falling knife.

    iPhone or Android is no save harbor as well. Which % of Gamelofts or Glus revenues coming from those two platforms - too less alone in the moment and for sure too less for the whole mid-tier publishers.