Enterprise Values of 22 Public Mobile Entertainment Companies Aug 2010

Update June '10: Enterprise Values of 21 Public Mobile Entertainment Cos Including Motricity

The Good The Bad & The Ugly In The Mobile Content Ecosystem May 2010

This segment, which covers my current perception of the state of select companies and business sectors in mobile entertainment, will be a recurring feature on Cabana Mobile. You'll notice dynamism in terms of the companies covered and where they fall within these categories, over time, as my inputs change. Let me know if you agree or disagree with my opinion... and tell me what other companies/categories you'd like to see on this list.

THE GOOD

• DeNA - Japanese powerhouse, fueled by the uber-successful Mobage-town social mobile games portal, has over $500mil in annual revenue, $125mil in profits and over $350mil in cash. These guys could roll-up several major western games publishers in a heartbeat if they were so inclined.
• Gameloft - the French publisher, always a high quality player, has been on its iPhone game from the start and now derives a full 21% of their revenues come from the AppStore... which is (for better or worse) the only game in town in terms of paid mobile content. Gameloft is proof that you can turn a super-tanker in rough seas.
• GAMEVIL - South Korean game publisher has 2 things going for it... great capabilities with micropayment model games in its home market and a focus on high-quality builds that are conducive to smartphones. These guys regularly deliver solid profits and have a market cap that must make many of their bigger competitors very envious.
• Millennial Media - It's no secret that I've always had a healthy level of skepticism about the value of the mobile ad networks. That said, there ain't no denying that the biggest, and one of the best managed, of the independents is in a super-sweet spot in light of Google's $750mil acquisition of AdMob and Apple's $275mil acquisition of much smaller Quattro. Rumors have been swirling for months that Microsoft is in the hunt.
• Firemint - smart, lean Australian games developer, turned iPhone publisher, is one of my favorite content success stories of the smartphone revolution. Flight Control and Real Racing have been true phenomena on both the iPhone & iPad. The big question is, of course... what's next?

THE BAD

• Glu Mobile - this quality mobile games publisher, that I once called the "barometer of the health of the mobile entertainment space", has been struggling to evolve from a carrier-focused, licensed IP based company, into a smartphone savvy developer of original game franchises. They're currently going through a painful right-sizing process and experiencing declining quarter over quarter revenues. Cash is a severe pain point and their market cap (under $40mil) is currently 11% of rival Gameloft's.
• Carrier Decks - remember way back when (2years ago) when Get It Now! and MEdia Mall (and their ilk) used to be like WalMart and Target for mobile content? Well unfortunately the smartphone revolution and Apple's retail smarts have shifted that paradigm... big time. Publishers now routinely report alarming declines in their carrier-based revenue. I doubt the tide will turn back, unless operators focus their efforts on curating and facilitating billing for paid Android apps... 'cause that's a growing mess they're in a position to fix.
• Motricity - back in January this veteran, Bellvue, WA based, carrier content platform management company made its intentions known to the SEC that it wanted to go public. Lots of folks in the industry were shocked by the timing, considering the the general state of the IPO market, current conditions in the carrier deck business, the very substantial losses Motricity has racked up over the last few years and the fact that 74% of its revenues come from 2 companies.

THE UGLY

• GetFugu - when your stock price is under a penny, you have to take a bridge loan for $170k & after 6 months your one app has only 333 mostly poor ratings in the AppStore, that's kinda ugly. Even the micro-cap day trader crowd is way over it. It's hard to believe that this company will survive the summer.
• NeuMedia (f/k/a Mandalay Media) - the owner of Twistbox & AMV has always had an identity crisis; is it an adult entertainment or a games company? Recent exec & board defections and a cash-balance triggered notice of default indicate to me that they may not have to struggle with this issue too much longer.
• Off-Deck Mobile Portals - before the smartphone revolution this was a red hot space, with power-players like Thumbplay, Flycell & Jamba/Jamster vending recurring ringtone & graphics subscriptions, to under-supervised kids. After paying $120 bucks over a year for those 3 Young Jeezy tones and a blingy pot leaf screensaver, most suckers (or their parents) got a clue.

THE QUESTION MARKS

• Zed - the Spanish personalization giant has been like The Borg for the last couple of years, sucking up companies left & right, and diversifying into myriad content plays... including TV production. Though privately held, they used to brag about being the biggest mobile content company in the world, claiming revenues over $800mil!... but I haven't heard a lot of bragging recently.
• Buongiorno - this Italian mobile personalization & services goliath still has revenues in the $300mil range, but their revenue has been on a downward trajectory as the company's content offerings get a little long on the tooth and it tries to figure out how to be relevant in a smartphone world.
• Index - this longtime Japanese content powerhouse, whose mobile group is perennially in my Top 5 by revenue, seems to be faltering a bit. Their one time bid to be a global player, by virtue of a North American & European buying spree, flamed out and now they're fighting to stay relevant in a home market where the iPhone and Android are gaining traction.
• Android Paid Apps - as I alluded to earlier, this is a mess. Considering how quickly Android handsets (and soon to be tablets) are proliferating across carriers, this should be a huge opportunity. However, Google's disinterest in managing their store & consumer resistance to setting up Google Checkout accounts, have really stifled Android's paid app potential. I think it'll be up to the carriers to fix this problem.
• Ovi - Considering Nokia's 2.7% marketshare in the US this won't be a factor here for a long time. In the rest of the world there's more hope, especially considering some recently promising download numbers, and the appointment of industry vet Bryan Biniak (a guy who I know understands content) to run Ovi Publish. Frankly I'm more bullish on Ovi now than anytime in the last year.
• Augmented Reality - Boy, I was really excited about this space for awhile, particularly apps like Layar... but I'm definitely not feelin' it right now. AR still seems more like a novelty than a necessity.

Updated Enterprise Values of 15 Public Mobile Entertainment Companies

What a difference a week makes. I'm already updating this spreadsheet with some new data. Here are some notable changes:

• Buongiorno posted Q1 2010 earnings
• Velti filed updated earnings with the SEC as part of their bid to go public on the NASDAQ (they're currently listed on LSE)... their numbers are pretty impressive (more on that soon)
• Mandalay Media, parent of Twistbox & AMV, changed its name to NeuMedia, Inc. & announced a notice of default related to a cash balance provision from a key creditor
• ROK Entertainment's stock is down over 50% today (guessing they'll be more news to follow). Btw - did y'all know the biggest shareholder in ROK is the DeJoria family, which controls the Paul Mitchell salon product empire? Always thought the guy in the ads was Paul Mitchell... but that's actually John Paul DeJoria (Mitchell was his founding partner). Anyhoo, probably hasn't been a great investment no matter how you cut & color it

Select Data From Buongiorno's Q1 2010 Earnings

Latest Enterprise Values of 15 Public Mobile Entertainment Companies

• Data for Velti & ROK Entertainment should be taken with a grain of salt, since they haven't released financials in recent quarters
• It looks like a couple of these companies should consider giving their cash back to the investors, and calling it a day. Some of them shouldn't be public at all (and are barely going concerns)
• I think the shining stars of this lot are the mobile games publishers Gameloft, GAMEVIL & Com2uS
• I look forward to adding Motricity into the mix, once (if?) they go public
• Let me know your thoughts on this and if there are any other public mobile entertainment companies I should be tracking

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).

Buongiorno Revenue Continues On Predicted Trajectory

€mils

Italian mobile personalization & services goliath Buongiorno (BIT:BNG) reported preliminary FY 2009 numbers this morning and the results were very much in line my predictions for this ol' skool playa. Full year revenues were down 18% compared with 2008 and Q4 2009 period was down 27% compared with Q4 2008. In dollars, they brought the year in at $360mil, which should keep them in the #5 slot on my Top 20 mobile entertainment companies by revenue.

Some Predictions For 2010

• The Nexus One and myriad other Android devices will launch with varying degrees of fanfare, but the Google devices in aggregate and the Android Market will continue to pale in the shadow of iPhone/iTunes as a consumer event due to inconsistent marketing, klugy app billing and OS fragmentation

• Mobile marketing will graduate from the experimental stage, and become a core strategy component for several enlightened global brands

• Several established mobile games publishers will either be acquired or file for bankruptcy protection... companies that could be in play during 2010 include: Hands-On Mobile, I-Play, Twistbox, Digital Chocolate and perhaps Glu Mobile

• Apple will finally strike a deal with Adobe that will allow iPhone users to access content built in Flash through the browser, creating a boon for Hulu, Vevo, YouTube, MovieClips, et al

• Apple will make eBooks and eMagazines available through iTunes for their upcoming tablet... but they will also be available for iPhone and touch

• Nokia will scrap it's Comes With Music offering, will continue to struggle to make Ovi a meaningful consumer proposition and will see declining market share as it gets squeezed by Apple, RIM and Android devices on the smartphone front and by low cost Chinese manufacturers in developing markets

• LTE & WiMax services will continue to roll out slowly, but 4G won't be a significant consumer event during 2010

• Google Googles will move beyond Android and quickly establish itself as the world's most popular augmented reality application... leaving companies like Layar & GetFugu in its dust

• The current Top 5 companies in my Cabana Mobile Entertainment Top 20 by Revenue (Zed, Index Mobile, UMG Mobile, MobiTV & Buongiorno) will all see mobile revenues decline during 2010. Smaller App-focused publishers will see the greatest revenue gains

• Carrier-based App stores will make consumers yawn, but on a positive note they'll benefit the coffers of several advertising and identity/design agencies

• An application developer, a credit card company and a major retailer will collaborate to launch the first commercial in-store mobile transaction service in the US

More to follow throughout the day...

Cabana Mobile Entertainment Top 20 by Revenue

€/$=1.4849

? = best estimate

Buongiorno Earnings Q3 2009: The Other Side of the Growth Curve

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.

Enterprise Values of 15 Public Mobile Entertainment Companies

Enterprise Values of 12 Public Mobile Entertainment Companies

Cabana Mobile Entertainment Top 20 by Revenue

All numbers are in US$ based on annual reports or last 4 quarters.

As usual, please comment with any suggested changes.

Buongiorno Earnings Q2 2009...No Surprises

Italian personalization and services giant Buongiorno posted Q2 earnings just before the US markets closed today...actually they reported consolidated H1 2009 earnings, which always seems like an obfuscation tactic to me (and required me to do some extra math). Anyway, here are some highlights:

• Revenue declined 17% from the same period last year & 2% from Q1 2009.
• Net increased $5.17mil from a small loss in the same period last year and & 65% over from Q1 2009
• B! claims 7.6mil subs on its BlinkoGold graphics, tones & games D2C service & 300k subs on their nascent "peoplesound" mobile social network
• B! claims that its carrier services businesses....which includes CRM tools, contest management & hosting a games portal on TIM made positive contributions to earnings in Q2
• The company is now generating 90% of its revenue outside of its domestic market, Italy
• Marketing Services extended a contract with Orange UK & picked up a deal to sell ads on mobile sites owned by the Espresso Group... and contributed $5.6mil (6%) to Q2 revenue
• B! is still trimming the fat following their July 2007 acquisition of iTouch (for $185mil)...and has reduced headcount 21% in 2yrs to 994, reduced the # of legal entities in the company from 100 to 77, closed offices in 13 countries and moved customer care to South Africa

Basically the concerns I've raised about Buongiorno in the past stand. This is a Mobile Content 1.0 company trying to stay relevant in a 2.0 world, with mixed (limited) success...it's a dinosaur. My guess is that we will continue to see their quarterly revenues erode as consumers seek more sophisticated content for their more sophisticated devices (and bail on sleeper subscription services), and that they will need to keep cutting costs to maintain profitability. Buongiorno could reverse the path to extinction if one of its new ventures really takes off (it won't be peoplesound, btw) or it buys its way into relevance. If not, the good news is that the process will be slow, since they've just about achieved a worldwide personalizaton duopoly with Spanish rival Zed.

It's All Good?...Buongiorno CEO Says Economy Not Hurting Business

According to a detail-light Reuters interview this morning with Buongiorno (BNG) CEO Andrea Casalini, the Italian mobile giant had a "very good" 1st half 2009 and claims that the economy hasn't hurt business. Without providing any numbers, Casalini indicated that Buongiorno was performing in line with its plan and while it has the resources to make acquisitions it was going to focus in organic growth. I'm very interested to see the actual Q2 numbers. As I reported in early May their Q1 figures were down 15% from a year earlier...and I have to believe that their personalization heavy product line is becoming less and less relevant in a smartphone world. Moreover, I still can't find any indication that their big mobile social networking initiative Peoplesound is getting any meaningful popular traction (see graph below). But, we shall see...these guys are still a mobile entertainment powerhouse, with ~$450mil in 2008 revs (#4 on my revised Mobile Entertainment Top 20) and they do have significant mobile marketing and telco aggregation components to their business to offset potential content woes.

Updated Cabana Mobile Entertainment Top 20 by Revenue

Cabana Mobile Entertainment Top 20 by Revenue

Revenues are in US$ and are based on latest annual reports or industry estimates. The range of revenue on this list goes from a low of ~$50mil to a high of ~$550mil. Total revenue for the Top 20 is ~$4bil.

Please let me know if you think I'm missing a company or if you think I might have the order wrong.

Are These The Top 20 Mobile Entertainment Companies By Revenue?

I think so...but I could be wrong. Who am I missing? Anyone on this list who shouldn't be there? Any issues with the order? I'll adjust and re-post based on feedback.

btw -- this list obviously includes mobile entertainment divisions of companies that are not exclusively involved in mobile or mobile entertainment. Also it does not include the mobile operators or divisions of traditional entertainment companies, such as the studios, networks & music companies.

Can Buongiorno Keep It Up?

Mobile Entertainment reported this morning on Buongiorno's Q1 2009 earnings announcement. The company experienced a 15% decrease in sales over the same period a year ago...which is not entirely surprising given the economy. Probably more troubling for the Italian mobile media & technology company is that they continue to rely upon sales of ringtones & graphics through breakage-model D2C subscription services for the bulk of their revenues. This model has been on a long death spiral with consumers and regulators...and these products are totally commoditized. That said, the company has been able to maintain its position as the #2 mobile entertainment company worldwide by revenue (behind Spain's Zed) and they continue to search for ways to leverage their substantial infrastructure & expertise to create new mobile solutions for consumers & business partners. As I reported earlier I'm skeptical about one of these initiatives in particular (called peoplesound), but it's a move in the right direction. Innovation/diversification are mission critical if Buongiorno wants to stay relevant...and if they ever want to start generating healthier profits for their shareholders.

btw -- here's a look at Buongiorno's revs & consolidated net over the last 2 years in millions of US dollars. Note that I calculated the €/$ rate @ 1.3597 & that the jump in 2008 revs is attributable to their acquisition of iTouch at the very end of 2007.