DeNA Reports $1.23bil Revenue & $334mil Net For Calendar 2010

Quarterly revenue trend 2006 - 2010
DeNA Fiscal Q3 (Calendar Q4) 2010 Operating Results

Guess Who Isn't Struggling In Mobile Games? Billion $ DeNA

Recent Cabana Mobile Facebook Page Updates

I hope you guy are all following & LIKE the Cabana Mobile Facebook Page. For those of you who've been missing the fun 'cause you're snoozing at the keyboard, been too busy raising your next round or are conscientiously objecting to social networks (resistance is futile), that site includes all my blog posts & more quick commentary. It's like super-tweets about articles I find interesting and more brainfarts on the mobile/digital entertainment space in general. Check it out. Meanwhile here's a list of some recent posts...

10/16/2010 Re: Fast Company article Should Albums Cost $1.50?: "Consumer me loves the idea of a $1.50 album & MBA me sees the value of inefficiencies being taken out of the system across media as a result of consumer/OEM-centric digital distribution business models. That said, all of us vested in content should be wary of the rapid race to the bottom in terms of pricing. This will inevitably lead to less content being created, fewer risks being taken and the loss of thousands of jobs. Deflation is a dangerous spiral... once consumers begin to believe that content will be cheaper (or free) in the future, they get really good at keeping their wallets in their pockets."

10/15/2010 Re: Gameloft sizzle reel on YouTube: "Will the Samsung Galaxy Tab & the availability of quality game apps prove that the tablet market isn't only about iPad? What will the paid conversions on these impressive Gameloft's teaser apps look like if they rely on Google Checkout?"

10/15/2010 Re: Tweet from Google exec Mike Steib: "Perfect tweet to sum up Google's mobile business from Mike Steib: "$1B.""

10/15/2010 Re: Mobile Entertainment article Full Angry Birds Android game goes live on GetJar... for free!: "Interesting strategy. When a red-hot developer believes that the best path forward on Android is to give their trophy title away, sell some ads against it and figure out in-app monetization later, it really manifests the dire state of paid app monetization within Android Market. Frankly, I'm worried that this approach will just further contribute to price erosion in the overall mobile content space... but I'll be happy to be proved wrong by some mindblasting freemium success stories (outside Japan/Korea) in coming quarters. Meanwhile I'm getting the app for my Nexus One as soon as GetJar's site is back up."

10/14/2010 Re: PocketGamer.biz article Opinion: Why ngmoco is worth the $195 million DeNA might actually pay for it: "Perhaps DeNA isn't actually overpaying for ngmoco... what do you guys think?"

10/14/2010 Re: Business Insider SAI video interview with Gene Munster: "Piper Jaffray analyst Gene Munster stands by a 12-month price target of $390 for Apple and tells Business Insider that "Apple is in the best position of any technology company" for the next decade... assuming Jobs is at the helm."

10/14/2010 Re: The Register article When Dilbert came to Nokia: "Apparently the matrix organization structure that Nokia trumpeted for years played a large role in stifling product innovation..."

10/13/2010 Re: PocketGamer.biz article Opinion: The ten next best acquisitions in mobile gaming: "Nice opinion piece from Jon Jordan. I think Digital Chocolate is missing from this list... who else should be on the radar?

10/13/2010 Re: Mobile Entertainment article The numbers behind DeNA's ngmoco acquisition: "‎$403mil buyout on $3.16mil 2009 revenues & net loss of $10.9mil (significantly lower than I had guessed). Am I missing something or this just stupid?"

10/12/2010 "Yahoo! has $1.2bil in the bank, their embattled CEO is due to take a big swing & they haven't done anything crazy in mobile for years... just sayin'"

10/12/2010 Re: TechCrunch article Kleiner Perkins Harvests Over $100 Million From Ngmoco Acquisition: "Things are about to get super-extra-frothy..."

10/12/2010 "Google has got to fix Android Market if publishers of quality paid apps are going to support (or continue to support) the platform... buzz at CTIA was that despite impressive market penetration Android is still almost meaningless to publishers from a revenue perspective. Anybody experiencing anything different?"

Social Mobile Madness?: DeNA ngmoco Rumor

Yesterday's TechCrunch story about Japanese social mobile gaming powerhouse DeNA making a play for San Francisco smartphone games shop ngmoco, for over 400 milly (!), sent the buzzometer through the roof amongst mobile content peeps at XYZ & the Redwood Room (oh, I mean CTIA). Some were adamant that the deal was done, some were more skeptical, some were hoping the story would goose their stock price (it didn't). If this is true, the valuation is beyond super-frothy! My estimate is that ngmoco probably has revenue of around $10mil & net of around $2mil (maybe), which means DeNA would be paying more than 200x earnings. Why?... this would be like EA/Jamdat all over again. Who's advising these guys?... 'cause I definitely want some of whatever they're smoking & I think I'd be entitled to a few million yen for saving them a fortune with my secret insider brain knowledge that they could buy Glu Mobile (market cap $43mil), Digital Chocolate & the social platform of their choice for a fraction of that price. Oops!... well I guess they can send me one of those bean cake jelly gift boxes as a token of their appreciation.

Enterprise Values of 22 Public Mobile Entertainment Companies Aug 2010

DeNA's Path To Ascendancy

Revenue by calendar quarters, $mils, $/¥=85.26

Japanese powerhouse DeNA reported fiscal Q1/calendar Q2 2010 operating results earlier this month. This company is on a revenue rocket ride... fueled by the home market popularity of its Moba-ge-town mobile social gaming platform. The only mobile entertainment company in the world who purports to be in the same league as DeNA, in terms of revenue, is the private Spanish personalization publisher Zed... who bragged to the press that they'd realized $870mil in turnover during 2008. I must say I was typically skeptical at the time, and Zed has been dead silent on the earnings front for more than a year. I'm confident, based on their current trajectory, that DeNA will have a significantly bigger business than Zed by the end of this year, if they don't already.

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

Hypothetical SWOT Analysis For DeNA Roll-up of Glu Mobile, Hands-On & Digital Chocolate

As I've been blabbing about for months, the established publishers in the mid-tier of mobile games are languishing under the new smartphone app store paradigm, as the two biggest players (EA & Gameloft) have consolidated power, and nimble newcomers (Firemint, Lima Sky, Chillingo) have seized marketshare. The competitive advantages these guys once enjoyed (carrier sales teams, the ability to port to a thousand devices, licensing relationships), have become expensive burdens, and most lack the resources to make wholesale changes to their businesses. In light of this, I've often wondered if it would be feasible for a company, with some vision and cash, to roll-up a few of these guys in the interest of unseating the top players and creating a true smartphone games powerhouse. For fun, let's imagine a scenario wherein Japanese social mobile gaming powerhouse DeNA, with its $530mil in revenues, almost $400mil in cash & ambitions to put a stake in the ground outside Japan, considered buying Glu Mobile, Digital Chocolate and Hands-On Mobile (for like $100mil, right?). What would a SWOT analysis for this "Newco" look like?

Strengths (Internal)

• Combined annual revenue of ~$125mil puts Newco within striking distance of Gameloft
• 98 Paid iPhone Apps featuring quality franchise titles like Deer Hunter, Glyder, World Poker Tour, Kitten Cannon, Brick Breaker & Tower Bloxx
• Interesting leadership potential... The icon: Trip Hawkins & the upstart: Niccolo de Masi
• All global HQs are in Northern California
• Studios in Finland, China & US
• Global distribution capability
• Healthy balance of original & licensed IP

Weaknesses (Internal)

• Cash... DeNA would have to fix that
• Re-branding would be required, none of these brands is perceived as a winner or has meaningful consumer cache... plus there's no combination that doesn't sound X-rated
• With over 500 employees... there would need to be some downsizing/consolidation
• $20+million in debt
• Reconciling investors & boards won't be a job for the faint of heart
• Scale sometimes leads to inertia

Opportunities (External)

• Unify all games with OpenFeint's social gaming/app discovery platform (in which DeNA has a 20% stake)
• Build in-app purchases into as many titles as possible to maximize longterm revenue potential
• Historic carrier relationships might become valuable again as Verizon, AT&T, et al take a larger role in managing Android Market
• Take all components of Newco private, clean 'em up and then spin it back out as an IPO when market conditions improve
• Take cue from Zynga in terms of marketing on social, new & traditional media

Threats (External)

• Platform consolidation and platform dependency (when Apple changes the rules, it hurts)
• Continued price erosion
• Competition with other forms of gaming & entertainment for consumer discretionary dollars
• New, well financed, market entrants

I'm sure Newco would appreciate your unpaid consulting, in form of comments. I'll add to and adjust this over the next few days based on your input and my own random inspiration (brain farts).

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.

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).

Cabana Mobile Entertainment Top 20 by Revenue

€/$=1.4849

? = best estimate

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.

Updated Cabana Mobile Entertainment Top 20 by Revenue