Big 3 Mobile Game Publisher Revenue Comparo Q3 2010

EA Mobile:

• Saw both Q-on-Q & Y-on-Y revenue declines
• "Almost" offset losses in feature phone business with smartphone games in quarter
• Company revealed that Chillingo purchase was for $17mil in cash, with up to $12mil in earnouts... still seems like a pretty good deal to me

Gameloft:

• Strongest performer of the Big 3, realized both Q-on-Q & Y-on-Y growth
• Geographical mix was Europe 32.6%, North America 31.9%, Rest of World 35.5%
• North American & European revenue fell slightly from Q2. Makes me wonder which developing markets are driving growth... LatAm?
  
• Revenue relative to EA Mobile is benefiting from the strong Euro

Glu Mobile:

• Smartphone revs were $2.35mil, or 15% of total Q3 10... includes Android, Windows, RIM, iOS, Palm, Ovi, Symbian & in-game advertising
• As the company pushes its freemium persistent games agenda, it's emphasizing Daily Active User (DAU) & Monthly Active User (MAU) measurements a la Facebook apps
• Guiding Q4 revenue down even further, at between $14.0mil & $14.5mil, with a GAAP net loss between $7.0mil & $7.4mil. Clearly things are going to get harder still before they get easier
• 23% of revenue came from original IP... that number expected to increase
• Verizon accounted for 14% of revenue, China Mobile 11% & Apple almost 10%

Updated: Apple Still The Big Story In Gameloft's Earnings... But Not As Big As It Initially Appears

Gameloft issued a release last Wednesday outlining their top-line Q2 2010 performance. Revenue was up 14.7% over Q2 2009 to €33.60mil ($44.44mil), and for the first half of the year it was up 11%. That puts their revenues for the last 4 quarters at $169.95mil, at current exchange rates. North America held steady at 34% of revenue or $15mil, while Europe lost some ground to developing markets. Overall this looks like a solid result pending the release of comprehensive financials at the end of August.

The most amazing claim in the release is actually one made in error. The release states that "Gameloft has positioned itself as a leading game publisher on Apple's iPhone and iPad and has seen its sales on the AppStore grow by 113% during the second quarter of 2010." That initially led me (and others) to believe that their iOS revenue had spiked from €6.93mil in Q1 to €14.76mil in Q2... which would represent a whopping 44% of revenue. However, after contacting investor relations it turns out what they meant to say is that their iOS revenue has grown 113% since Q2 2009 and that the figure associated with iPhone, iPad, iPod touch is actually €7mil, or 21% of revenue... which is the same percentage they reported for Q1 2010.

Now that that's straightened out I'd be interested to hear what their revenue looks like on other smartphone platforms. Despite all the hype about Android, publishers keep telling me that paid app sales in that channel are still insignificant (attributable to Google Checkout, poor management of Android Market & OS fragmentation), and that the other smartphone platforms are barely worth mentioning. Meanwhile the carriers, at least in North America & Europe, are becoming less important with each passing quarter. For games publishers, this has got to be troubling... it's never a good thing when one distribution channel dominates the agenda of an industry. Unfortunately, for Gameloft et al, it appears that they're gonna have to be comfortable with a dependency on Apple, and the dangers inherent in that type of relationship, for the foreseeable future.

Top Mobile Games Publisher EA Mobile Exceeds $200mil in 2009

EA Mobile's last 19 calendar quarters in millions

Electronic Arts Inc. (ERTS) reported fiscal Q3 2010 earnings after the bell today.... that's calendar year Q4 2009 for the rest of us. EA Mobile's revenue for the quarter was $56mil, on a GAAP basis, which represents a 14% increase over Q4 2008. The full calendar year came in at $206mil for the mobile games group, which is a 14.4% increase over 2008. Overall the result looks substantially stronger than that of #2 player Gameloft, who reported last week. Perhaps the responders to last week's poll are on to something...

Gameloft 2009 Revenues: Merci Beaucoup iPhone!

The world's 2nd largest mobile games publisher, Paris-based Gameloft (GFT), released preliminary FY & Q4 2009 earnings today. Here are the highlights:

• FY 2009 revenues were up 11% to $170mil... pure mobile games growth was 12%
• Q4 2009 revenues were down 6% to $44mil, which the company attributes to their "withdrawal from boxed games in January 2009 and to the drop in the dollar. On a like for like basis, sales in the last quarter of 2009 were up 7%." Hmm... for sure this messes with my mobile publisher poll.
• iPhone revenues for FY 2009 were $24.5mil or 14.4% of overall revenues. Interestingly this lines up pretty well with my ratings-based estimate on Jan 6th derived from the disclosure that they had sold 10mil games through the App Store since launch. At that time I estimated the total revenue generated by their games was about $38mil, which after Apple's share (30%) is almost $27mil in 18mos.
• iPhone revenues in Q4 2009 were $9.75mil or 40% of total 2009 iPhone sales. That means iPhone sales accounted for 22% of Gameloft's worldwide mobile games sales in Q4
• 39% of revenues came from Europe, 32% from North America, 29% rest of world

Gameloft is clearly an iPhone superstar, and as they've been fond of pointing out recently, they're very well positioned to leverage that success on to the iPad. Good stuff and overall I'd characterize their 2009 results as pretty solid (pending a look at all the numbers in March). However, I do have ecosystem concerns now that they've basically confirmed what we all suspected... that Apple is the dominant retail channel in mobile games space and the operator portal business is becoming less & less relevant. I think this is ultimately a dangerous thing for publishers (ask the music guys) and they should all be encouraging Android, Ovi and BlackBerry to get their butts in gear, so that they can provide some viable competition.

Revenues last 16 quarters in millions.

Stuck In Low Gear: Glu Mobile Q3 2009 Underwhelms

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

Artificial Life | The New Hotness In Mobile Games?

Artificial Life (ALIF) reported super-strong Q1 2009 earnings yesterday. The LA/HK based mobile games and applications publisher announced that they had ~3.5mil java/BREW + 1.2mil App Store downloads in the quarter...making it their biggest earnings quarter ever (significant since these guys pre-date the Moto StarTAC).

Revs = $7.1mil ^71% from Q1 2008

Net = $2.7mil ^9% from Q1 2008

The company was particularly excited about the iPhone App Store (like everyone else) where they currently have 3 paid and 2 free Apps. 3 titles are promo Apps...2 for Red Bull and 1 for BMW. A mixture of free and paid games/apps tied to major brands is the sweet spot for these guys. My guess is that not all of these titles are licensed in the classic sense...in some instances they are probably being paid as a marketing vendor (which isn't a bad model in the current environment).

I've gotta admit that I was (as is my nature) super-skeptical about these guys and some of their licensing/promo relationship choices...Braveheart, Tokio Hotel, Red Bull, etc. They seemed like a fluffy mobile marketing company (the type that approach studios/networks daily). But looking at their numbers (and some of their game reviews) I am happy to concede that I was wrong. These guys are on the fast-track to becoming a revenue leader in the 2nd tier of mobile game publishers, which features companies like I-play, Hands-On Mobile & Digital Chocolate...and to becoming more profitable than any mobile game publisher in the 1st, 2nd or any other tier!!! Sweet!...love to see some energy/excitement in the mobile games category.

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.

Revenue Last 4 Quarters: EA Mobile, Gameloft & Glu Mobile

$mils, €=$1.333, calendar Qtrs

In light of the recent flood of Q1 earnings announcements I thought you all might find it interesting to see how the Big 3 mobile games publishers have done in terms of revenues over the last 4 quarters. Frankly, I was really shocked by how flat EA Mobile's revenues have been over the last year. Also, it should be noted that Gameloft's numbers have been adversely impacted by the decline in the value of the euro vs. the dollar. I would love to include Namco Mobile, HandsOn, I-Play, etc., but I don't have a lot of reliable financial data on those firms.

Vive la iPhone! Gameloft Posts Solid Q1 2009

PocketGamer.biz is reporting today that French mobile games publisher Gameloft saw 22% revenue growth in Q1 2009 vs Q1 2008 to $40.2mil. During that same time period they saw 57% growth in North America, making it the company's biggest region by revenue...surpassing its traditional stronghold of Europe (which was flat to down). Despite a lot of posturing about good Java & BREW performance we all know that these numbers mean that iPhone is driving growth in their business. Frankly, they should be proud of their performance on that platform...of all the established mobile games publishers Gameloft embraced the iPhone most aggressively and I think it is paying off handsomely. As a result, I predict that 2009 is the year that Gameloft surpasses EA Mobile as the top mobile game publisher by revenue.

KongZhong Rocks On

Major Beijing-based mobile content aggregator/publisher KongZhong (KONG) recently released an unaudited 2008 earnings statement.

Revs = $96.69mil a 31% increase over 2007

(Value added services = $86.91mil, mobile games = $7.74mil & mobile advertising $2.04mil)

Net Loss = $20.66mil...the company would have been profitable without hefty write down of goodwill (popular theme)

Subsequently it was reported that the company had taken a $6.8mil investment from Nokia Growth Partners. Smart move for Nokia (NOK) with a company that is becoming the dominant content player in market on the verge of a 3G roll out that has proven impossible to penetrate without a local partner.

Overall KongZhong's stock price has held up really well during the current economic meltdown (particularly compared to it's competition) and it's market cap is an impressive $179.22mil (2x Buongiorno (BNG) which has 4x the Rev).

I currently have these guys as a Top10 mobile content player worldwide, sitting between Thumbplay and Gameloft...anybody want to challenge this?

2008 Brings Buono Fortuna to Buongiorno

In a pre-close earnings announcement today Milan-based publisher and ondeck/offdeck services provider Buongiorno (BNG) offered a taste of its 2008 financials...

Revs = 315mil euros ($402mil) +80% from 2007

EBITDA = 40mil euros ($51mil)

Growth was driven by their acquisition of iTouch, increase in recurring subs to BlinkoGold services and mobile lottery hosting for Telefonica's Movistar services in Africa & LatAm.

Assuming these numbers hold Buongiorno maintains its #2 position in the mobile content space by revenue behind Spain's ZED.

Glu Mobile 2008 Earnings...Hoping For a Less Sticky 2009

I look forward to Glu Mobile's (GLUU) quarterly earnings calls like kids look forward to Christmas. Because they are one of the larger public mobile pure-play companies the calls are a great barometer of the overall state of the mobile games business and always feature lots of valuable mobile business data points. Moreover, I think all of us vested in the health of the market for mobile games based on entertainment IP desperately want to Glu Mobile to succeed. Here are the key take-aways:

2008

• Q4 2008 Rev = $21.6 mil Net Loss = 37.8 mil
• FY 2008 Rev = $89.8 mil Net Loss = 107 mil (ouch!)
• 34% increase in Revs over 2007
• Top 4 carriers = 42% of Revs, Verizon was a whopping 23%
• Non-carrier business (iPhone, Android, N-Gage) was insignificant in 2008
• 54% North America 27% EMEA 19% Rest of World (10% China)

2009

• Q1 2009 Estimate Rev = $18 mil to 18.5 mil Estimated Net Loss =$6.7 mil to $7.1 mil
• FY 2009 Estimated Rev = $76 mil (15% decrease!) Estimated Net Loss = $16.6 mil to $19.6 mil
• $19.2 mil in cash on hand at end of FY 2008
• Plan is to be Cash Flow Positive in 2009 (Profitability is clearly off the table)
• 75% - 80% of IP for 2009 games will be licensed...big movie titles for 2009 are Watchmen & Ice Age 3
• Glu Mobile will release fewer titles in 2009 than 2008 (more like 2007 volume)
• The Dark Knight: Batmobile (co-Published with WB) got as far as 8th place in the iTunes App Store giving Glu Mobile the ability to model Rev potential of a Top 10 title in that channel
• 30% to 40% of Glu Mobile's development capability is focused on iPhone, N-Gage and Android
• Headcount is currently 560

DATA NUGGETS (all this is from Glu Mobile's perspective)

• The global economic downturn is hurting mobile games business as consumers curtail new handset purchases (most games purchases happen in first 90days of ownership)
• Consumers are migrating to Smartphones (see Cabana's Trend Watch)
• 17 mil iPhones Worldwide (additionally iPod Touch is a factor in App Store games). iPhone has the highest tie ratio to games purchases of all handsets (2nd is BlackBerry Pearl)
• Richer merchandising environment in iTunes App Store means non-established brands can flourish
• iPhone App Store is allowing smaller publishers enter the business, but ultimately larger companies that stay focused on the platform will consolidate market share (as happened on carrier decks)
• Executives at the carriers are paying more attention games due to there success on iPhone, but this is not yet being reflected in marketing initiatives

Nevermind What Haters Say...They're Just Living Their Artificial Life

Failing to heed Rihanna's call LA-based (HK production) mo'games and mo'apps publisher Artificial Life (ALIF) chased major paper in 2008 and grew revenue 287% to $22.4 mil according to their earnings release today. Net increased a whopping 945% to $10.6 mil. 57% of revenue came from games. The company which does a lot of work with studios, networks and brands only launched their first iPhone game in December. I must say this and some other recent mo'games publisher announcements might force me to remove "Flat Mobile Games Market" item from my Trend Watch.

EA Mobile Still Top MoGames Publisher

EA Mobile's revenues initially look somewhat positive within the bleakness of Electronic Arts' (ERTS) fiscal Q3 09 earnings announcement yesterday. GAAP revenue for the quarter (calendar Q4 08) was $48 mil, which is 23% growth year on year and 3% from the previous quarter. The release did not break out profitability by platform. EA Mobile continues to face stiff competition from Gameloft (GFT) which last week posted Q4 08 revenue of just over $43 mil with 31% year on year growth. For calendar 2008 here's how the competitors stack up:

EA Mobile = $181 mil

Gameloft = $143 mil

Notably, Gameloft has far more games available for the fastest growing gaming handset - the iPhone. Currently they have 28 titles in the iTunes App Store, while EA Mobile only has 10.

Digital Mouse Droppings

Nikki Finke is reporting that Disney (DIS), in an after hours release of its Q1 earnings, broke out numbers for the Disney Interactive Media Group for the first time. The group is home to the console, online and mobile games businesses for the studio.

Revenue = $313 mil
Operating Loss = ($45mil)

According to the accompanying Disney press release the loss was attributable "to a decline at Disney Interactive Studios as higher sales volume was more than offset by an increase in unit cost of sales and higher marketing expenses in the current quarter."

MOTASTROPHE!

Q4 earnings released today indicate that the once mighty handset division of Motorola (MOT) continues its sad and spectacular free fall.

· Sales plummet 51%
· Marketshare is down to 6.5% (from 12.4% a year ago)
· Q4 Operating Loss of $595 mil
· Moody's cut Motorola's debt rating to Baa3 - the lowest investment grade level
· Dividend suspended

...but the analysts quotes sum it up best of all:

“They better hurry and fix mobile devices or it will become irrelevant” Mark Sue (RBC Capital Markets)

"...their luxury line-up is a hot mess” and "gruesome" Tero Kuittinen (Global Crown Capital)

“I feel their position in handsets is awful and will get worse” Simona Jankowitz (Goldman Sachs)

“Their handsets right now are stagnant, and there’s no sign of a new product cycle coming until maybe the end of the year” Samuel Wilson (JMP Securities LLC)

Gameloft 2008 Revs Buoyed by iPhone

In a Gameloft (GFT.PA) earnings release today the French games publisher reported a 15% increase in revenues in 2008 to EUR110.3mil ($143mil), in line with expectations. 43% of revenue came from Europe, 30% from North America, 27% ROW. It looks like iTunes App Store game sales in Q4 really pushed these guys over the top (rev increased 31% in Q4 to EUR 33.8mil)...with top selling apps like Hero of Sparta & Brothers in Arms Hour of Heroes. Good news. It will be interesting to see what their bottomline looks like when the announce full earnings on March 19.