Big 3 Mobile Game Publisher Revenue Comparo 2010

Glu Mobile Stock Price During The Year of De Masi

Pretty nice run. The stock closed today just a penny shy of its 52 week high. I look forward to watching how the market reacts to their Q4 and 2010 earnings after they report on Monday.

Glu Mobile Stock Price Over Last Year

Update: Top 10 Mobile Games Publishers WW November '10

Update #1 Nov 24 2010 @ 9:45pm: Based on feedback I've added Capcom to the list & moved Digital Chocolate up in the rankings, while moving Namco down a bit. I've elected to remove Artificial Life because only about 50% of their revenue can be attributed to mobile games. Please... I encourage more feedback in the interest of making this the definitive list.

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• Note that I've added Chinese mobile powerhouse KongZhong to the list... in recent quarters mobile games have become a much more significant portion of the their overall revenue, which is about $145mil over the past 4 quarters.
• Purely from a mobile games perspective, it could be argued that both Artificial Life & Digital Chocolate don't belong on this list, but I'm keeping them here for the time being, while their primary businesses are still mobile games. If current trends persist, Digital Chocolate will quickly evolve into a company that primarily derives revenue from social online gaming (Facebook games).
• Per a previous suggestion from Jon Jordan over at PocketGamer.biz, I'm considering adding Disney/Tapulous to the Top 10... but I'd need some independent confirmation that their combined worldwide mobile games business yields at least 20 something million dollars.
• Overall I'd suggest that the Top 10 are becoming less significant in terms of their contribution to mobile gaming revenue and even in terms of real dollars I've dropped their aggregate revenue to $715mil from $720mil just 3mos ago.

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%

Update: Top 20 Movie & TV iPhone Games By Revenue

Update Nov. 2, 2010: Based on some welcome feedback I've tweaked my model very slightly and added one major title to this list... EA Mobile's The Simpsons Arcade. As a result of this combination of changes, Sony's iZombieland has dropped out of the Top 20. Also, just a quick clarification, since it's come up several times... my model uses the estimated average price over an app's lifetime (not the current price, shown above) to calculate estimated revenue.

It's been about 11 months since I last looked at how movie & television based game titles were faring in the App Store... so I figured it was about time to update my spreadsheet. This time 'round I'm showing my estimate of the Top 20 performing paid iPhone titles currently available in the US instance of the store, sorted by total publisher revenue. I've elected to hide my current title-by-title revenue estimates, but what I will tell you is that I think they range from $600k up to about $3mil, and the average for the lot is about $1.3mil.

One of the most shocking things to note is that 9 out the 10 titles on my December 2009 list are still in this Top 20... and the Top 3 are exactly the same. There are a handful of new strong performers, including, on the film side, Avatar and Iron Man 2, both from Gameloft and Predators from Chillingo. From TV, the new stars are Family Guy and, in the biggest surprise on the list, Dexter from Marc Ecko Entertainment (who knew they made games, right?). But in general my take is that paid movie and TV game titles aren't playing a particularly important role in the App Store, and are certainly not the revenue stars of the show... as is evidenced by not one of them currently appearing in the Top 150 of Top Grossing Games. This clearly presents challenges to studio/network digital & licensing groups, who are undoubtedly saddled with unrealistic expectations about how their properties should be performing in a climate of smartphone exuberance.

As usual please let me know if I've missed any titles, and I'll make the appropriate changes.

Top 25 Game Titles In Nokia's US Ovi Store

It's been a year since my last, somewhat snarky, look at the top paid game titles in the US version of Ovi Store. Clearly, during that time Nokia has been able to attract a more robust line-up of publishers to their platform. From what I can tell Gameloft, EA Mobile & Digital Chocolate are now each fielding about 40 paid titles on the service. Meanwhile, Glu Mobile & I-play each have about half that many, with the latter company seeing particularly strong performance in the US Top 25... perhaps a factor of their AppStore-esque pricing strategy. On that note, as we've seen across the spectrum in mobile gaming, price erosion is in full effect... with the average price of the Top 25 having dropped 33% from $4.03 to $2.71 in the last year. I must say, I was happy to see some lingering randomness from publishers I've never heard of, but by virtue of there being less of it, and in light of the myriad head-scratchers that pollute Android Market, this aspect of Ovi is much less amusing than it was a year ago.

Though Nokia recently touted that they're doing 2mil downloads a day through the Ovi stores worldwide, I feel pretty confident that;

1. very little of that activity is coming from the US market (I wouldn't fall down if I learned the Ukraine represented more downloads);
2. most of those downloads are free games (as is true across all smartphone app stores);
3. considering that no publishers are bragging publicly or privately about Ovi revenues, numbers are still small relative to other channels.

That said, with new talent at the helm at Nokia (and Ovi), more carrier billing integration and a slew of new games friendly devices on the horizon, we'll all be hearing about some boffo results everywhere, including the US, by September 2011... right?

btw - I put this data together on the web store, prior to selecting a handset... that way I figured I'd get the best result across devices.

Top 10 Mobile Games Publishers WW August 2010

All numbers are for the most recent 4 quarters for which I have data, at today's exchange rates.

In terms of non-public, guesstimated data, I've moved Chillingo onto this list... due to their boffo performance in the AppStore (see related post)... I'll move them up or down based on community feedback. I've also let Namco slip a bit as the PacMan franchise seems to cooling a bit in the new retail channels. I still have D'Choc hanging on by a thread. Granted, they've rolled a lot of iOS titles, but none appear to be rockstars and their new emphasis on Facebook games is a bit of a tell, right? Do you guys think ngmoco should be on this list? Please, please let me know your thoughts.

Enterprise Values of 22 Public Mobile Entertainment Companies Aug 2010

Big 3 Mobile Game Publisher Revenue Comparo Q2 2010

7 Reasons Why Glu Wants Shareholders To Approve Their $13.5mil Private Placement

This is from a Schedule 14A filed with the SEC on Friday July 23rd. I've highlighted some key points.

1. the fact that the proceeds from the Proposed Issuance will enable us to advance our new strategic direction and the development of persistent-state, freemium products;
2. our financial condition, results of operations, cash flow and liquidity, including our outstanding debt obligations, which required us to raise additional capital for ongoing cash needs;
3. our view that the proceeds from the Proposed Issuance will enhance our balance sheet;
4. current and projected challenging economic and market conditions, and general uncertainty surrounding forecasted economic conditions globally as well as within the mobile gaming industry;
5. the fact that the Proposed Issuance represented the best of several financing and other strategic transaction alternatives resulting from the extensive process undertaken by the Special Committee, with the assistance of our management and our advisors, in soliciting third party indications of interest in both a financing transaction and a potential sale of the Assets;
6. the fact that each of our stockholders who hold at least 300,000 shares, or approximately 1% of our outstanding shares of common stock, was given the opportunity to participate in the Private Placement; and
7. the fact that our stockholders would have an opportunity to approve the Proposed Issuance.

Some key adverse factors to the issuance that the company's board considered were...

• the fact that our stockholders who did not participate in the Private Placement will be diluted and the value of our common stock could be diluted;
• the fact that the ownership by the Investors of a substantial percentage of our total voting power may make it more difficult and expensive for a third party to pursue a change of control of our company;
• the fees and expenses to be incurred by us in connection with the Proposed Issuance; and
• the fact that the covenant in the Proposed Issuance prohibiting “variable rate transactions,” as described in further detail in the section entitled “Terms of the Proposed Issuance — Summary of the Terms of the Purchase Agreement” below, may limit our financing flexibility in the future.

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).

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.

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

Big 3 Mobile Game Publisher Revenue Comparo

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

Glu Mobile Still Struggling With Smartphone Traction & Cash

Glu Mobile (GLUU) reported earnings after the close of markets today. Here are some highlights from their conference call:

• Revenue was above guidance, but still down 17% compared with the Q1 2009
• Glu Mobile is still only deriving 9% of its revenues from smartphones, which looks pretty weak compared with Gameloft, which generates 21% of its revenues from iPhone OS alone
• They are putting a big stake in 4 new original "mass-market persistent" game franchises that will launch before the end of 2010
• Forecasting Q2 2010 between $13.6mil & $14mil
• Revenue by region: 52% NA, 27% EMEA, 21% rest of world
• Avg revenue per Top 10 title in quarter was $791k
• Largest title accounted for 9% of revenue
• Verizon accounted for 18% of revenues
• 80% of revenues came from licensed titles
• Even though the company realized a positive cash flow of $1.6mil in Q1, ongoing payment obligations related to their $30.5 acquisition of MIG for in 2007 continue to drain their resources... currently they've got about $7.5mil in the bank
• CEO Niccolo de Masi & CFO Eric Ludwig plan to announce a solution to ongoing liquidity concerns by the Q2 2010 earnings call
• There was only 1 question from an analyst at the end of the call (after a long awkward silence)... kinda sad really

Glu Mobile Stock Trading Volume Over Last Year