Monday, August 31, 2009

Un Bon Résultat: Gameloft Shows Solid H1 Rev Growth & Profit

Gameloft's earnings release today, which provides more detail about their H1 2009 performance than a topline announcement last month, reveals that the French publisher is doing a commendable job adapting to the ever evolving mobile distribution paradigm, while effectively managing costs. The company grew revenues 19% over the same period last year, generated over $9mil in cash and realized its healthiest Net Income result since 2006.

Gameloft's stubborn dedication to a philosophy of developing internally and growing organically means that it hasn't bowed to the urge to buy development studios or struggling rivals...and thus may be one of the few companies in mobile entertainment that can claim to have no financial debt. It's also kept them focused on developing production and distribution capabilities for new mobile and other portable gaming (PSN, DSiWare, WiiWare, etc.) platforms. Frankly, that whole stubborn philosophy thing looks like its beginning to pay off for Gameloft's investors.

Updated Top 10 Mobile Games Publishers Worldwide

Friday, August 28, 2009

Updated: Glu Mobile Trading At Very High Volumes For 3rd Day...

Some non-mobile trading sites like Trading Floor Blog on Schaeffer's Investment Research are picking up on this activity...I'm still digging to see if it means anything more than stock speculation. The stock is trading at $1.45 as of noon Eastern time...the highest level since its last penny trader driven run-up in mid-June.

Thursday, August 27, 2009

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)'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.

Breaking...Glu Mobile Stock Up Over 20% On Heavy Volume...

...I will update if there's anything to this beyond penny stock speculation.

Sexy Stats Make Nokia N900 Look Mobilicious For Content...But Is It?

Hasn't Nokia spent the last 9mos trying to convince us...and kinda failing...that the N97 was the sweet new hotness that was going to kick the iPhone's ass? Well apparently they were just kidding, because now they're trotting out a new top filly in the smartphone derby called the N900. I must say the stats (below) look compelling on paper and it sure is perty...but the same can be said for the N97, which is a cool handset, but no iPhone killer. Nokia needs to realize that they can throw all the technology and features at a device that their Finnish engineering minds can conjure, but until they make the content acquisition process slick, simple and innate to that device they'll continue to lose the mindshare of mobile content influence leaders to "that fruit company from Cupertino." Oh, and by the way, if it retails for $700 because no carrier will support/subsidize it, the entire US customer base for this device is reading this blog.
  • Dimensions: 110.9 x 59.8 x 18 mm
  • Weight: 181grams
  • Keyboard: Tactile & touchscreen QWERTY
  • Screen: 3.5 in touch sensitive widescreen (16:9) w/ 800 x 480 pixel resolution
  • Processor: TI OMAP 3430:ARM Cortex - A8 600MHz
  • 3D Graphics accelerator with OpenGL ES 2.0 support
  • Memory: 1GB application memory (256MB RAM)
  • 32GB internal storage expandable to 48GB with microSD
  • Quad-band GSM EDGE 850/900/1800/1900
  • WCDMA & HSPA 900/1700/2100 MHz
  • WLAN 802.11 b/g
  • OS: Maemo 5 on Linux
  • Adobe Flash 9.4 support
  • 5 megapixel camera w/ Carl Zeiss lens w/ 3x digital zoom
  • Duel LED flash
  • On device photo editor
  • 800x480 resolution video recording
  • TV Out
  • GPS with Ovi Maps

Wednesday, August 26, 2009

If The Top 10 Generate $700mil Can Mobile Games Really Be A $5.4bil Business?

Back in March FierceMobileContent and others reported that widely respected telecoms & media analyst Juniper Research had estimated that the worldwide mobile games market had reached $5.4bil in 2008. That's crazy good, right?....or, perhaps it's just crazy.

As I've mentioned recently, I'm generally pretty cynical about big numbers from analysts, pundits, etc...especially when they just don't feel right. As part of the process of digging into this further I recently put together a Top 10 list of mobile games publishers worldwide. It's missing some numbers and the order may need some tweaking (audience participation, please), but I'm very confident about the Top 3, and pretty sure that Namco and G-Mode belong on this list. There could be a place for Capcom Mobile or maybe Konami, but I have no good data on their mobile operations... and I think I may be being generous to Hands-On (which has kinda dropped off the radar recently). Anyway, here's what I came up with (#s are annual revs or 4 most recent quarters):
My feeling is, that if I fill in the blanks here, that the total revenue for the Top 10 comes out to about $700mil. Soon after this list (and some of the companies I mentioned above) the revenue drop-off is pretty steep, with a bunch of companies generating low single digit $millions. If I make a small leap and assume that this group of industry leaders represents 70% of the wholesale revenue in the business...then the wholesale (before distribution channel) value is $1bil. If publishers are keeping 60% of the retail (consumer) price blended across all distribution platforms then the retail mobile games business is worth close to $1.7bil...not anywhere close to $5.4bil. Even if this group represented 30% of worldwide wholesale revenue (which is absurd!) the business would still be over a billion dollars short of the Juniper estimate. (As usual, let me know if there's something I'm missing!)

So what's my point here? I believe that those of us who are vested in mobile entertainment have an obligation to aggressively scrutinize the numbers associated with it, in the interest of clarity and accuracy. It's impossible to properly assess the opportunities in its various sectors (like games), or measure success within them, without proper industry metrics. Hyperbole and froth have not helped this fact they've exacerbated the numerous (too numerous for a young business) boom and bust cycles we've all experienced since the late 90s and fueled substantial skepticism about mobile entertainment amongst those who are generally motivated to invest capital or intellectual property in new media.

Tuesday, August 25, 2009

Gameloft To Create Mobile Games Based On Highly Anticipated Avatar

James Cameron's "Avatar", which 20th Century Fox is releasing in the US on December 18th, is one of the most highly anticipated films of 2009. Buzz about it is off the meter on every meaningful market indicator... particularly as more imagery is revealed (in the form of theatrical trailers) teasing the film's revolutionary, immersive 3D experience. There's also a lot of film industry speculation about whether Cameron, who hasn't directed a non-documentary feature film since the ultimate blockbuster "Titanic" in 1997, can pull another boxoffice rabbit out of his hat. Considering that the film’s budget is said to be well over $200 million, Fox is betting on it. Btw - From what I've seen the film looks pretty cool.

Today Fox Mobile Entertainment and Gameloft announced that the French mobile games titan has signed a license agreement to develop, publish and distribute games based on "Avatar". Given Gameloft's extensive experience creating high-quality film-based games (e.g. King Kong), unparalleled worldwide distribution capability, and considering sister company Ubisoft has been involved with title on the console side since mid-2007, I think this is a wise/natural choice for this crown jewel title. The mobile games will release in conjunction with the film at the end of the my guess (hope) is that Gameloft is already pretty far along in the development process. The release doesn't go into any detail about the style of gameplay, storyline or if Gameloft is giving any special consideration to 3D in light of its importance to the film. It's also not specific about whether they have rights for all mobile platforms... specifically iPhone. I'll do some digging... In the meantime, any thoughts on what this license may have cost Gameloft? Will "Avatar" have to be the "Titanic" of mobile games for them to recoup?

Monday, August 24, 2009

Update #1: US Success Wiki For Nokia

Motivated by Nokia's publicity coup with Fast Company, wherein they got the September cover, a highly celebratory article and in which EVP of Entertainment & Communities Tero Ojanperä (great/smart guy, btw) boldly claims that Nokia "will quickly be the world's biggest entertainment media network"... I've decided to add a bullet to the top of the wiki I generously dedicated to their success in the US in a post last month:
  • Nokia shouldn't try to starfuck its way to marketshare in the US...hanging/collaborating with Dave Stewart, Spike Lee and their celebricronies must be fun/glam (I presume) but they won't help the company sell any additional handsets. That said, if that crack publicity team can get/pay Megan Fox or Oprah to talk regularly on TV about how awesome their N97 or E75 is...that just might move the needle.
  • Make Nokia an aspirational brand by exclusively marketing & selling premium, cutting edge handsets, like N-Series & E-Series devices & specialty phones like the 5800XpressMusic. Nokia needs to create the perception that it's the BMW or Mercedes of mobile phones. That low-end crap on T-Mo is doing nothing to help the company's reputation.
  • Nokia needs to get over its long-standing pissing match with the US carriers & do deals with all of them in the interest of getting devices subsidized down to prices people can afford & sold in places where people actually buy handsets.
  • All Nokia devices need to be available on CDMA carriers.
  • The super-convoluted & non-intuitive UI (that only an engineer could love...& US consumers hate) on Nokia phones needs to be overhauled. Just because a device can do ten thousand things doesn't mean it has look like it (think...not Microsoft).
  • Make sure Ovi is technologically brilliant (no one is saying that right now), provides users with a compelling shopping experience & is chock full of cool, reasonably priced, apps...and then promote the crap out of it (using some of that money the company is currently wasting on stadium naming rights & motocross sponsorships).

UK Nerds Ponder Whether A £500 LG Watch Phone Will Get Them Laid... anyone other than other nerds, that is. They have until Thursday to noodle it...that's when the GD910 goes on sale, exclusively at Orange UK's Bond Street Station store.

Saturday, August 22, 2009

Naughty Is Looking Nicer At Mandalay Media

It's been just over a month since mobile porn & games holding company Mandalay Media (parent of Twistbox & AMV) reported it's fiscal Q4 and full year 2009 earnings and we're already seeing fiscal Q1 2010 (quarter ended June 30, 2009). Perhaps this indicates that the company is moving towards a more traditional reporting cycle...which would be nice. Anyway, the company actually had a decent quarter, considering the state of the World and the typical seasonality trends in the mobile content industry. They saw a little quarter-over-quarter revenue growth (2%), showed solid (89%) growth over the same period last year (thanks mostly to their Oct 2008 acquisition of UK-based AMV) and came within $1mil of (real) net profitability. Twistbox CEO (the guy running the whole show) Ian Aron is now guiding revenues to $40mil for FY 2010 (period ending March 31, 2010), which would represent 28% growth over FY 2009 ($31mil) and put them into my top 25 mobile entertainment companies.

What's becoming clear, if you look beyond their press release and into their 10-Q, is that Mandalay's adult business is working and that their games business is not. Adult now accounts for a whopping 87% of revenue (up from 82% in FY 2009). This is an area where the company has been (from back in the WAAT days), and still is, a legitimate market leader. If they can maintain their licensing/distribution relationships for high quality content, they should be able to realize meaningful, sustained growth as more distribution platforms open up to spicier fare. The games business, which is basically the Play for Prizes platform it acquired from Infospace in 2007, has never made money for the company. Mobile games is a saturated, over-crowded space with a few established power players and myriad nimble startups...Mandalay (Twistbox) is neither of these. I think the company should begin to seriously consider, if it isn't already, selling this business (and their unique platform) to a more established player like EA Mobile.

Selling the games business may help Mandalay with its biggest issue of the moment...which is a serious lack of cash. I expressed concern about this in my last post about their earnings, and things have gone from bad to worse. During the quarter they used another $1.7mil and currently only have about $4.2mil in the bank. That's not enough for a company that relies on expensive licenses, has a global operation with almost 200 employees and has monthly operating costs of about $2.5mil. The other lingering concern (which I also mentioned in July) is ongoing litigation with licensor Penthouse, which is seeking $4mil from the company for breach of contract. Mandalay is vigorously defending and has accrued for its estimated liability...but even if they win, a public squabble with a powerful player in a small licensing community can give a company a reputation (whether warranted or not) that's difficult to overcome.

Friday, August 21, 2009

SpinVox Drama Continues

The Register & Techcrunch UK have been doing a great job keeping up with the ongoing soap opera at embattled voice-to-text (once) superstar SpinVox. In a post last month I discussed scandals over the company attempting to pay its employees with stock, despite having been the recipient of $200mil in funding (much of it quite recent), and a BBC investigation that revealed substantial human intervention in the company's highly touted, automated, voice-to-text processing technology. Before these issues came to light, the company had recruited former Alcatel-Lucent CEO Patricia Russo to their board...ostensibly to provide some additional street cred...but clearly she didn't want anything to do with July's drama-fest, and according to reports, she hastily stepped down early this month. Now, The Register is revealing that the company has secured a short-term $50mil loan, due to be repaid in December, from hedge fund Tisbury Master Fund and made its director, John Botts, Chairman of the company (Botts has been on the board & an investor in SpinVox since 2006). The company claims through it's PR firm that it's "comfortable with (their) position," but it smells like crisis to me. I think a comment on Techcruch's UK site sums it up best, "This is a train wreck in slow motion." Speaking of Techcrunch UK, they ran a great piece this morning rebutting a BBC Blog post from Monday which suggested that if SpinVox fails it would be a blow to the reputation of British technology and startups. TC's Mike Butcher took exception to that position and suggest that "its extinction wouldn't matter" because SpinVox is basically a relic of 1999 style dot com investing...whereby big "dumb money" chases surface level tech hotness in the interest of a quick, lucrative exit. Absolutely!...and by the way, there are more than a handful of similar dinosaurs roaming the mobile landscape on both sides of the Atlantic.

Thursday, August 20, 2009

GAMEVIL's First Public Quarter Is A Winner

Earlier today veteran So. Korean mobile games publisher GAMEVIL (est. 2000) reported its Q2 2009 earnings... the company's first report since going public on the KOSDAQ last month. It was a very solid quarter for this quality-focused games creator, driven by titles like Baseball Superstars and HYBRID: Eternal Whisper. The company has effectively leveraged microtransactions as way to grow revenues in its domestic market...and in the US, where the company initially struggled to find firm footing in a carrier-driven world, it is beginning to see meaningful growth on iPhone & Android platforms.

Rev = $4.33mil ^67% from Q2 2008 ^30% Q1 2009
Net = $2.08mil ^214% from Q2 2008 ^55% Q1 2009

btw - According to the blog Volker on Mobile the company was valued at $70mil when it went public on July 21st.

How Much Money Do Mobile Ad Networks Make?

I always relish a good data nugget sandwich like the MocoNews post from a couple of weeks ago about how difficult it is to measure the size and reach of the 6 biggest US mobile advertising networks. The article highlighted some recent monthly unique site visitor data, per network, from Nielsen. Ostensibly the data indicates that Millennial's network is the biggest (by a wide margin) in the US, with the potential to reach up to 82% of the 55mil US mobile web users (hmm...that's if they ever use their mobile browsers, right?). Moco and an associated post on Mobile Marketer spend a lot of time debating the value of these numbers as a method of comparison. Interesting, if you're into that sort of thing...but frankly what I really care about, and I know you do too, is figuring out how much money these guys make. Analysts, pundits and panelistas love to throw out big mobile ad numbers like $2.7bil WW and $300mil in the US...but I'm generally super-cynical about accepting that kinda nonsense at face value. So, despite the aforementioned measurement difficulties & the advice of school marms everywhere, I decided to take a stab at the revenues the big 6 US mobile ad networks are seeing from selling ads on those networks.

So here are my assumptions... and, frankly, I think I'm being generous. I'm gonna say that the average US mobile browser is exposed to about 20 ads per month across these networks, which would be a total of 1.1bil impressions (55mil x 20) total. The reality, of course, is that this is a Pareto principle on steroids...wherein most of the activity is generated by a very small base. I've divided that number by the share each network has of unique visits (yielding about 6.4 impressions per network per month). Fantasy (rate card) mobile CPMs are $15 (good luck), but the blended reality (effective CPM) considering CPC deals, unsold inventory & a large remnant market is probably more like $1.75 (I know...ouch). Publishers keep about 60% of ad revenue (maybe more) and carriers (when involved) can take 50% before I'm guessing that on average the networks keep something like 25% of their topline revenues. If these assumptions are correct...or even close to it (and my model isn't broken)...then, as you can see, these companies still have pretty nascent businesses.
btw -- this is a guesstimate (based on lots of assumptions...though, I believe, generous ones), so if anyone has any data points that could yield a more accurate outcome please feel free to comment (or contact me directly) and I'll make the appropriate modifications.

Wednesday, August 19, 2009

Despite Solid Q2 2009 Earnings Artificial Life May Need Real Life Support

LA and Hong Kong based mobile games company Artificial Life (ALIF) posted another quarter of strong earnings last week. Revenues increased an impressive 38% over the same period last year and the company continues to be solidly profitable, with Net Income of $2.77mil... representing net margins that some of the bigger players can only dream about. The company sees potential for continued growth through expansion of activities in international markets, particularly China, where they recently became a subcontractor of China Telecom. Good stuff, BUT... I'm seriously concerned that their somewhat dire cash situation ($1.44mil) and a growing/lingering high level of outstanding receivables ($18.77mil) could jeopardize growth opportunities in the last half of 2009. The company issued a private placement of new shares in July to raise $1.9mil and is actively seeking additional investment.

This Sony Ericsson App Really Cooks

Friday, August 14, 2009

Mobile Game Mavericks On The Move

Three veteran luminaries of the mobile games business, and three people that make this a great space to work in, have made professional moves in the last couple of weeks...

1) On August 3rd industry journalist and thought leader Stuart Dredge left popular games news source in order to contribute his freelance talent to UK mag/website Mobile Entertainment. Previously he was at Informa, where he was lead reporter for the analytical newsletter Mobile Games Analyst. Stuart is, without doubt, the most highly regarded journalist in the mobile games business.

2) On August 7th Qualcomm's gaming BREWmeister and ubiquitous industry panelist Mike Yuen left the company after an 8 year career to join Zeebo (a company Qualcomm funded with Brazil's Tectoy) to become its SVP of worldwide content & services. Zeebo has developed a low priced console for the developing world that uses OTA distribution and leverages Qualcomm's BREW technology and protocols. Mike is a clear thinker, great guy, games enthusiast and, perhaps most importantly, super-helpful at navigating companies through the often labyrinthine world of Qualcomm.

3) Today it was announced that Jason Ford, who was at Namco for the last 3 years, has joined re-emergent Kansas City based developer/publisher Handmark as its VP of Games. Ford is probably best known in the industry for his 5 year tenure at Sprint, where he was an almost legendary, obsessively quality focused, not-that-shy about sharing an opinion, general manager of that operator's game deck when it was a dataARPU superstar. When the book is written about the development of mobile entertainment there will be a chapter about Jason Ford.

Wednesday, August 12, 2009

What Did I Tell You About Best Buy Pricing?

It looks like Best Buy made another major pricing boo boo today according to a story...and almost on the very item I was hoping for in my post a couple of weeks ago about the Palm Pre incident. The best part is that they did way better than I expected, and offered a $3k+ Samsung 52in LCD TV for $9.99. If I wasn't on vacation I would have been all over it...but, alas, it would have been a total waste of my time, since in this case the retailer determined it wasn't going to honor the price. Apparently they've wised up and now put a disclaimer in all their ads that they can rescind any offer at any paraphrase Clint Eastwood in Magnum Force, "a retailer has to know its limitations."

Tuesday, August 11, 2009

KongZhong's Earnings Got Game

Chinese mobile content king KongZhong reported strong Q2 2009 earnings yesterday, with revenue jumping 37% from the same period last year, beating analyst expectations. Q3 guidance of between $34-$35mil was also higher than consensus. Much of the growth was attributable to the mobile games business, which the company grew 368% to $6.8mil (now 21% of their revenues). It's critical that the company continues to grow this component in the interest of realizing higher margins, diversifying beyond its traditional role as a content service provider to China Mobile and developing revenue outside of its domestic market. Two of the most intriguing components of KongZhong's mobile games business are; 1) that they are beginning to see meaningful revenue streams from the sale of in-game virtual items (a trend we're yet to see develop in mobile in US/Europe); and 2) the company is putting a lot of resources behind the development of mobile social networking games. The company believes that they will be well positioned for the launch of the iPhone in China (particularly by virtue of their recent Simlife acquisition)...but they don't think it will be a meaningful device in the short-term outside of wealthier communities in Shanghai & Beijing.

No doubt these numbers are impressive...but, my concerns about the company's exposure to government regulation and China Mobile linger.

Friday, August 7, 2009

On Vacation...Limited Posting

I'm on vacation for the next 10 days and will only be posting on a limited basis.

Tuesday, August 4, 2009

ROK E Road

According to post yesterday on The Lawyer website UK law firm Field Fisher Waterhouse LLP is taking mobile video streaming company ROK Entertainment Group (ROKE) to court to recover almost $125k (+ interest) in alleged unpaid fees for advisory work on a planned acquisition of a company called Inter Credit Group. The action seemed to spook investors, sending ROK's stock down 88% today to just over a penny (yikes). ROK, founded in the West Midlands in 2004, has long struggled to find its financial footing and like many mobile firms of its vintage has redefined its primary mission more than a few times. They did make an encouraging recent announcement that their ROK TV product is now compatible with BlackBerry devices, which is no mean feat given how restrictive RIM has been with video players on its platform. Unfortunately this may be a case of too little, too late given the financial, and now legal, obstacles the company faces.

Mobile Games Big 3 Revenue Recent Quarters

Either the mobile games business is completely flat (astonishing considering all the iPhone hype), or it's growing and the Big 3 are losing share.

Monday, August 3, 2009

Like Water For Digital Chocolate

The mobile space suffered from a drought of interesting stories in the latter half of last I was outta town at a wedding. But Monday morning has turned out to be pretty interesting. My favorite story so far is typically sensational fare from our friends at Digital Chocolate. PocketGamer reported this morning about a post on CEO Trip Hawkins' blog that company employees had a run in with (notoriously corrupt) police in the Northern Mexico town of Mexicali. The group, which was scoping out a new D'Choc operation there, was handcuffed, aggressively interrogated and then let go. The big news here is that Trip is alleging that the whole incident was the result of a false tip suggesting the group was involved in a drug deal (no laughing matter in Mexico right now) from a mobile gaming competitor that already has operation in Mexico. This sounds a little bit like conspiracy theory paranoia to me (and I hope to God it's not a publicity stunt)...but if it's true, it would be a very serious matter that should result in some form of industry (if not criminal) sanction against the perpetrator. I'll update as this story develops...