Thursday, June 17, 2010

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).

1 comment:

  1. just my personal brain farts as you mentioned it:

    glu is and will never be a healthy player in the market. the time of this company is over long time ago and why buy them now? Buy them when they go to chapter 11 which will come up soon for sure. I doubt anyone wants to touch them.

    As you can imagine I am not a big fan of the wunderkind de Masi as well. The comments on the article here are just funny more to find on the net:

    DC just received a loan but they just lost Ilkka. A well respected person in the industry for ages. I doubt Trip will sell cheap.

    Handson is a walking corps no value in it for ages and no good management as well. I see no sense in buying such a company. They didnt found a CEO for how long and who run from it after some weeks? Exactly the wunderkind de Masi ;-)

    So which other companies are around that would make sense and you didnt have on your list:
    Gamevil, Gamehouse/Real, Chillingo, Connect2Media, Handy-Games, Fishlabs, Herocraft, Bulkypix, missed some for sure.

    Buying into only one platform or one country will not make sense so lets see. I bet for a M&A show down later this year and early next year! Too many companies want to come into it.