Name That Balance Sheet!

It's time to play everyone's favorite game... "Name That Balance Sheet!" Click on the image above, identify the mobile company associated with this balance sheet recently filed with the SEC, and submit your answer as a comment to this post. If you answer correctly by 6pm PDT Friday September 10, 2010 you'll be entered for a chance to win a supermarket sushi lunch with me at the Ralphs of your choice in Glendale, CA (or something nicer if you're paying), at my convenience, sometime in the next 6 months. Travel and accommodations are not included... and no, you can't get the party platter (maximum retail value is $8.99). If history is an indicator, very few will enter, probably no one will win.

Samsung's Galaxy Tab Looks Kinda Badass

• Android 2.2
• Video calling
• Google Maps Navigation embedded
• Flash Player 10.1
• and you can hold it in one hand

...take that iPad

Gameloft: Revenue & Net For The Last 2 Halves

Gameloft released its financial results for the first half of 2010, after teasing topline sales late last month. The points that caught my eye were...

1. Profitability seems to be ramping nicely, which isn't typical in the space
2. The company now sits on a stash of $33mil in cash
3. Emphasis on Java/BREW marketshare the company is gaining as competitors exit that space

All of which make me wonder what how much of Gameloft profitability is being generated from non-smartphone channels.

Ain't Price Erosion A Bitch?

Angry Birds is the current reigning champion of iOS Paid Apps. The simple, addictive game from Chillingo & Rovio has sold over 6.5mil copies in 8 months. This eclipses former App Store phenoms like Lima Sky's Doodle Jump, which hit 5mil in June, the Tap Tap franchise from Disney's Tapulous, that was allegedly pulling down between $500k and $1mil a month in late 2009, and Firemint's Flight Control, which realized 2mil downloads within 11 months of launch. No doubt, all amazing feats from great, small companies. Moreover, the impact these companies have had in terms of introducing mobile gaming (and apps in general) to a broad audience, and in perpetuating the cult of iPhone, cannot be overstated. Unfortunately, the economics of the very ecosystem they edify are conspiring to keep them small.

As PocketGamer reported yesterday, the average price of an iPhone game is now $1.24. We can all see that the Top Paid Apps chart is now dominated by 99¢ titles. Increasingly user reviews bash titles that are priced any higher, and perhaps to appease these consumers, publishers now run frequent, often endless price promotions. Let's face it, 99¢ is the price the user community has come to expect for most games. Apple, of course, fosters this scenario, as part of their reverse razorblade model in which they provide budget priced entertainment for their premium priced hardware.

Ironically, back in the much maligned carrier deck era, the economics were actually better for top-tier games. Circa 2006/2007 the average blended global wholesale price (after carrier) for a triple-A Java/BREW title, including monthly re-ups, was about $2.25. That's more than 3X the 70¢ Chillingo, Lima Sky et al are seeing from each of their downloads post Apple. And it's not like hit games weren't doing boffo download numbers back then... in fact less competition, recurring subscriptions (in the US) and some politics conspired to create mega-blockbusters on a scale (considering the addressable user base) we may never see again. Of course, the all time king is Tetris, which has allegedly been sold over 100mil times in its various mobile incarnations... yielding at least $200mil for EA Mobile and its predecessor companies. On the lower end of the Java-era hit spectrum was the Fast & Furious franchise, which I-play openly claimed had sold 13 million units by the dawn of the iPhone era... which meant something like $30mil for the publisher if my math is correct. Then there are franchises like Namco's Pac-Man and PopCap's Bejeweled that sat between these two... closer to the Tetris end. At today's App Store prices, Chillingo would have to sell 40mil copies of Angry Birds to be in the league with these Java/BREW era revenue stars, and over 300mil to be the new Tetris. Even considering the the cost savings afforded by slicker development environments and not having to port, I'm confident that today's hit titles are far less profitable than those of the pre-iPhone era.

So, the consequence of current smartphone platforms being more democratic, and their owners being price agnostic, is that publishers not only have a significantly more difficult time manufacturing hits (in the fog of 10s of thousands of titles), but thanks to price erosion, those hits are less meaningful to their bottom lines. These dynamics, along with the added complexity of the freemium model, will further escalate a frenzied state of competition without price differentiation amongst publishers... virtually ensuring that none will amass enough wealth to aggressively scale their businesses, and that many will be forced to exit altogether. Meanwhile, it's better news for consumers, who continue to get more for less, and the hardware and network guys, who are laughing all the way to the bank.

The Beginning of Think Different

Thanks to Pekka Parnanen for pointing me to this great video from the beginning of Steve Jobs' reinvention of Apple, soon after regaining control in 1997. I'm not an Apple fanboy (and don't use an iPhone), but I have no end of respect for this company, its products and its market savvy... and I think most of it is attributable to the singular vision of Mr. Jobs. I would go on to propose that Apple has emerged as the most important force in terms "consumerizing" the mobile entertainment products many of us worked on, in relative obscurity, for years (I expect some arguments) and that the mobile revolution they've spawned is a corollary of Think Different. BTW - the ad Jobs introduces in this video still gives me goosebumps.

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.

Battle For So.Korea: GAMEVIL vs Com2uS Q2 2010

Enterprise Values of 22 Public Mobile Entertainment Companies Aug 2010

What Are Mobile Game Publishers Doing With Facebook Apps?

Dev Rank = developer's rank in terms of MAU across all Facebook apps. MAU = monthly active users. DAU = daily active users.

In light of all the insanity about Zynga and lots of rhetoric from mobile games publishers about diversifying into social gaming online (er... Facebook games), I decided to take a look at what the mobile guys were actually doing on Facebook. First, let me tell y'all that after spending far too long digging through titles, it's abundantly clear that that platform is jam-packed with even more cr'apps than Android Market. Fortunately, consumers clearly ignore most of this junk... but I'm sure it's damaged overall perception of the product on offer. Many of these are blatant infringements on other folks' IP... which makes me wonder if corporate grown-ups at content owners/creators are really paying enough attention. Also, I've gotta mention that the two sources of Facebook application information, AppData & Facebakers are pretty shoddy (but free). The former seems to have better data, but a super-clunky interface (e.g. search is useless), while the latter is slicker, but with more questionable data. The data here comes from AppData.

So what did I learn? Well, Zynga is still the undisputed king of gaming on this platform, with 49.5mil daily active users of its titles and 217.5mil monthly active users... and despite all the blah-blah not much is happening with the mobile games guys. The only once pure-play mobile publisher that appears to be creating a meaningful presence on Facebook is Digital Chocolate. EA, GameHouse (RealNetworks), PopCap & I-play are probably running these initiatives more as a function of their established online casual businesses, than what they do in mobile. Glu Mobile, which launched its first Facebook title, Atom Blast, last Fall has now apparently bailed entirely from the platform. Meanwhile Hands-On is leveraging its last piece of premium IP, under a pseudonym no less, to try make of a go of it. Is anyone aware of anything else going on out there with the mobile publishers?... let me know. The next question, of course is how much money D'Choc et al are making from this platform... any thoughts? I'm sure it's billions :-P

US Carrier Metrics Compared Q2 2010

The Big 4 carriers represent over 92% of US wireless subscriber connections.

I've highlighted the top performer in each category. Note Sprint's Data ARPU number is in italics because it's from last quarter... for some reason they chose not to break out Data ARPU for Q2 2010 (hmmm).

For fun, take a look at how these numbers compare with Q4 2008.

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.

Big 3 Mobile Game Publisher Revenue Comparo Q2 2010

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.

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.

I Switched: Why One San Francisco Exec Ditched His iPhone For An EVO

Guest post by Daniel Stein

------------------------------
I have been an iPod advocate since the very beginning. Since the device launched in 2002, I have lost count at how many iPods I have purchased. I have a shoe box at home that is filled with my old hardware – the original 5GB (engraved, even), an iPod Shuffle; 2 iPod Minis (that I used with my Nike+ system); 2 Nanos, an iPod Touch (can’t remember why I bought that); a 60GB and 80GB iPod; and a few more that I am sure I forgot to mention.

When the iPhone launched in 2007, I was one of the first to own it. Since then, I have replaced or upgraded my iPhone 4 times. When the app store launched in July 2008, I was blown away. It made me realize how powerful mobile and location-based computing could be. It was probably the single most game changing device that I had ever experienced. It tied together entertainment, communications, social media, music and productivity in a simple, easy-to-use and very cool-looking package.

All that said, in early July of this year, I threw away my iPhone, paid my extortion money to AT&T to cancel my account and switched to Sprint and the HTC EVO. Regardless of how cool the iPhone was and how powerful the applications are, I made the decision that the reliability of the phone was more important than the power of the applications.

At the time I switched, I was dropping about 15-20 calls per day. Generally speaking, about every call over 3 minutes would be dropped at some point in the conversation. There was no rhyme or reason to when a call would be dropped. There was no pattern, no dead patch, no spotty reception. One minute you were there, the next minute you were gone. It was driving me insane and I eventually got to the point where I couldn’t take it anymore.

What I found when I switched was that I really did not give up as much as I thought I would. Although the Android market didn’t have near as many applications as the iPhone, it had many of the same applications and everything that I consistently use. Some of the native apps (like Google Maps) were actually much better than the apps on the iPhone. Best of all, the phone worked, everywhere and all the time. This may sound absurd to say in 2010, but having a phone that you can rely to simply work as promised changed my life.

Don’t get me wrong, the EVO isn’t perfect. There are a lot of shortcomings that I would love to see fixed in the future, but overall I am very happy with my decision to switch. Here is a quick list of pros and cons I have expected with the device.

PROS

• Phone: Phone works great. I have had the EVO for over three weeks and have not dropped one call. There are a few “dead” spots that I have noticed in San Francisco and Oakland, but I assume that is expected with any service.
• Apps: The Android Market has far more apps than I expected. There isn’t anything that I am “missing” from the iphone.
• Mapping: The mapping software and turn-by-turn navigation was seamless, fast and accurate.
• Social Integration: Integration with my Google, Facebook, Twitter, Flickr account, etc. worked right out of the box integrates with your address book, mail and SMS features.
• Camera: The 8 mega-pixel camera and flash takes incredible pictures.
• Sprint HotSpot (i.e. Tethering): By a simple click of a button (and an extra $29.95 per month), you can turn your mobile phone into a sprint mobile hotspot and share internet service to your Mac, PC or other device.

CONS

• Battery Life: The battery life of the EVO is horrible. The first time I traveled with the device, it fully discharged in about 3 hours. Since then, I purchased a portable charger and reconfigured it to use less power.
• Usability: After using as iPhone for so many years, I found the interface clunky and unintuitive. It took me a few weeks to feel “at home” with the device.
• Size: The EVO is big. A co-worker of mine calls it the Hummer of smart phones. It doesn’t bother me, but it may be too big for some of you.
• Typing: Typing without a physical keyboard is still frustrating. I find myself making many mistakes on the the any virtual keyboard, but the autocorrect on the iPhone worked pretty well. The autocorrect on the EVO doesn’t work near as well.
• 4G: I am not really sure what this means, as I have never been able to access 4G. I am starting to think it’s like turning your stereo to 11. It doesn’t really exist, but it sounds very powerful.

Daniel Stein is Founder & CEO of the digital advertising & branding agency Evolution Bureau

Dueling Tweets Highlight Polarized Views On Windows Phone 7

Silicon Alley Insider picked up an overwhelmingly positive review from a comprehensive Gizmodo story, while PocketGamer.biz covers a decidedly negative take from a reviewer at InfoWorld. I'm sure we're going to be hearing many more opinions on this subject as Microsoft's long-delayed, high-stakes smartphone OS prepares for its October debut.

Select Game Publisher iPhone Stats

Sorry about the eye-chart, simply click on the image above to see a bigger version.

I compiled this little spreadsheet for kicks (and 'cause I haven't looked at the AppStore in awhile) based on iTunes data for all the major games publishers I could remember on a random Wednesday morning (let me know who I'm missing). These stats are for iPhone and iPod touch games only, not iPad and are for the US version of the store. BTW, I've heard a lot of folks whine that Apple will occasionally, indiscriminately erase Customer Ratings during version upgrades... making these numbers a poor indicator of App performance. OK, I'm not sure if that's true (and shame on Apple if it is), but if you believe it you can take those numbers with an appropriate grain of salt. That said, here are my initial observations based on this data:

• British publisher Chillingo (including its Clickgamer subsidiary) is a friggin' powerhouse!... with a plethora of titles and more than a couple superstars, they might well be generating more topline revenue than any other games publisher on this platform, right?
• Digital Chocolate has a large number of titles, but almost 50% are free and it doesn't look like their top paid title is a superstar
• The recently combined entity of ngmoco/Freeverse is a major player
• I bet Lima Sky is the most profitable iPhone games publisher... Tapulous & Ludia would be contenders but their 3rd party licensing costs have gotta be substantial
• At first blush, Disney's recent Tapulous buy looks pretty genius (Tap Tap is a juggernaut), but their success isn't exactly a fresh story and they do have some of the traits of a one (or two) hit wonder... we'll have to see
• The distinction between paid and free apps will become less meaningful as freemium products, featuring in-app purchases, become more the norm on the platform... but for now most free apps are simply barkers for their paid compadres
• Happy to see that I-play (which has been dead quiet in the press lately) is making a pretty decent go of it relative to some of its mid-tier, old-timer peers and that my favorite film-based license (Fast & Furious) is still their trophy title
• Firemint is awesome, but it's definitely time for their next big thing

Let me know what you all think.

Consumer Reports Can't Recommend iPhone 4... Without Duct Tape

HotStocked Takes On The Curious Case of Amico Games

It turns out that Amico Games Corp. (AMCG), the former Chinese mining company that magically morphed into a public Java & WAP mobile games publisher (that no one has ever heard of), is even too weird for the jaded penny stock set. HotStocked.com, in a post that included the video above, expressed concern about a recent story (that was linked from the company's website) that referred to Amico as the "largest U.S. steel grating producer." What HotStocked probably doesn't realize is that there's a proud tradition of this sort of shape shifting nonsense in the mobile entertainment space, which features other public companies whose SIC codes indicate they're primarily in the auto repair or restaurant business... which, in those particular examples, they probably should be.

Mobile Content Developers' Platform Proclivities

See entire SAI article.