Tag: ea mobile

Mobile Games Publishing in 2011

I have been blogging way too little recently, so here’s – finally – a bigger one again.

What is a Publisher?

I have recently been asked more and more what the role of a publisher in mobile gaming is today. I mean, heck, there are now even websites proclaiming the (traditional) publishers’ death. On the other hand, venerable old and ruthless new ones are on a spending spree acquiring – seemingly – studios and smaller publishers by the dozen: In the past year or so, EA gobbled up Playfish, Chillingo and Firemint (and probably a few more I don’t know of). Zynga, even hungrier, absorbed XPD Media, Challenge Games, Conduit Labs, Dextrose, Bonfire Studios, Newtoy, Area/Code and Floodgate Entertainment. So what is right?

According to Wikipedia, a videogame publisher is (was?) someone who

publishes video games that they have either developed internally or have had developed by a […] developer. […] They usually finance the development […]. The large video game publishers also distribute the games they publish, while some smaller publishers instead hire distribution companies (or larger video game publishers) to distribute the games they publish.

Other functions usually performed by the publisher include deciding on and paying for any license that a game may utilize; paying for localization; layout, printing and possibly writing of the user manual; and the creation of graphic design elements such as the box design.

Pretty old-school stuff, you say? Erm, yes. Broken down from its beautifully naive pseudo-scientific language, we arrive at the following:

  1. Publishers pay for development (i.e. absorb the development risk). This could also be classed as project finance.
  2. Publishers pay for licenses, another case of project finance – unless of course they pretty much own (legally or, through long-term licensing relationships, factually) certain IP.
  3. Publishers provide a bit of gloss and lots of marketing around a title to help it on the way.
  4. Publishers – sometimes – distribute.

Is the Same in the Digital Realm?

Now, the Wikipedia definition pretty much focuses on traditional console and PC publishing, it seems (box art anyone?). And this is where the new world sharply departs. No box art, no Walmart or GameStop deals are required if digital distribution is in place. How difficult can it be then for the more modern, more evolved (?) world of digitally distributed and, perhaps (but only perhaps) even more specifically for mobile games?

Nos. 1 and 2 above are pretty much arbitrary parts of the puzzle: you can get money from many places (or not of course) but it is a financing game, and video games could be called a specific (because intrinsically hit-driven) asset class. That is to say, these are not unique attributes.

No. 3 is a combination of money, know-how, experience and network. The more complex the landscape the higher the value of a specialist in the field.

No. 4 is, well, arguably a much easier game when you can feed your distribution channels from your own desk – via the Internet. However, again, the more channels you need to serve, the more complex the landscape, the higher the value of someone "who knows".

Nos. 3 and 4 are – arguably – what made Chillingo (based in the same honest North-West English town as I am) what it is (or, prior to its acquisition by EA, was): Chillingo seems to have had a knack of identifying good or at least decent games and promote them effectively across digital channels. Alas, their biggest hit, Rovio’s Angry Birds had not much good to say about them in terms of support. And indeed, if one looks at what Rovio did with its hit title outside of the Chillingo relationship, one can argue about the value add it had received from its publisher. But then again, Angry Birds seems to have been one of a kind, and there are other titles Chillingo brought to reasonable success that may not have had the same success – be it for lack of a Mighty Eagle such as the fearless and tireless Peter Vesterbacka or otherwise.

Changed Metrics

Chillingo, alas, is not where it’s at, I think. The war is being fought over those (in)famous MAUs – or monthly active users. You see, if you can command those hundreds of millions and parade your own wares by them, the likelihood of your next game becoming a success rises: Digital connectivity solves the dilemma of publishing of old, and that was to attract the attention of the gamer (your customer!) for your next release.

In a box-product world, you had to shout again, and very loudly, in order to have your customer part with his hard-earnd monies for the benefit of your title rather than your competitors’. This is – arguably – why EA Sports sponsors UK football (scil. soccer) broadcasts: "please, God, let people not defect to Konami’s PES from my very own EA FIFA".

Now, Zynga laughs all the way to the bank on this: if you played FarmVille, you will not have come around of realizing that CityVille was out. And you would also get additional points if you also played Zynga Poker. The result? Well, check the top-10 games charts for Facebook games for yourself. Suffice to say that Zynga is – according to the second market – worth more than Electronic Arts… Why is that? Eyeballs, addressable users, dollars spent per acquired user. That the business model is a little different for console games than it is online, doesn’t really matter for the argument here: you can drastically reduce the user acquisition costs if you play it smartly, so no need to take in $39.99 per game in order to break even. $1 or $5 will be just fine, thank you very much.

The above is also the reason for the spending spree of the publishers, I would suggest: if you can buy eyeballs and get a studio with proven skills (just check out either of Newtoy or Firemint on the mobile end), and you can combine it with a mechanism to attract people to future releases, there is a much better chance you can recoup your investment on that future release (effectively de-risking nos. 1 and 2 from the above list).

And now for Mobile!?

Zynga, EA’s Playfish and Crowdstar have shown that you can tweak the fortunes your way if you smartly combine game releases, updates and promotions to work with each other. But how is it for mobile? Backflip Studios, which rose to fame with a simple but well-executed game ("Paper Toss"), claimed to have had racked up more than 2m daily active users and 50m total downloads, mostly driven through promotion of its own titles inside, well, its own titles. Did it have a publisher? No. Does it have a very smart CEO who solved nos. 1 and 2 above and knows how to play no. 3 itself? Yes. So what about no. 4, distribution? Well, on iOS, that is a non-issue: one distribution channel to bind them all. However, on Android, it still falls short of a copycat, "Toss It", who were there earlier, are as ingenious and still rule. And elsewhere? Not much.

But we don’t have to rely on one case alone, and one by a small – though incredibly smart – studio no less. Look at Zynga’s performance on mobile. It is mediocre at best. EA though? Not so bad. What do they do? Well, apply the good old publishing principles learned in the olden world.

And this is where the specific complexities of mobile come into play: mobile is fiendishly complex. On the OS side, there is iOS, Android (in an increasing number of iterations), Windows Phone 7 (with some added spice since the announcement of their Nokia partnership), Blackberry, Samsung’s bada, and then maybe BREW, perhaps still a little bit of Symbian and J2ME. But then there are also the still mighty gatekeepers, the mobile operators. And then you will see that users tend to want to have it their specific way, ideally localized. The plethora of channels thus created makes it tough on a developer to maneuver its way through…

There are tools that can aid progress (and, yes, our very own Scoreloop provides some of them) but it is important to recognize the complexity of it all. Reaching users and convincing them with compelling offers is key to success in any world. It is important to bear that in mind in mobile, too. And if you think you cannot walk it on your own, a publisher might just be the right partner for you.

Changed Weighting

Since 1. and 2. above might not be such a big thing anymore (mobile titles can be developed for less – and, yes, I know this does not necessarily apply to the likes of "Galaxy on Fire" or "Real Racing") and 3. might be manageable but 4. might (not: always is) still be a key reason to part with some share in order to reach the user, convince the user, be able to bill the user.

In celebration of Tetris (and Jamdat)

The mobile version of Tetris, the iconic game published by EA Mobile, has now clocked up in excess of 100m paid downloads, cracking a landmark that is arguably miles ahead of everything else. This in itself is to be lauded.

However, in the press buzz around this incredible achievement, I have not seen anyone reminiscing on what brought this franchise to EA Mobile, and the deals leading up to that are something not to be sniffed at either, so here’s to the people who made an audacious move in 2005 when they bought Blue Lava Wireless, the Hawaiian studio run by Henk Rogers (who is also the CEO of Blue Planet Software, which still controls the rights to the game), together with a 15-year license to the mobile game for a rather breathtaking $145m ($137m + c. $8m non-recoupable license advance to the Tetris Company in which Blue Planet Software holds 50%).

The company at the time was Jamdat who some people described as the only company ever to go public on the back of a bowling game (Jamdat Bowling was one of the first run-away successes in the mobile space). Jamdat had just floated on Nasdaq in a $86m IPO (here’s the original S-1) with its market cap at the end of the first day of trading standing at $439m (up 45% from opening). They had struggled a little outside North America (as per their S-1/A nearly 80% of their revenues were North American) and were hence pondering to leverage Tetris’ global appeal to grow their markets outside the US. And how well they did!

At the time, however, few people thought the transaction would amortize ever. This might have been besides the point since the amortization for the original Jamdat shareholders came soon by the $680m acquisition by EA but few people (me included) had thought that the mobile Tetris property could yield a positive ROI (in isolation) on the back of, effectively, one game. This is naturally grossly simplifying since the lever of Tetris into carriers Jamdat did not reach prior to that provided incremental growth across the portfolio but the fact that it appeared to being an extraordinarily rich deal remained.

I do no longer have my numbers on what was needed to provide a satisfactory return but, over the 15-year license term, I believe it stood somewhere around $225m. With 100m paid downloads, EA may very well be there already – and this after only 5 years or so (this is again a simplification since there were of course sales prior to the acquisition).

I therefore tip my hat to Mitch Lasky, Jamdat’s former CEO and now a General Partner with Benchmark Capital (his very enjoyable personal blog is here), who had the foresight and/or luck to score this deal and I bow before the success of Tetris!

EA & Playfish: Gaming Being Re-Defined

In my last post, I hinted that the Google/AdMob deal might just not be the #1 deal of the week and, whilst one can of course dispute this, here’s why:

On the same day Google’s AdMob acquisition was announced, there were more guys walking to the bank, namely the good folks from Facebook games kings Playfish (well, joint kings with Zynga) who have been acquired by Electronic Arts for a cool $400m (incl. earn-outs).

Why is this more significant? Because it is (like Google/AdMob) a cross-platform play that (unlike Google/AdMob) also expands the basis of business models deployed. Playfish derives the majority of its revenues from so-called virtual currencies, and in particular also from lead-generation deals (which recently have become “a little bit” under fire for queries of their ethics). But ethics or not (and Playfish seems to have been fairly clean in this respect), the main point is that there has been a business model that is new, well -ish: it is not reliant on display ads nor paid subscriptions or download fees, etc. It is a new form of engagement there, crude in its beginnings but new no less: users are encouraged to interact with brands in exchange for personal details. Now, if done – as often – crudely, this has a bad feel.

But brands might also want to grab this with both hands because it offers unprecedented opportunities to truly enagage their users: interact with them and they will be more forthcoming. Behave and their sentiment will be positive. Be sincere and they will recommend your brand to their peers (which accounts for 74% of purchases online!). Check my recent keynote on this topic…

EA had changed the mobile gaming world when it acquired Jamdat by using a significant distribution footprint and leverage it with its own brands and the financial muscle only someone with its revenue HQ outside mobile could at the time. The acquisition of Playfish provides a similar footprint in the online world (do not forget that Facebook is “only” the largest bridgehead of online games).

As with Jamdat, EA is expanding the options of available business models and this is to be commended!

Convergence in games

It’s been the buzz for some time but no one had, with few exceptions, been seeing too much of it but now it seems to start taking off: cross-platform convergence of games. It is a bit of a holy grail: the network operators (or carriers) are not always the most creative and daring bunch when it comes to trying things out and they take a very healthy cut of the revenues from a tough, fragmented and still relatively small market. No wonder then that a lot of people are praying for alternative solutions. But, alas, it never really worked: every games publisher will tell you that, other than for music, wallpapers, etc, the direct-to-consumer model never really worked for games; the operators dominate the space as the, by far, most important distribution channels.

This could be, one thinks, overcome when more users would actually get themselves familiar with the games in a less constrained environment, the web being an immediate answer. Many have tried, many have failed (even the superstars of mobile games, Gameloft, stopped their in-house offering). But, hey, maybe it was just the wrong approach. Trip Hawkins‘ brainchild Digital Chocolate showed with their approach to their award-winning game TowerBloxx how it can also be done: they created a Facebook app and an online Flash version of the game that have been roaring successes: allegdely, the Flash game saw more than 10 million plays to date and the Facebook app has had 430,000 lifetime users. For a property that sprung from mobile, these are very respectable numbers indeed. And whilst I have no idea if it actually helped selling more games (300,000 clicked the “buy now” button but, for some odd reason, they don’t know how many actually bought it), it will have played its part to keeping the game in the front of people’s minds – and that’s half the work done, isn’t it?

Other players are onto it, too: online gaming giant Oberon Media bought mobile publisher I-Play last year in order to offer a more comprehensive line-up across media boundaries. Real is doing similar things. It is probably only a question of time before EA connects its pogo.com online destination with its mobile titles. I also know of quite a few smaller developers that start to very actively incorporate the multi-platform into their game design and development considerations. Very encouraging, that is!

And it makes so much sense of course: handsets get more and more powerful, the garden walles gardens start to come down with flat-rate data plans for mobiles becoming more and more the rule: all in all, a perfect runway for the ascent of convergent media consumption.

Now let’s add (mobile) Flash to the equation, and things could become very interesting indeed… (and, yes, I know, we may not yet have the install base but it’s getting there…)

EA makes more with mobile than with PS3 and PSP!?

Someone went deep into EA’s financials to find that the gaming giant actually makes more money with its mobile games than it does with releases on the super-high-end Sony PS3: the numbers are apparently $37m for mobile vs. $21m and $17m for PSP and PS3 respectively, and this is despite a shallow 5.7% revenue growth (industry leaders Gameloft grew by 51% in the same time).

However, one must of course take into account that the PS3 was only released in spring 2007, so will have a smaller install base and – arguably most importantly – it leaves aside the first big season for the PS3, namely the upcoming Christmas sales, which traditionally account for a huge amount of console and game sales.

It is nonetheless very encouraging that even mighty EA, despite the huge marketing effort by Sony, made more from mobile, which is still being perceived niche by many, than from Sony’s new flagship!

EA times 4

Gaming behemoth Electronic Arts announced it would be splitting the company into 4, namely EA Games, EA Sports, EA Sims and EA Casual. The first two cater for the classic console and specific sports properties respectively and – rather remarkably – the 3rd creates a whole division for one single property, namely the ludicrously successful Sims. It would seem that this is a sign for more to come, that is after Sims packs some of which 3rd party-sponsored/endorsed/branded. So we are probably here to see the first moves towards an MMO, an online community, etc, etc.

EA Mobile will become part of EA Casual (this piece had been announced a few days earlier). Reuters interestingly speaks of casual games as “games, which are usually played online or on mobile phones, are a small but rapidly growing part of the industry.” So now mobile games are already part of the “usual” – great news!

EA Mobile will surely continue to serve as the mobile extension for EA’s other divisions’ properties and licenses, such as Tiger Woods, FIFA, Need for Speed, Madden NFL etc. The division’s new President, Kathy Vrabeck formerly of Activision, at least mentioned something along those lines, so no big news here.

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