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Event: ICT Spring Luxembourg

Are you in Luxembourg and not involved in either counting money or European law? Then I would urge you to come along to ICT Spring, the conference that will take place next week.

it is a widely varied agenda. I’ll be speaking on a panel on “How Games are Impacting the Global Social and Business Landscapes” (yes, it is about gamification) and will be joined by a venerable list of A-listers:

  • None less but Trip Hawkins (founder of EA and Digital Chocolate);
  • Boris Pfeiffer (MD of Kabam Europe);
  • David Gardner (Co-Founder and General Partner of London Venture Partners); and
  • Raphael Goumot (Founder of CREAgile and previously Head of Games at France Telecom/Orange)

It should be rather lively indeed and with the event being headlined by Wikipedia founder Jimmy Wales, Eventbrite CTO and Co-Founder Renaud Visage and a raft of other very high-profile speakers, it promises to be inspiring and, well, simply awesome.

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!

Why an iPhone Deal with Verizon Wireless would be Cool

Today, interesting reports surfaced (or re-surfaced?) according to which Verizon Wireless and Apple are in discussions about bringing the iPhone to the former. However, because Verizon runs on a CDMA network and Apple has only ever supported GSM, commentators reckoned that this deal might be for Verizon’s next-generation LTE network. And this is when one can start dreaming…

To recap: Verizon will be amongst the (if not The) first tier-1 network operators rolling out the next generation of wireless networks under the LTE standard (see here for more on this). Under LTE, unprecedented wireless bandwidth will be available, comparable (or exceeding) what households in Western and Far-Eastern countries have in their homes today. But then you would have it of course wherever you are (well, if the respective technology is installed).
Due to the immense speeds, a lot of people think that the first big change will be on the (computer) broadband side of things: no need for wireline access if the speeds are the same and you can actually wander around and through town and always be with your provider. Simplicity, ease of use, bliss of connected life.

When it comes to mobile handsets (previously known as phones), the iPhone is of course (and despite the heckling by its many critics) arguably the most successful multimedia device known to man (so far). To marry this with these speeds? Ah, what would await us (see here for earlier thoughts). The iPhone (if they can fix the battery life) would be perfectly suited to bring the new lush wireless life to the masses (albeit first to the more affluent ones): rich graphics, innovative inputs and the fairly unique form factor would show the opportunities off rather beautifully and could hence aid to avoid the post-3G hangover where people asked themselves why on earth they should get 3G phones: there was nothing much to do with them (other than being able to make “faster” phone calls…).
The most common uses would arguably be music and apps with the latter being even more successful than the former: it is estimated that iTunes took 6 years to record 6.8 bn downloads; the App Store did 1 bn in only 9 months (or 1.3bn p.a.), which would equal 7.8 bn in 6 years if no further growth would occur. Anyway, with 1.1 bn downloads p.a. not being too shabby either, let’s take both, so what do we get?
On the music side, it would either mean quick and high-quality downloads or, more likely (?), streamed music. The same applies to the VOD and movie segments.
On the apps side, LTE would arguably push the envelope into two directions: (1) high-end, graphically rich games, and (2) ultra-connected social games that seamlessly bridge media platforms. Now: both types had their advent on the iPhone. Speak to any number of high-end games makers, and they will tell you that their life became much easier since the iPhone was there. Look at products like EA’s Scrabble (with full Facebook integration), Playfish‘s games (coming from the other end, i.e. from Facebook to iPhone), etc and you have the foundations laid here, too. With LTE, all this becomes mass-marketable to a much higher extent. And this would be real fun!

Mobile Games on Twitter

Birds (sic!) do it, bees do it, even educated fleas do it, and now even Oprah (have you been there before her? Check here)… so: what about mobile games companies tweeting? Now, there’s many of them already out there (see list below) but how much sense does it make (that it makes sense for your business I demonstrated recently)?

Looking at a few of them, you’ll find anything from very 20th-century in-your-face selling (probably not so efficient) to enlisting (or trying to) followers to help in everything from game design, logo colours to community components that should go into the next iteration of the website. And it is in the crowdsourcing where I see a bit of potential: most mobile games companies are fairly small, and money to spend on sophisticated research, focus groups and what not is scarce or AWOL. If one can draw on the opinions and insights of friendly followers to learn about their (the consumers’) preferences, this is surely all good. Since Oprah is on there now, too, there is even a chance that your followers will not only be fellow industry professionals…
Although, even to the industry, Twitter is as powerful a tool to the mobile games people as to anything else (maybe with the exception of the global car-wash industry – everyone who’s been to CTIA Wireless will understand the reference): it is a great channel to get the message out to people who matter to you (and who actually show that they care by following you), which puts trade marketing (even if not in the strict sense of the word) onto the list on why you should do it.
So here’s a (surely incomplete – please excuse and feel free to add!) list of mobile games companies who tweet:
Gameloft: @gameloft
Connect 2 Media (yes, that’s us): @connect2media
Oasys Mobile: @oasysmobile
Hands-On Mobile: @handsonmobile
Digital Chocolate: @dchocgames
I-Play: @iplaymobile

Tag Games: @taggames
Fishlabs: @fishlabs
Gamevil: @gamevil
Distinctive Developments: @distinctivegame
Lemonquest: @lemonquest
Oh, and I’m out there as @vhirsch

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…)

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