This one leaves me a bit speechless: other than reporting the press blurb, there seems little to say but then, the press blurb is too large to ignore it. So here goes: :LaNetro Zed announced 2007 revenues of a cool $ 554 million with an even cooler $100 million profit (this last bit is only reported by ME; others mention that it actually does not report any profit). There you have it. Revenues from what? Don’t know. “Proper” US-GAAP revenue? Don’t know. Profitable or not? Don’t know. Everyone reports it, no one seems to know the details. A dilemma…
It is the usual crux with private companies: one never really gets the whole picture. On the other hand, I want to be fair: half a billion dollars in revenue is rather honourable by anyone’s count. So let’s try to dissect it:
– In early 2007, Zed bought a piece of Monstermob and, as part thereof, 9Squared. So this will account for quite a bit of the growth. But still! Zed claims to derive revenue from content 85% of which it owns outright. They do sound-alikes (or “original compositions”) rather than the real thing although 9Squared also licenses the SonyBMG and – recently – KOCH catalogues (for ringbacks). Their rationale for going “original” is compelling though: there isn’t enough money off-deck to pay for royalties, said their US CEO last autumn.
– In October 2007, 9Squared reported over 60m downloads to consumers through its BREW application catalog. “This includes real music ringtones, polyphonic ringtones and wallpapers from 9 Squared’s RealTone JukeBox, Univision Tonos, Alltel’s RealTone JukeBox for Celltop, RingTone JukeBox, mTat2 Wallpapers, Musica Real and GAC Country Ringtones.”
– Zed is an early runner on convergence: its Zed StatiOn combines desktop, online and mobile in one offering. Smart move, I’d say: capture the users wherever they are and hook them in with free services that stick (IM, etc). They hooked in MetaCafe into this, too.
In particular the amount of generic content utilised (which improves margins) is, in a content world driven by brands, brands, brands, a very interesting phenomenon – and no mean feat to pull off: to build a customer base (most of them tied into subscriptions, yes) based on unbranded, generic stuff shows that surrendering to the big brands (and their up-front) demands may not be the only way. If all is clean, then my call will be to the carriers: listen, there is a world out there… There is of course always the suspicion that a lot of the revenue might come from subscribers that cannot extricate themselves from nifty and well-crafted subscriptions and suffer a life of funding Zed’s success. Is that so? I don’t have the foggiest clue!
The whole unbranded thing has an interesting twist of course: if it is possible to get so many consumers into this, then – arguably – quality isn’t the big thing after all: Zed’s games don’t seem to rank high (at least I have never seen them rated by anyone of note) and, with a volume-driven business (on their website, Zed claimed to have more than 27,000 games available today), there is presumably little time to cater for high production values and highly polished games.
It is, in any event, a remarkable story: the ugly duckling into which Sonera sunk hundreds of millions, evolves as one of the powerhouses of mobile content. If only their guys would now get in touch and explain to me in a bit more depth how all this adds up… Hey, dear Zed people: drop me a note (volker [dot] hirsch [at] gmail [dot] com) and let me know how this works (OK, or at least get me a bit more insight on those numbers). Thanks!
US D2C mobile content distributor Playphone announced it would acquire (well, they call it merge) UK counterpart Pitch Entertainment. No details disclosed (yawn). Playphone operates its own content storefront as well as the mobile portals for the likes of ABC, Wal-Mart, Cartoon Network and RealNetworks. Pitch does similar things but predominantly in Europe and a few South-East Asian countries.
The move likely signifies the begin of the assault of the US D2C players onto Europe. This may have been a bit of a surprise a couple of years ago but it demonstrates the change the US market has undergone, which lets companies emerge that have a huge home market in their backs giving them the muscle to try out expansion into other markets. The advantage of US-groomed companies in this space is that they have been growing up in an environment that centers more around the web than it does/did in Europe. And they have become very, very good at that. Numbers are, as always, hard to come by but by the looks of it the likes of Thumbplay have slammed even D2C giants Jamba/Jamster pretty heavily over there.
With the market moving away from expensive, low-margin off-the-page distribution, which also provides limited scalability and the increasing attraction of the mobile web, that medium is likely to gain in significance fast. This will also be boosted by the tumbling walled gardens and the aggressive introduction of data flat rates by carriers (see a piece here). The trio of European D2C giants, Jamba, Zed (see here and here) and Buongiorno are girding themselves for this but a market entry by Thumbplay, which has been going from strength to strength in the US can surely only be a question of when not if. The battle for D2C Europe should be an interesting one…
