Following the publication of this article in Moconews, I had a call with Greg Ballard, CEO of mobile gaming company GLU.
Glu is adamant that despite a smaller size than EA Mobile or Gameloft, the company is very well placed in porting games on the balkanized mobile handset market. He righlty pointed out that if smaller in revenues, Glu has a scalable business and claimed to be ahead of its competitors in some regions of the world (n2 after EA in the US and after Gameloft in Latam, n1 in China and Australia). He also made the point that Tetris still represents a significant chunk of EA revenues. Looking back at the Jamdat acquisition in December 2005, I have no other choice than to agree.
So, let me precise that my comment "the larger companies have economies of scales that their smaller rival doesn’t" mainly addresses the smaller players in the mobile gaming industry. Despite consolidation that took place over the last few years, this market is still very fragmented. Also, it is fair to point out that Gameloft’s developer/production/porting teams represent close to 90% of the workforce (and thousands of employees). But I am not a financial analyst so I can’t really make a call here.
However, I still believe that:
– EA and increasingly Gameloft (due to the fact that the company is part of the Ubisoft galaxy and that it started developing games for consoles) can develop synergies by licensing content on multiple platforms and not only for mobile. They also have their own IP rights, reducing the needs to pay royalties to the likes of Fox or Celador.
– GLU did not join the iPhone train yet, contrary to Gameloft. Building for new platforms and alternative distribution channels (iPhone, N-Gage, Android,…) is key. See in previous post the reasons why.
– Some companies may be hurt in the decline, doesn’t mean all companies won’t do well, or that some parts of the mobile gaming sector won’t thrive. Indeed, there will be a slowdown due to the economic downturn (mainly because of longer handset renewal cycles and potentially because of the need to cut non-core telecom spending) particularly for traditional java games. It thus all the more important to develop for new platforms and to innovate (new merchandizing, biz models…)