Mobile Entertainment

Just clarify for us how Mobile Entertainment Distribution fits with Telcogames.

MED bought the assets and business of Telcogames, which includes all sales channel and supplier contracts. These include O2, Orange, Red Circle and others. We’re also employing some key Telcogames.

I’m sure you realise that creditors will look at the situation and conclude you’ve just started again and left them to carry the can.

I say to them: we could easily have walked away, but we want to make things right. 33 companies expressed an interest in the business and ours was the highest cash offer. Obviously the administrator will manage the process in the best interests of the creditors, but we’ve pledged to pay seven per cent of gross margin in the first year back to the creditors. That shows we’re sincere, and it means that suppliers that work with us will directly repay some of their debts.

What makes you think it’s worth having another go?

Operators can’t sustain their walled gardens. They need quality distributors that can bring independent product to them, merchandise it properly and invest in the category. Also, the retail channel is getting more fragmented so suppliers will need distributors with the backend systems to manage all the transactions and reporting. We have strong knowledge of off-portal and this give us confidence.

But one of the reasons people cite for Telcogames’ demise was its accounting system.

That’s not accurate. The system was, and still is, excellent. The fact that our suppliers were chasing payments shows how thorough it was – otherwise they wouldn’t have known what they were owed.

So why weren’t they paid?

What failed us were late payments bysales channels, with some operators taking six months to settle bills. Of the 140 channels we dealt with, perhaps 40 per cent made regular full payments on audited dowloads.

But every aggregator faces the same issue. Why didn’t Telcogames have the funds to allow for these late payments?

They didn’t pursue the same aggressive policy as Telcogames in native gaming. We bought Fathammer and Magic Productions in the belief that high end mobile gaming was going to take off. I think we’re now being proved right about that market. But we were too early, and it hurt us.

But why was Telcogames publishing while representing other publishers as diistributor. Wasn’t there a conflict of interest?

We never self-published any Java games, so I didn’t see any conflict. Even though the publishing investment didn’t pay off, shouldn’t Telcogames have ring-fenced some cash to pay suppliers? We were weeks away from getting new investment in June 2007 that would have secured this funding. It didn’t materialise, and neither did the additional shareholder cash we were expecting in Q4 last year. The investment climate for mobile completely changed.

Can you understand the anger directed at MED – and why some developers won’t work with you?

Yes, of course. And I know some have moved to other aggregators. But I say again, we were the victims of unfortunate, complex circumstances. We could have walked away, and Telcogames would have been liquidated. Instead, we put the company into administration. It was a going concern thanks to the remedial action taken in 2007. We went from 72 people to 22 and closed Fathammer, Magic and the Liverpool
publishing team. It’s because Telco was a going concern that MED has the ability to pay back the seven per cent of gross margin. I still believe we would have turned it round if some creditors had been more patient.

What about the retail channels? Do you expect them to keep faith when there’s bad feeling around?

I can see why some channels wouldn’t go with us. But I believe the majority will. Again, they know we had some bad breaks and that there’s a strong team of committed professional people in the company they’d like to continue working with.