What's the status of investment in mobile games? A panel of experts tells all.
How are venture capitalists and investors seeing the mobile games market - and the more general apps and mobile technology market? That was the subject of a panel at the Mobile Games Forum in London this afternoon.
The panel: Nic Brisbourne, partner at DF J Esprit; Ray Sharma, founder of XMG Studio; Jack Kent, analyst at Screen Digest; Barry O'Neill, founder of Other Ventures; and Edward Kershaw, VP EMEA of mobile media at The Nielsen Company.
"The big thing for 2010 and I think we'll see more of it throughout 2011 is the rise of Android," said Brisbourne, kicking off the debate. "We're back into a multi-platform world." However, he thought more investment will be focused around middleware, rather than consumer-focused mobile games and apps necessarily.
O'Neill referred back to DeNA's acquisition of ngmoco last year as a lesson into how to sell a company - and an "astonishing leap of faith" from DeNA's perspective. He also criticised Google, saying the company needs to get its act together and run a store "that people can monetise on".
Sharma talked about his company's response to EA Mobile's controversial price-drop campaign before Christmas, as a sign of what's happening to the market.
"I think Electronic Arts really screwed the industry at Christmas time, and it's unfortunate, because of what Apple did to support them... They basically saturated the whole iOS community, they got 160 million units out there, and as a developer you had to sit there and watch Electronic Arts saturate the whole app economy. It's bullshit! I don't know how they want developers and the app economy to respond, but for us, it's been an increased migration to the freemium model."
So Sharma sees a wholesale migration to freemium from independent developers on the App Store. "You may have won in the battle in the short term in terms of owning this Christmas 2010, but in the long term I'll be very interested to see how EA competes against indies in the freemium space, given their cost structure."
Sharma estimated that XMG Studio - a developer - lost 15-20% of its December revenues due to EA's promotion.
Brisbourne turned his attention to monetisation of non-iOS games, saying that "something's got to click" before we see more investment in that space. Meanwhile, O'Neill warned against sky-high valuations of mobile content companies based on assumptions of a certain level of growth in the market.
Sharma talked about the paradox of Android, where Google wants its platform to be open, but is suffering from fragmentation as a result. He praised Microsoft's approach with Windows Phone 7, which he expects to "really run" towards the latter end of this year. And he also pointed out that "70% of the app economy is being driven by games".
The discussion, it's fair to say, was a little fragmented. Sharma also said RIM's shift to the QNX OS will have an initially negative impact on the BlackBerry apps market - with developers wondering why they should make apps for BlackBerry when they'll have to recode them for QNX in a few months. He also said buzz around HTML5 and mobile web is overstated when it comes to mobile games - "those technologies don't work for the games we do".
Sharma was very positive about the overall app economy though, although he thinks this will go beyond games and focus more on medical apps and other lifestyle services. And there was a discussion around how investment companies can assign a value to mobile games firms - who often will only be as good as their next game.
O'Neill said that mobile games developers don't necessarily need traditional VC funding - smaller games companies can look for project funding (something O'Neill's Other Ventures has been set up to do), and other funding sources.
XMG Studio just went through a financing process, and said the reality is "you should be able to start up a mobile games company and be gunning for cashflow within 6-12 months". And then it's the companies that show the potential for scaling to millions of users that will need venture finance, if at all.
"I wouldn't go with the VC, I'd go with the angel investor," he continued. "There's plenty of high net-worth individuals out there, and they're easier to deal with."