Digital Chocolate boss holds forth on the current state of the industry.
Where is Trip Hawkins' head at right now? The Digital Chocolate boss has had big ideas in mind ever since he joined the mobile games industry, whether it was the importance of original IP, wrapping social features around mobile games, or more recently his idea of the Omni Gamer – casual gamers who play across all platforms.
In an entirely unsycophantic way (no, really) this industry is lucky to have him. There's a huge buzz around mobile games thanks to iPhone, new distribution channels are opening up both within and without the mobile operators, and developers are starting to tap into the potential of social features. Now we just need a few more people with grand schemes and big ideas.
Earlier this week, Hawkins unveiled Digital Chocolate's latest initiative, NanoStars, which aims to bring a more characterful approach to virtual items on mobile and social networks.
But before getting onto that, ME asked him how things are going at Digital Chocolate – and following the news of yet another mid-tier games publisher (Namco Bandai) pulling out of the European carrier portals, whether that whole sector has been swamped by the success of iPhone.
“There's a massive growth opportunity with the carriers,” says Hawkins. “The iPhone is just an archetype that everyone else is following, including merchandising products through an app store that follows those principles. We're at a tipping point: a lot of new handset purchases are going to be iPhone clones, and you're going to see this unbelievable growth opportunity for the carriers around app stores like the ones Vodafone and Verizon have announced.”
One reason for this: billing. Hawkins points out that Apple has been extraordinarily blessed in its ability to require iPhone users to create a billing relationship via iTunes when they activate their device.
“I don't know how many other brands could get away with it, so in many cases they have launched products without the billing, like Android Market or the BlackBerry Storm on Verizon. With all due respect to something like Google Checkout, if you can't get the public to adopt it, then you either have to force them, as Apple has done, or directly integrate your app store with carrier billing.”
Enter the operator app stores, which will launch with exactly that. For all their faults, billing is their key advantage. It's enough to make you wonder – and this isn't an idea voiced by Hawkins – whether the delay in carrier billing for non-operator app stores is because the carriers themselves are holding back, to avoid rival stores getting traction before their own launch. Just a thought.
Even so, iPhone is proving lucrative for Digital Chocolate: “Typically, we've had to support well over 100 handsets with the carriers, and probably supply them with 100 games. And suddenly Apple has one handset, we put out a handful of games, and voila – it's suddenly 20-25% of our business.”
He pauses. “But they have penetrated less than 1% of the available market, so how exciting is it if this gets 100 times bigger?”
So how about that iPhone performance? Hawkins says Digital Chocolate is “a few weeks away” from hitting 40 million downloads on the App Store, although this includes free Lite games as well as paid titles. He estimates that Digital Chocolate has been responsible for as much as 5% of Apple's games downloads in the nine months since its first game was released.
“We have six games that have gone to number one, and we regularly get into the Top 100, purely on the basis of the merit of the products,” he says. “There's not a lot of viral plumbing built into our current iPhone games, we're not spending much money on marketing, and we're not getting games featured by Apple, which has been a huge driver of downloads for our competitors.”
Hawkins is interesting on the importance of the Top 100 charts on the App Store, saying it's “more of an industry bulletin” to assess how well different games and publishers are doing. Which is the point of a chart, of course – but his view is that word of mouth is more important than being, say, number 78 in the chart. He accepts that being in he Top 25, or the front page of specific genre listings, is important, though.
Digital Chocolate's strategic shift in the last couple of years has been fascinating to watch. From a mobile-focused company concentrating on original IP, the publisher has kept the latter principle, but extended this onto multiple platforms, including PC, Facebook and soon Xbox Live Arcade.
It's hard to argue that this was the grand plan all along – taking Tower Bloxx to Facebook was surely an experiment, for example – but it does seem to have coalesced into a grand plan – the cross-platform casual publisher with a growing interest in social features.
Or, as Hawkins puts it: “There's a huge opportunity for companies like us who have mastered how to be cross-platform companies. The big social winners are going to have to be cross-platform, but it's not that easy. A lot of Facebook companies are really just doing HTML and Flash, then you have iPhone companies just doing native iPhone development.”
So who are the main competitors in this space? Is it companies like PopCap who've come from a casual background to embrace mobile, iPhone and Facebook, or is it the social games startups like Playfish and Zynga who are going mobile? Get set for a zinger.
“Zynga have not performed that well on the iPhone, and they've pooh-poohed it as not being that big a deal – but that's because they haven't done that well,” he says. “iPhone requires special attention if you're going to do it well, but their content wasn't planned with the iPhone in mind. There are very few companies set up to be cross-platform companies – and that applies to almost every silo in the games industry, including the console companies who are struggling with ...
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This could be read as rather bullish boasting that Digital Chocolate is the only great cross-platform games firm, and everyone else should go home. But Hawkins clarifies that what he's saying is this space is completely up for grabs – and that Digital Chocolate has plenty of work to do to capitalise on this trend too.
“We have a really good head-start, but we have plenty of work to do,” he says. “I wouldn't say we have scaled up on Facebook, so we're going to have to accomplish a lot more. But it's not that hard for us: we're already doing Flash and PC stuff, we've already had a hit on Facebook, and we understand the principles of social spread. It's not like we're starting from ground zero.”
Actually, the companies that Hawkins praises are a good indicator of where his thoughts are currently at. He says Nexon deserves praise for pioneering virtual items in casual games AND bringing it to the US with some success. He also talks about what Playfish has done on Facebook, creating games that aren't fully-fledged virtual worlds, but feel like they are - “hamster-type games” - and reside within the social network.
He also says he's fascinated by the economics of virtual items and social games, where if you have enough paying customers spending $20 over the course of playing a game, you can support a big base of free players too.
“We're very excited about getting into virtual item economics,” he says. “We can increase the lifetime value of that customer relationship.”
Which brings us neatly onto NanoStars – Digital Chocolate's new Big Idea. Stand by for more on that in part two of the interview.
