Initial Signs Promising for iPhone Games, Say Glu, THQ CEOs
Initial signs are promising for iPhone as a gaming platform, Glu Mobile CEO Greg Ballard and THQ CEO Brian Farrell said in separate presentations at Thursday’s Goldman Sachs conference in New York. “We really like what we see” on the iPhone and smartphone market in general, Farrell said. THQ is seeing “some traction” for iPhone games and “we just can’t buy” the “cool factor” that comes with being on Apple’s App Store, he said. IPhone is a “legitimate handheld platform,” but it’s “still a small market,” said Farrell.
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IPhone has “clearly been a success story” and “a big part of the reason why” is the device’s flat-rate data service plan, Ballard said. Customers with flat data plans on iPhones and other mobile devices tend to download games at twice the rate of those who don’t, he said. Another factor has been superior merchandising of games on Apple’s device, Ballard said. IPhone has the “best merchandising,” with the “possible exception” of Nokia’s N-Gage platform in Europe, he said.
Apple overall offers the best business model for publishers, Ballard said, saying game makers keep 70 percent of revenue from games on Apple devices. “That’s the best deal that we get from anybody,” he said. Carriers have told Glu Apple’s business model is “one of the reasons why developers and publishers have spent as much time as they have” making titles available for iPhone, Ballard said.
Glu plans to be “involved extensively” with making games available for iPhone and other “high-end” mobile devices next year, compared with its fairly cautious approach in 2008, said Ballard. Next year the company plans to launch “ten or more titles” on such devices, he said. But those devices still will account for only about 15 percent of next year’s mobile game business, versus about 85 percent “at worst” for games on BREW and Java mobile devices.
A drawback to iPhone gaming is that the quality of titles in general is much lower than those made for N-Gage devices, Ballard said. Glu is now “more comfortable” with the N-Gage business model, he said, noting his company’s long, strong relationship with Nokia. In comparison, iPhone is “sort of the Wild West” where nearly anything goes, as in the “early days” of mobile gaming with the various carriers, he said. “That’s going to evolve,” and iPhone games will become “more and more sophisticated,” Ballard predicted. IPhone is now the easiest platform to release mobile games on, a characteristic he termed “deceptive” because of today’s low quality bar on titles for Apple’s device. The quality of $9.99 iPhone games, in particular, will rise quickly, he said. But Glu’s aim is to not make iPhone-exclusive games, he said, pointing out that it makes better economic sense to make titles for multiple platforms.
There’s a charge for many iPhone games apart from the flat data fee. Some games are free, but publishers’ prices are all over the map -- 99 cents, $4.99, $9.99 and more. It’s hard for a publisher to make any money on games under $4.99, said Ballard, who predicted Apple could move to a subscription model for iPhone games. Glu had recommended to Apple that the fee for iPhone games be more like those for the Nintendo DS dual-screen portable videogame system than for cellphones, but Apple opted to let the market decide pricing, Ballard said.
Phone service carriers “will always be a part” of the mobile game business, Ballard said, but predicted they will take more of a backseat to device makers and game makers, as seen now with iPhone now. Glu has a “white label program” for certain games with Verizon Wireless under which select titles carry the carrier’s brand name instead of Glu’s, but he said that’s the closest Verizon Wireless had come to the content business. The game business is “simply too complicated” for the carriers, he said.
The “next wave of consolidation” in the mobile game space is underway, and it’s mostly apparent in the current run of distribution deals, said Ballard. As Farrell did, he said more companies will exit the mobile game arena. Those not market share leaders will find it increasingly difficult to compete, especially as games become more complex, Ballard said. Game makers with a focus outside the mobile arena, such as Sony, will opt increasingly to have one of the major mobile players handle their titles in the mobile space, he predicted. Glu signed a deal with Sony under which Glu handles that company’s titles in the mobile arena in all markets except the U.S., he noted.
On the online game front, THQ said early this week that it had formed a joint venture with ICE Entertainment, an operator of online games located in Shanghai, to launch Dragonica, a free-to-play, micro-transaction-based massively multiplayer online casual game, in North America during 2009. ICE CEO Sun Tao is the former chief technology officer of The9, which operates online games, including Activision Blizzard’s hit World of Warcraft, in China.