How EA screwed the App Store, why Blackberry is screwed and why you should move to Toronto
This was originally published in Pocket Gamer.
A panel talk dryily entitled 'VC and research panel' is perhaps not the most exciting thing to experience after an excellent lunch, but that was the situation at the Mobile Games Forum.
However, with Ray Sharma, founder of Canadian developer XMG Studio, on the panel, such notions proved ill founded.
But to kick off, the panel where asked what the biggest trend of 2010 and 2011 was.
According to Nic Brisbourne of venture capitalist DF J Espirit, "The big trend in 2010 and 2011 is the rise of Android so we're back to a multi-platform world, which means cheaper devices and that's good for developers. It's an opportunity for middleware companies. "
"Ngmoco was the most high profile deal but Google bought Bumptop, which provides the basis for Honeycomb tablets," said XMG's Ray Sharma.
"Google made 19 acquisitions in mobile in 2010," said Screen Digest's Jack Kent. "That's more than Microsoft, RIM, and Nokia combined."
Barry O'Neill, once of Namco, now of Other Ventures said, "ngmoco was the event of 2010. It's a great example of how to sell a company. The attempt to turn the US consumer into a $50 ARPU customer demonstrates something about the overheated nature of the social market. The TaT acquisition by RIM was great too.
"Also, as I said last year, the Android Market was like a half-built shopping mall. Why can't Google get its crap together to make a decent store? I hope it will in 2011."
EA stole Christmas
It was about this point that the Ray Sharma roadshow kicked into gear.
Chairman Tim Harrison asked whether people expected to see continued growth in devices or have we plateaued?
Following some brief discussion, Sharma started.
"EA screwed the industry at Christmas with its 99c price cut. EA saturated the App Store, and Apple supported it. It was bullshit right?
"How can you compete with Madden at 99c? We had Inspector Gadget at $1.99. I think we lost 15-20 percent of our December sales because we had to cut prices to compete. We've moved to freemium now.
"It will be interesting in the longrun to see how EA will compete with indie freemium given its cost structure."
After this point, the discussion turned to company valuations.
"We're seeing high valuations on projected growth, which is something we last saw in the Java space," said Barry O'Neill. "I think it's quite dangerous, because Android is a fragmented space compared to iOS. Google has a responsibility to address the Android Market issues in a serious way."
"The Android Market is where iTunes was in 2000/2001," said Sharma
"I was talking to Google recently. It's caught in a paradox over fragmentation because it wants to be open for OEMs to make devices while supporting developers. The comparison is Microsoft, which has three chassis cases for Windows Phone 7. Microsoft has payment issues and development issues but I expect it to do well in Christmas 2011.
He then went on to talk about RIM.
"70 percent of iOS revenues are driven by games but how many BlackBerry devices have OpenGL support?" he asked. "The number one games company on RIM is doing $5,000/month."
"RIM's market share is overstated. It's falling in US. The brand is sustaining it in Canada but it has challenges. Using QNX for future devices has broken the reason for developing on BlackBerry now because you'll have to redevelop content for new BlackBerry devices.
Do you need the money?
There followed various topics such as the use of HTML5, apps stores for cars, and medical apps that tell you when you're going to have a heart attack.
The conversation settled down to profitability and investment.
"I think it's feasible for developers to be profitable on two or three projects on two or three platforms," said Barry O'Neill. "You don't need VC money to provide a nice living for the shareholders and founders.”
"VCs are interested right at the start of new markets. After that it becomes much more difficult to judge, then investment moves to spades and shovels such as analytics and payment services," commented Nic Brisbourne.
Unsurprisingly Ray Sharma had a view too.
"The costs of running a business are 98 percent cheaper than there were 10 years ago. Developers should have made cashflow breakeven with 6-12 months. Companies with the potential to scale to tens of millions of users maybe should use VCs, but using VCs is a loss of control. No VC wants to invest until to have a hit, but when you have a hit, who needs a VC?" said, adding...
"Locate your office in a low tax environment such as Canada. 40 percent of our operating costs come back to us in tax credits, and it's 50-60% for R&D costs. The government is very supportive of game development, especially in Toronto. There's also a lot of talent in Toronto. That's the best reason to be there."