Interview

Gameloft: 'Apple has become our biggest customer'

Gameloft: 'Apple has become our biggest customer'

The iPhone App Store is now Gameloft's single biggest sales channel, overtaking the mobile operators, says CFO Alexandre de Rochefort.

Apple has become our biggest customer," he tells PocketGamer.biz. "We also believe we are the biggest or second biggest publisher on the iPhone in terms of revenues generated."

Earlier this evening, Gameloft announced revenues of €26.2 million (around $33.45 million) for the third quarter of 2008 - an 8% rise year-on-year.

"We think they're pretty good results given the current global economy, and our industry," he says.

iPhone growth

iPhone has clearly been a big success for Gameloft so far. Could that success slow as competition hots up on the App Store in the coming months, though? Rochefort is bullish. "We are amazed at the absence of big triple-A titles on the iPhone," he says.

"Most of the games are from small developers, and the production values are not that high. There are only around 15 of what we would call triple-A titles, although I can assure you that we have quite a few more coming to market very soon."

Rochefort thinks that as the number of big titles from the likes of Gameloft and EA increase, so the opportunity for small developers to make money on the App Store will decrease.

"The window of opportunity for small developers is going to close. From a consumer's point of view, it won't make any sense to buy a game even for £1 or £2, if it's significantly less exciting than a game sold for £4 or £5."

The obvious retort is that he would say that, working for Gameloft. People are buying cheaper games from indie developers on the App Store, and there's arguably downward pressure on pricing even of the large firms' games.

Rochefort doesn't agree. "If you look at the triple-A games we've put on the App Store, we haven't changed the price even for a week or a day," he says.

"Real Football 2009, Asphalt and Brain Challenge have all been sold at $9.99 and £5.99, and they are still selling well. Our view is that these games are DS-quality, therefore the price at which we're selling them is actually a very good opportunity for the consumer - four times less expensive than DS."

That said, Gameloft has cut the prices of some iPhone games - particularly its more casual titles. Rochefort admits that this is because they were "basically mispriced at the beginning... the great thing about Apple's platform is that you can correct mistakes when they happen."

Console changesGameloft's console activities - DS, Xbox Live Arcade and WiiWare - accounted for 2 per cent of its revenues in Q3, compared to 6 per cent in Q2.

Why the drop? It's partly due to the strong performance of iPhone, which helped tilt the balance back to 98 per cent of revenues coming from mobile.

However, there were other reasons. Most of Gameloft's console revenues in Q3 came from older releases, but the publisher will be launching more games in Q4 on these platforms.

"Previously, we have said that for our full year 2008, we are expecting console revenues to be 10 to 15 per cent of total revenues, so as you can imagine, there is going to be a significant push in Q4," says Rochefort.

"The only slight disappointment I would also mention relates to WiiWare, which has got off to a pretty slow start."

He stresses that this isn't a Gameloft-specific problem, though.

"We think the reasons are linked to the [WiiWare] platform itself, and basically the interface, which is probably not up to the task. But this can very easily be changed."

Mobile flattening

Gameloft is clearly doing pretty well from iPhone, and hopes to do well from N-Gage and Android too going forward. What about basic mobile games sold through operators?

Rochefort agrees with comments made last week by Nokia's Jaakko Kaidesoja, in which he said mobile games growth had been flat for some time, and may continue to be so in 2009.

"We have been saying this to analysts for the last 12 months, but Nokia have a bit more weight than us, so people have taken notice more of what they are saying!" he says.

"The industry has very little growth at the moment, because there has been a lack of innovation for the last 12 months. Key platforms like iPhone and N-Gage were supposed to launch last year, but instead iPhone's gaming came in July this year, and N-Gage in September effectively."

He continues: "Until then, companies like Gameloft have been dealing with the same old phones for 18 months, and the same old decks from carriers. This is why the market is pretty much flat. So in that context, we are happy with our performance in the first nine months of 2008, because even stripping out the iPhone effect in Q3, our numbers still show growth in the old mobile activity."

Transition period

Rochefort thinks the mobile games industry has been in a transition period, not entirely dissimilar to those that cyclically affect the traditional games industry, just before the introduction of a new generation of consoles.

How big will N-Gage be for Gameloft, and how soon? EA Mobile had some negative things to say last week at the Nokia Games Summit, albeit while committing to supporting the platform with several new titles. What's Gameloft's view?

"With N-Gage, everything depends on how many units of Nseries phones they ship embedding the Ovi engine," says Rochefort.

"Judging by the numbers given to us by Nokia, N-Gage could become significant from a revenue standpoint as soon as Q4 2008. We have the games ready, we're just waiting for phones to be shipped to see a sales increase."

Android prospects

Android is another story - although Gameloft is supporting the platform and excited about its potential, it won't be a significant revenue generator until the first half of next year, when Android Market lets publishers charge for apps.

That said, Gameloft is one of the few mobile games firms to be selling Android titles from its own website already (EA is also doing this).

"We have tried to create a way for consumers to be able to buy games on Android," says Rochefort. "But it's mainly using your credit card, and from our experience selling mobile games in this way, we know the revenues are not going to be huge. At this time, it's just an opportunity for people who have Android to actually buy a game."

EA Mobile rivalry

So what about the competition with EA Mobile? At the start of this year, Gameloft was trumpeting the fact that its Q4 2007 revenues were ahead of EA's, but since then, its fierce rival appears to have pulled ahead - it posted $47 million of Q3 2008 revenues last week.

Rochefort can and does have views on this, analysing the respective publishers' financials and stripping out Gameloft's console revenues, exchange rate impacts, and EA's estimated revenues from its acquisition of Hands-On Mobile Korea to prove that it's Gameloft which is showing stronger year-on-year and sequential quarterly growth.

In truth, you can make numbers prove anything: the fact is that both publishers have grown their revenues year-on-year.

"For us, it's reassuring to see that even though EA has been extremely aggressive in terms of investment, licences and hiring people, the two companies are growing at the same levels," says Rochefort. "We are holding up quite nicely."

Recession-proof?

The looming global recession is one cause from concern, as may be the fact that EA and Gameloft's rivals are all either struggling, facing share price drops, or exiting the market altogether. This can't be a good sign, can it?

"For me, it's just an illustration of a market that is flat," says Rochefort. "These companies are not suited or organised to face a flat-ish industry. Keep in mind that Gameloft stopped hiring in September 07, so in a way, we have been lucky to have been aggressive during the good years, when the industry was growing very fast."Gameloft's view appears to be that for all the concerns about the economy, and a possible drop in consumer spending, the mobile publishers who remain will benefit from the upside - the better discovery and purchasing experiences offered by iPhone, N-Gage and Android.

"iPhone is the first next-generation handset to be sold massively into the mass-market, and the usage rates are very high already," he says.

"The sheer volume of iPhones, N-Gages and those type of phones that are going to sell, and the fact that the consumer experience is so much improved, means overall we'll still see a rebound. The rebound won't be as high as it could have been with a strong economy, but I still think we will see it."


Contributing Editor

Stuart is a freelance journalist and blogger who's been getting paid to write stuff since 1998. In that time, he's focused on topics ranging from Sega's Dreamcast console to robots. That's what you call versatility. (Or a short attention span.)

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