With a new CEO and a fresh business strategy, I-Play is jockeying for a lead spot in the quickly consolidating mobile game industry.
The 8-year-old U.K.-based company, which has its North American headquarters in San Mateo, is competing with several mobile game makers -- nearly all in the Bay Area -- for dominance of a young industry expected to generate U.S. sales of $1 billion by 2010. VCs have doused mobile game publishers with hundreds of millions of dollars in the last few years, hoping to cash in on an industry which gives large players a disproportionate advantage over small fry.
"The challenges and capital requirements needed to build a top global mobile publisher are challenging to overcome in this crowded and quickly maturing market," said Keith McCurdy of San Francisco-based Hands-On Mobile.
Establishing early leadership is crucial in mobile entertainment in part because wireless carriers limit the number of games they offer to subscribers.
"Verizon and Sprint don't want to deal with a hundred little players," said Todd Chaffee, managing director of Institutional Venture Partners, a Hands-On investor. "They've told me they want two or three content partners. That's the beauty of getting to scale."
Scaling up
The mobile game industry has been consolidating steadily for the last two years. In that time, "at least 50 mobile game companies have either been acquired or have ceased operations," said Trip Hawkins, founder of San Mateo mobile game publisher Digital Chocolate, which raised $22.5 million this week to fuel its expansion.
Consolidation sped up in December, when Redwood City gaming giant Electronic Arts swallowed market leader Jamdat Mobile for $680 million, making EA Mobile arguably the largest player, followed by Ubisoft's mobile game subsidiary Gameloft.
Other competitors include sizable independent players such as I-Play and San Mateo's Glu Mobile -- which both have raised between $50 and $60 million and are expected to bring in roughly $50 million in revenue this year -- and smaller Peninsula-based firms such as Limelife, Digital Chocolate and Blaze.
Game veteran McCurdy just left his spot as CEO of Blaze to become president of studios and products at Hands-On Mobile, which is set to become a broader mobile media company with revenue of $100 million this year.
"I think the industry is going to consolidate into three or four larger players and I wanted to be one of those companies," McCurdy said.
Where I-Play fits in
David Gosen, who was promoted to I-Play's CEO in March, has been bulking up his 150-person business primarily through organic growth. This, he said, has saved I-Play time others have spent weaving together corporate cultures, technologies and business processes. But he said the company may well tread on the acquisition trail in the future.
"To be successful in mobile gaming you cannot afford to be subscale," he said.
Growing organically also has saved I-Play some cash, helping it reach profitability in early 2006. Analysts say the firm will bring in revenue of roughly $45 million in 2006. Gosen would not confirm that number, but said I-Play more than doubled revenue between the first quarter of 2005 and the first quarter of 2006.
Acting CEO since October, Gosen has focused the company's growth on the U.S. market, where it has picked up notable market share, according to research firm Telephia. Its most recent report from the first quarter of 2006 ranks I-Play second with 8.2 percent market share in terms of revenue compared with EA's 30.8 percent. Glu Mobile, which some analysts say is on par or slightly ahead of I-Play, ranks fifth in the report with 5.3 percent market share.
Gosen said I-Play has done well in the United States in part because it is well-equipped to navigate the market. Unlike many companies that launch in the U.S. and expand abroad, I-Play gained early experience in the more fragmented European market, with its many languages and wireless carriers.
In addition, I-Play is focusing on so-called casual games, simple addictive fare like puzzles and card games. The strategy seems to be working well, and has produced hits such as "Jewel Quest" and "Mah Jong Quest."
The CEO is most jazzed about the popularity of mobile racing game "The Fast and the Furious."
Raved Gosen, "It's a colossal success."
