We had a wonderful GamesBeat 2015 conference with 116 speakers and moderators who showed us the breadth of gaming. I thoroughly enjoyed many of the speeches, fireside chats, and panels over two full days of programming based on our Game of Thrones theme. But a couple of talks stuck in my head the most. Two of our first speakers showed us the very different paths that leaders can take once they’ve scored a big hit in the $30 billion mobile game market.
Niccolo De Masi, chief executive of Glu Mobile, talked about a portfolio strategy to making hit games, even in the wake of the company’s phenomenal celebrity title, Kim Kardashian: Hollywood. He was followed by our mystery speaker, Gabe Leydon, CEO of Machine Zone, maker of the No. 1 top-grossing mobile title Game of War: Fire Age. They’ve both got big hits, but they’re taking very different approaches to how they’re using the resources that those hits are producing.
These companies are not unlike Activision Blizzard and Electronic Arts, two giant video game companies have been dueling for decades. For many years, EA was chasing the success of Activision Blizzard, which learned how to focus its energy on a handful of properties, such as Call of Duty, Skylanders, Destiny, World of Warcraft, Diablo, and StarCraft. EA also had some huge hits like EA Sports, Battlefield, The Sims, and Need for Speed. But it took longer to narrow down its bets on surefire hits. And so, for many years, Activision Blizzard was ahead. EA has finally begun to close the gap, but it is still in the process of winnowing down the number of things that it does, as evidenced by its recent decision to shut down Maxis. It’s a little like looking at the Starks and the Lannisters in Game of Thrones.
The comparison of Glu and Machine Zone looks similar. De Masi was proud that his company had many different intellectual properties to choose from. In its most recent quarter, Glu generated revenue from not only Kim Kardashian: Hollywood, but also titles like Deer Hunter 2014, Racing Rivals, and Contract Killer. Glu is playing in genres such as sports and Diner Dash time management games. This is the safer strategy, spreading bets across many different kinds of games.
And while De Masi strongly believes in the staying power of Kim Kardashian, he is also diversifying his bets within the big genre of celebrity games. He has signed deals with Britney Spears, Katy Perry, and Kendall and Kyle Jenner. Kim Kardashian West is closing in on 100 million followers on social media. When she says something about the game, that’s free advertising for Glu. Based on numbers from the summer, the other celebrities who signed up give Glu a reach of 650 million people. Over the next five years, De Masi believes the celebrity social followers engaged with Glu’s games will grow to a billion. De Masi is only targeting the A-list celebrities with more than 100 million followers now. That’s going to make life harder for some of his competitors who are trying to make me-too celebrity games.
For De Masi, the growth in games is unpredictable, and he is covering all the bases. For the licensed games, he has to share perhaps 10 percent of revenues with the licensors. If the games are successful, it’s a win-win. But if consumers get tired of the brands and celebrities, it could sink like a rock. The strategy is a sound one, but it comes with no guarantees that it’s going to work in the presence of people like Leydon.
Leydon is playing a very different game. To make Game of War, he put 80 of his company’s 95 employees to work on just one game for 18 months. They created a messaging infrastructure, a translation engine, and a strategy game on top of it. When they launched it in 2013, it became a big hit and it grew to the point where it became No. 1 in gross revenues earlier this summer. That success allowed Leydon to grow to 550 employees. But in contrast to De Masi, Leydon is pouring most of it back into what, for now, is just one major game.
Like De Masi, Leydon is also making other bets. He has teams working on other games in stealth. And he is pouring a lot of money into research and development for improved technologies. But he sees the pressures of running a huge, at scale mobile game across the globe. And it is a very difficult thing to do.
While others focused on making simple mobile games. Leydon was thinking about doing a massively multiplayer game, like World of Warcraft, on mobile. That requires constant updates and a lot of reinvestment aimed at retaining players for the long haul. When I asked Leydon why he didn’t just do more games with all the money he has, he said, “Why doesn’t Blizzard just do four World of Warcrafts?”
These games aren’t easy to run, he said.
“I would say, looking at other video game companies, that I don’t think the multi-title strategy is going to last,” Leydon said in our fireside chat. “That was our bet in 2011. The market is too competitive. The process of creating an app, running an app, and marketing an app is too complicated to do for five games a year. Especially if you want to grow a game to a very large scale. I don’t think it’s possible to do five games a year. I’m not even sure it’s possible to do two.”
He added, “I see it as our responsibility to build out infrastructure and be able to create the company that can support mobile at scale. Mobile at scale is huge.”
Leydon believes that the pressures on game companies are only going to get worse. Even with all of the money Machine Zone puts into Game of War, players still complain. And Machine Zone is adding 200 customer service people in Las Vegas. By 2017, Leydon says that everything will be much harder. The requirements for executing will be higher. The user’s definition of high quality will be different. Leydon will put his focus on doing one, maybe two games, with thousands of employees supporting them so they can be at scale, global mobile games.
That’s an incredibly risky strategy. But if he wins, as he is already doing so on the app stores today, he doesn’t have to share the spoils. Leydon believes that if he focuses on making one game really good, he’ll beat the companies that are trying to do five or ten games really good.
I can’t say with any certainty that either De Masi or Leydon will be the victor. But I think this quote from the popular HBO show holds true. “In the Game of Thrones, you win or you die.”