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Glu's Greg Ballard on buying iFone

It has the effect of separating Glu from the rest of the pack...

The latest major consolidation move in the mobile games industry took place this week, with US firm Glu Mobile moving in to acquire British developer and publisher iFone. MobileIndustry.biz sat down with Glu's president and CEO, Greg Ballard, and its EMEA managing director, Kristian Segerstrale, to discuss the reasons behind the deal - and how Glu Mobile plans to continue its challenge for the top spots in the mobile game publishing space.

MobileIndustry.biz So, first and foremost, what was the thinking behind the decision to buy iFone?
Greg Ballard

There are really two things that iFone brings to Glu. One is an unparalleled collection of brands - the Hasbro brands, the Atari brands, now the SEGA brands, the Sony brands - just a true all-star collection of really, really great brands that we want to exploit in Europe and also in the rest of the world, so we're very excited about that part of it.

The second thing is, it brings us more size - we're a bigger company as a result of combining with iFone. As a matter of fact, it makes us the number two player in Europe; it probably makes us the number two player in the US, or very close to the number two player; it puts us in the top three on a worldwide basis.

So it has the effect, essentially, of separating Glu from the rest of the pack. We think it's really a three company race between EA, Gameloft and Glu. It makes us the leading independent company, not owned by somebody else, as well. So, brands, size, momentum - that's a pretty compelling package.

MobileIndustry.biz You mentioned being in the top three there - I'd assume your eventual goal is to become the number one. How are you going to compete with the other two companies?
Greg Ballard

Well, it's not easy, because those are both very good companies. Jamdat actually is struggling to get its traction in Europe and in Asia, and we think we're ahead in both places, and so our real challenge in the US is Jamdat.

Gameloft just executes very, very well, but we think that we have some advantages in terms of the types of brands that we're focused on. Notice what Gameloft has done over the last couple of years - they've moved away from their heritage of big console titles, and more into the casual titles. Well, that's sort of our territory right now, and now with these brands that we've gotten, brands like Millionaire [in the UK] and Zuma worldwide, we really think that we have the right brands to compete head to head with either one of those companies.

MobileIndustry.biz With regard to brands like Tetris and Zuma - there was a comment made at GDC that we're asking gamers to play games that are actually older than them in some cases, and that maybe the mobile gaming industry is relying too much on classic titles and retro titles. Do you think that's an issue?
Greg Ballard

I actually don't think the mobile industry is relying on them; I think consumers are choosing them. If you look back over our history, or THQ's history, or even Gameloft's history, we've put out a lot of titles that were very modern, very innovative, very new - and by and large, consumers have voted for titles like Tetris, Monopoly, Millionaire and Zuma. So I actually think that what the industry's responding to is the signal that the consumer has sent, and the consumer likes easy, well-known titles that are just plain old entertainment.

MobileIndustry.biz Also at GDC, there was a lot of talk about quantity versus quality, and how it's a problem for the industry. Whose fault is that - is it the publishers or the networks? Do you think there is a problem at all?
Greg Ballard

As a matter of fact, I gave a keynote address at a conference in New York in 2004, where I made exactly the same point. The analogy I used was the old Atari systems in the 1980s that were boom and bust, because there were simply too many titles out. I expressed a concern that the same thing might happen in this business.

I think it's actually gotten better, but I do still think that in the US especially, there will have to be fewer titles ultimately on the decks in order to have consumers experience a higher quality of game overall. It's not anybody's fault; it's just the natural evolution of the system.

MobileIndustry.biz So you wouldn't put the blame on any particular sector of the industry?
Greg Ballard

No, I think the carriers could help by having fewer publishers that they support, and the publishers could help by putting out higher quality products; but at the end of the day it's a free market system that has to evolve, and it's going to evolve, I think, in the right way.

Both Macrospace, who we merged with last year, and iFone, who we're merging with this year, and Glu have always had a cultural commitment to high quality titles. So I don't know whose fault it is - but I know it's not ours.

MobileIndustry.biz What kind of projects do you have in the pipeline as a result of the iFone deal?
Greg Ballard

Right now, we're just picking up the projects that they had in the pipeline, the biggest one of which is Sonic the Hedgehog here in Europe, which is just starting to get rolled out and which we're very excited about. In the States, it's really Monopoly that is just starting to roll out, and Clue, because those titles just started to hit the decks in the last few months. So each region is a little bit different, and we're going to be looking at what we can do in Latin America and Asia on a separate basis, because those are both important markets for us.

Then, of course, we have our existing titles - Millionaire, which continues to be a very big property here in Europe, and we just launched Ice Age 2 on a worldwide basis, and we think it's going to be a hit.

MobileIndustry.biz Do you plan to acquire more brands and movie licenses? Are you more interested in developing original content, or in getting Monopoly, Ice Age and so on?
Greg Ballard

We've always believed in brands, and we continue to believe that brands are by and large easier for consumers to choose on a deck. We believe in the power of marketing that comes with those brands; Ice Age 2 is a classic example. We've literally gotten millions of dollars of advertising for Ice Age 2 that we otherwise wouldn't have gotten.

But having said that, in the last year or so, we have made an increased commitment to original IP. Alpha Wing 2 here in Europe has had a very successful rollout, and proves the power of original IP. In the States we've just announced Super K.O. Boxing, which will think will do well over there and here. So you'll see us continue to focus on our big brands, but you'll also see more original IP from especially the London studio, where they have a particular talent for it.

MobileIndustry.biz Do you think there's a big difference between the US and European markets?
Kristian Segerstrale

Actually, if you compare the top tens in the two regions, they're not that different. Sure, there might be a difference in timing, but in general there is more commonality than you would think.

But at the same time there are a couple of really important exceptions - titles which are culturally more relevant to regions. So you have titles like Deerhunter, which has been a great hit for us in North America and continues to do very well even two years after its launch. In Europe, on the other hand, we have Who Wants to be a Millionaire, which did more than a million units for us in less than nine months. We don't hold the rights for it in North America, but if you look at the North American charts it simply hasn't been as successful. So I think that there are exceptions, but increasingly, as the market matures, there are more global hits.

The other thing to note with Europe is that even though we like to lump together Europe as one market, it really is five big markets - the UK, France, Italy, Germany and Spain. If you look at those markets, you almost always find at least one or two products which are more local.

More than half, I would say, of hits tend to be global - but there's a very important local element as well, which is great news for us, because as a company, unlike our main competitors, we're actually home grown Europeans and a home grown US operation, and increasingly a home grown Asian organisation which can, in addition, leverage our global licenses. We're getting very good at tapping into what's good locally, and how we can act nimbly on a local level, whilst still leveraging that global scale. I think that's going to become more and more important.

MobileIndustry.biz So with regard to Europe, you believe it's important to view it in terms of separate countries?
Kristian Segerstrale

I think that's vital, yes. After our merger with Macrospace, I think we learned to think globally on a regional level. In terms of both business and technology decisions, we've become really good at making global decisions in such a way that we can still execute them in any local market in the best possible way as opposed to, say, making a European decision which is going to translate badly in the US.

The granularity of that is going to increase moving forward - you will see us being more granular in our approach to the European market, and be able to serve our key customers in the key regions of Europe even better, and invest in those relationships even more.

MobileIndustry.biz Returning to the iFone acquisition - will there be any job losses as a result of the deal?
Greg Ballard

I think that's inevitable. We haven't really gotten to the stage of looking at how big it's going to be, or where those losses are going to be, but I'm sure there will be some. But at the end of the day, I don't think that's going to be the biggest story coming out of this transaction; this is mostly about growth.

MobileIndustry.biz With that in mind, are you looking to expand the company so that you look more attractive to potential bidders, following the EA-Jamdat deal?
Greg Ballard

I don't think that's a principle or even a secondary purpose of this transaction. Our theory has always been that if you build a great company, you ultimately find a way of getting a reward for that value. But if you get distracted and start building your business in order to make yourself more attractive, or think too much about what it takes to be a public company, for example, you end up investing short term and for the wrong reasons.

So, internally, we just tell ourselves over and over again: 'Let's build a great company, and something good will come of that.'

MobileIndustry.biz So you would consider, in the future, an acquisition by a bigger company such as EA, if that opportunity came up?
Greg Ballard

I think it would have to be the right decision for our shareholders and our employees, but it's certainly not impossible. It is just as likely that we would take the company public on NASDAQ at some point - I've done that before as CEO, and our CFO has done it several times, so we'll see what the right thing is for our shareholders and employees when the time is right.

MobileIndustry.biz Do you have a date for a possible NASDAQ move in mind?
Greg Ballard

No, we're too busy dealing with this one.

MobileIndustry.biz What about any future mergers or acquisitions? Are there any companies you are keeping an eye on to see how they perform?
Greg Ballard

Like other companies in the business, we're constantly talking to a lot of different people, both in the gaming business, and other companies outside of that. But we're not trying to grow principally through acquisition - our ambition is to continue to grow the company organically, and to supplement on occasion by acquiring a company.

In the four years that we've been around, we've only done two transactions - Macrospace and now iFone - so it's not like we're on a spree. But if the right opportunity comes along, we have the backing of some of the world's biggest venture capital firms.

MobileIndustry.biz Where would you like see the company, ideally, in a year's time?
Greg Ballard

I'd like to see us in the top spot. I don't think any of are satisfied in this company with being number two, so we're trying to build the best business in the industry.

There are a lot of ways of thinking about that, by the way - it isn't just revenue. It's execution, it's the quality of your titles, it's how your employees feel about showing up every day... There are a lot of different ways we can achieve success over the course of the year, and measure ourselves at the end of that year. One of them will just be whether we're the number one company, but others will be are our employees happy, do our investors feel like they're getting a good return, are our customers pleased with the products that they're buying? Those are all important to us.

Kristian Segerstrale

We're still in the early phases of a market that is looking to be huge in the future. So in some ways, although it seems at least every quarter that now we're finally maturing, we have such a long runway ahead of us as an industry that it's still early days in many ways.

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