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Jason Spero, Digital Chocolate

Created by Electronic Arts founder Trip Hawkins, Digital Chocolate promotes itself as a mobile game developer and publisher with a difference - and indeed, with a product catalogue almost entirely devoid of licenses and filled with well-received, high quality titles, the company appears to be on the road to defining that difference. met up with Jason Spero, Digital Chocolate's VP of marketing, to discuss where the company now stands on achieving its goals in the market - and what obstacles he sees to the development of mobile gaming in the coming months and years. Check back next week for the second half of this interview, where we discuss Digital Chocolate's latest effort in the connected gaming space - Mobile League Sports Network. Can you give us a brief outline of where Digital Chocolate stands right now, in terms of your market position and outlook?
Jason Spero

Well, if you'll endure a quick history lesson about Digital Chocolate... Trip [Hawkins] founded Digital Chocolate in the US, focused on the US market originally, knowing that it was a global market. Around six months into it, Trip took a jaunt over to Europe and sat down with Tim Harrison at Vodafone, and said, we want to put the business together with somebody in Europe, who's the best developer there is? He said, without question, Sumea Studio in Helsinki.

So Trip raised another round of funding - we've only taken two relatively small rounds - and purchased Sumea Studio. That was July 2004, and with that we got a back catalogue of games, a lot of experience of games in Europe, and a team on the ground that did development and was actually transitioning into having direct relationships with operators to distribute their games.

Phase one of the company was about bringing a lot of that content to the US, as well as developing operator relationships in the US. If you fast forward to where we are today, we're 155 people worldwide, just over half of them in Helsinki - the other half or so are in San Mateo, California - and we have distribution relationships directly with all the major operators you can name in Europe and the US. The only hole in our distribution right now is Telefonica in Spain; we just did a fairly successful launch in France on the i-Mode service, and we hope to go with Telefonica fairly soon, although I can't talk about anything specific right now.

We also sell throughout south-east Asia, in many cases direct - in China we go through an SP, like most people, and in Japan we go through Upstart, who bring us into that market where we sell with Vodafone KK, as was, and pretty soon we'll launch with KDDI. So, we're doing a pretty good job on the distribution side.

In Europe, we're fairly well centralised in Helsinki. We do have a gentleman named Stephen Judge, who's on the ground just outside London, and takes care of the UK market for us. We have a really strong global relationship with Vodafone - us and GameLoft are the two platinum providers to Vodafone, so I think if you have a conversation with Tim and those guys, they know us quite well. We were the first JSR184 developer for Vodafone - they're now rolling out some of what they call In-Application Billing, IAB, which will let them do a lot more robust and flexible things with their billing mechanism, and so we're the first developer they've asked to take advantage of that API and write to it. Because of our leadership in leveraging technology for mobile, Vodafone looks to us, and as a result, we have a really healthy relationship.

Basically, we have a catalogue in the neighbourhood of 50 applications, and we will build in the neighbourhood of 16 to 18 this year. When I say that, I'm not counting shipping 2D and 3D versions - we think of that as one application - so about seven or eight of those will have both a 2D and a 3D partnership. We ship and cover all the phones - we don't think of 3D as its own application. It's a part of the handset cover.

I should say that on handset coverage, we're vertically integrated - so we do all of our own development, or 99 per cent of it anyway, we do the majority of our own porting work, and we do marketing and distribution. We're a vertically integrated publisher all the way through the system.

I think what's unique and different about Digital Chocolate from a story perspective is that we don't do a lot of brand licensing. Where some companies are in the business of licensing brands and building games to meet those brands, and sometimes just putting that brand on a fairly generic game, our entire strategy is original IP built for the mobile marketplace.

If you go back and look at the original business plan that Trip wrote, the theory is that the mobile phone is so disruptive and so different as a platform that there will be new killer content that's developed for the mobile phone. There are a couple of points along that development path that I'd identify, but the basics are - even in the simple Java and Brew download market, where you download something to your phone, it's 100KB, and you never make a data connection after the initial download, Digital Chocolate in 2005 was tied with GameLoft for the top-rated publisher in the Western world. That's if you use IGN ratings, or GameSpot, which stopped doing reviews halfway through the year. If you use those two reviewers, which are generally considered the top reviewers in the space, Digital Chocolate won the quality race - and we think that's incredibly critical.

We think that for a start, that's indicative of where we're spending our money. We're not spending our money on licenses, so we can spend it on games. There are a lot of people who have asked me why the industry seems to be stuck at its current penetration rate; everyone seems to have come to understand that we've hit a wall on penetration, usage levels and the number of downloads per quarter.

People ask me why, and what my opinion is - and my view is that we're churning users. My view is that we're not satisfying end users; my view is that we've got plenty of trial. So many people in the industry are focused on trying to bring more users into the tent, how to get more people to come in and try applications on Vodafone, or O2, or Sprint - and I'm happy that people are spending effort on trial, we are as well, but the industry as a whole has under-invested in customer satisfaction. So you believe that while they're bringing people in the front door...
Jason Spero

People are walking out the back door at the same time. Yeah. I won't name names, because you'll quote me on it, but we have on our wall in our office a Dirty Dozen - and the dirty dozen are applications that we think do great damage to the industry, whether it's because they get lots of downloads because they have good brands, but then don't deliver on user expectation, or because they have gotten enough love from operators that they have been in a featured position for quite some time. There are a lot of them in the racing category, and there are a lot of them in the movies category - and every time a user shows up and downloads one of these, that user is going to be lost to the mobile ecosystem for quite some time.

Our industry has the very beginnings of a word of mouth thing going on, and has the very beginnings of viral spread going on, with some tell-a-friend things that we and others have done, and the ability in some of the game lobbies to be able to review games yourself. You start to be able to have a little community going on; but every time we promote and feature something that is of low quality, and deliver a bad user experience, we've then taken $5.99 or $6.99 from that user, and lost them forever to the ecosystem. Do you think that effect is more damaging in the mobile industry than in the traditional PC and console gaming industries - perhaps because the user hasn't made the investment in hardware that they have on consoles?
Jason Spero

Because we're not the primary experience on this device, right? With a PSP, or an Xbox, or whatever else, as you say, they've made the investment. This is an impulse purchase. This is a "well, I'll give it a try" purchase. There are some people who download four, five, even six games a month - but they're in the vast minority. What you're talking about really is a lot of people downloading one app a month, or one every other month - meaning that this is something which is a nice-to-have for them, but not a must-have.

I do think that because it's after voice messaging, voice mail, maybe your address book - content is maybe the fifth or sixth most used thing on the device - so yes, I absolutely think it's a nice-to-have, and if we don't deliver, then it's a we-don't-need.

The larger principle of satisfying your customer is not specific to mobile gaming - the larger principle is true whether you're a retailer or whomever. People understand that it's much cheaper to keep your current customers than to acquire new customers. That's quite an old tenet. So, Digital Chocolate is focused on satisfying customers. We spend our entire budget on building a game, and it shows up in our reviews.

I think that there are a lot of people who talk about quality. We spend more of our oxygen and more of our air time talking about quality because it's pretty core to who we are, but you have to unpack what quality means, too. You have to ask, what is quality? Does it mean that it's well-engineered, and you've got a good line of sight, and you don't see blips in the screen? Well, yeah, that's part of it. But it's also about understanding what the phone is capable of.

A lot of other publishers talk about this, too. You want to have one-button gameplay, where you can use one finger and play while you're talking to someone, while you're in a conversation or whatever. That's because it's quite casual as an experience; we're not doing force feedback, two-handed console gaming. You're playing on something that's often the size of a sticky note.

We focus a lot on one-button gameplay. We focus on leveraging the APIs in the phone, so everybody knows about 3D now - it's quite well publicised - but the fact that you can make an HTTP connection out of a game now; the fact that you can send a message out of a Java session now; the fact that you can access the address book out of a game now. These are all things that can make an application more compelling, especially as you start thinking about community.

That's where we're focused. We continue to compete in the downloadable, what I would call local, application space - which means that I download, and I play, and I could be in a bunker underground and I could have the same experience, and it's quite fun. We compete in that space; we have to, that's where the majority of the industry's money is. But where we're investing our research and development is in connected apps.

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