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When Small Means Big

ngmoco's purchase price may have shocked some - but the company's track record easily justifies it

DeNA knows what it's doing, in other words - and it knows what it's doing well enough to be able to identify the areas in which it doesn't really have a clue what it's doing, such as engagement with overseas markets. Even more importantly, it knows that its own market in Japan is threatened right now, not by a rival but simply by progress, and that ngmoco is the company best placed to ward off that threat by embracing that progress.

The iPhone and the new business ecosystem which has developed around it has blindsided Japan just as much as it did the rest of the world. It wasn't hard to predict that the iPhone would be successful, but few foresaw that the real payload of the device was the App Store, a fundamental restructuring of the business model for mobile content which has rapidly spread to other handset manufacturers and has destroyed forever the dream of network operators becoming media giants.

In Japan, the change has happened more slowly than elsewhere - not so much because of slower iPhone adoption (the phone does a healthy business in Japan, despite countless predictions of doom) as because there was actually a thriving mobile gaming market here before the new platform arrived. In the West, despite the best efforts of some very dedicated and creative people, mobile gaming had never clicked with most consumers; in Japan, in spite of fairly tortuous phone interfaces and purchasing systems, the consumption of mobile content was well-established. Japan, in other words, has inertia to overcome, whereas the App Store model blew through Western markets like a hurricane.

Yet the change is coming in Japan, and DeNA knows that, just as it knows that it needs to globalise. Considered in the context of Japan's biggest player opening a doorway to the world while simultaneously safeguarding its home market from a major threat, $400m no longer sounds quite so insane - even if ngmoco is only a few months past its second birthday.

Besides which, companies don't "pay their dues" - that's not how business works - and nor do games companies have any responsibility to prove themselves at the sacred alter of core gaming before they can go off and become market behemoths. An informed look at ngmoco's success suggests that it is neither down to hype nor to some kind of bubble in the mobile sector. Rather, it's a combination of perfect positioning and extremely agile, clever business thinking.

ngmoco positioned itself like a surfer two years ago, ready to ride the wave of the iPhone's growing success all the way home. In itself, that's not such a remarkable thing - many other fledgling developers hopped on board with the iPhone at the outset, although few of them had the kind of industry pedigree represented by ngmoco's founder, former EA executive Neil Young. What's remarkable, instead, is that ngmoco has managed to stay on its board at the crest of the wave for two years.

That's been no mean feat, requiring courage, insight and extraordinary business acumen. No aspect of the ngmoco story demonstrates that quite so clearly as the company's decision, in spite of some success in the paid-for market, to abandon all of its paid-for products and cease development of any game which couldn't be readily moved to a freemium model.

At the time, the wisdom of that decision was widely questioned, but it has proven to be exactly the right position to take. Most of all, it demonstrated that despite the traditional gaming backgrounds of many of the firm's executives, ngmoco was a company willing to think deeply about the new market it was founded to exploit, and to consider approaches which would never have floated in the traditional games market from whence they came.

ngmoco's purchase price is justified several times over. It is justified by the company's record of growth, by the millions of games which it has sold, and perhaps more than anything, by the unique experience and knowledge which it brings to its new parent company. ngmoco's games may not be your personal cup of tea - but they are a beverage enjoyed by millions, and that in itself shows a diversity in the industry which deserves to be celebrated.

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Rob Fahey avatar

Rob Fahey

Contributing Editor

Rob Fahey is a former editor of GamesIndustry.biz who spent several years living in Japan and probably still has a mint condition Dreamcast Samba de Amigo set.

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