Consolidation continues in mobile gaming market

In the latest merger in the mobile gaming world, Glu Mobile Inc. has bought iFone Ltd.

The mobile gaming market continues to consolidate, with Glu Mobile announcing that it bought the U.K.'s iFone for an undisclosed sum.

IFone develops mobile versions of the popular games "Sonic The Hedgehog," "Monopoly" and "Lemmings." Glu Mobile gets rights to those games, as well as a stronger sales and marketing presence in Europe, it said.

It's the latest in a string of mergers in the sector. Glu Mobile was formed last year by a merger between mobile game developers Sorrent, of the U.S., and Macrospace, of the U.K. Soon after, Electronic Arts entered the market by acquiring Jamdat Mobile for US$680 million. There have been other mergers too.

The consolidation is happening because companies need sufficient economies of scale to develop versions of their games for global markets, said David Ward, formerly chairman of iFone and now chairman of Glu Mobile Europe.

Mobile publishers have to develop hundreds of versions of their games to cater for the networking standards, handset configurations and spoken languages used around the world, he said. "It's not like the console market where there are three platforms that change once every five years."

IFone had been developing versions of its games for Qualcomm's Brew platform, used by Verizon Wireless in the U.S. That work, as well as replicating iFone's sales and marketing operations in North America, was proving "a little bit of a stretch," Ward said.

The company looked for a buyer because it needed more capital, more global reach and access to more brands, he said. Glu Mobile has "huge internal development resources" and will be able to continue developing iFone's titles for world markets, he said.

"This is the rush for a global proposition," said Ward, who is also on the board of Atari Inc. "It's very evident, with the moves from Electronic Arts and others, that we're at the beginnings of real scale in this industry, and the winners are going to be those who can offer a global solution."

The deal makes Glu Mobile the number two mobile gaming company in the U.S. behind Jamdat, according to Ward, and "probably number two, or equal" in Europe with Gameloft, he said. IFone had doubled its revenue each year since its founding and turned profitable last year, he said, although he declined to give actual figures.

Daren Siddall, a principal analyst with research company Gartner Inc., said the mergers are also being driven by consolidation among wireless operators, who prefer to deal with a small number of large game publishers to reduce their costs.

The number of people willing to pay to download games to their mobile phones remains relatively small, he said.

Gamers shouldn't notice any big changes as a result of the mergers, according to Siddell. Pricing for games will continue to be set largely by the powerful operators, he said.

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James Niccolai

IDG News Service
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