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Dossier industrie: Distribution et exploitation

Le marché du divertissement mobile


- Jacob Møller, Président de Kiloo, fournisseur danois de contenus et jeux mobile, a présenté les stratégies et les opportunités du marché du divertissement mobile à Cartoon Master (Digital) 2008. Depuis son établissement en 2002, Kiloo a produit de nombreux jeux de grande qualité.

Cet article est disponible en anglais.

Founder and chief executive officer of Kiloo ApS, Jacob Møller created Kiloo in 2000 after working for a number of years as a programmer. Since then Kiloo has grown incredibly, becoming one of Europe’s most successful publishers of mobile games and entertainment.
Kiloo’s «Hugo The Troll» games, based on the successful cartoon series have sold over 2 M copies and the company is the exclusive global partner with LEGO™ for mobile games.

How is Kiloo’s distribution network composed?
Kiloo’s distribution network consists of more than 80 direct distribution channels (operators, media channels and aggregators) globally. The revenue model is pay-per-download or revenue share. We have several prices, according to the content. The average pay-out per download for content is as follows:
> Games between E UR 1.00 and 1.50
> Video between E UR 0.35 and 0.45
> Personalisation between E UR 0.25 and 0.35
> Games are the biggest earners of these three categories. Users pay between E UR 5 to 10.

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What is the development cost for a game?
The average cost is between 500,000 to 700,000 euros. We spend 15 to 20% of our budget in testing and distribution.
Mobile content is a high-volume market. You need to have successful content that can be sold more than 500,000 times in its lifetime to be profitable. You need to have a significant distribution power in order to achieve this result.
You need to develop a high quality product, but you need to bring an appealing licensing to it. The operators are getting more and more selective on the products they launch and the space is quite limited.
Producers need to be prepared for a long billing cycle before they can see return on investment. When a consumer buys a product it may take between 9 to 12 months before the company receives the proportion share of that download.

Who dominates the market?
The mobile entertainment market is an operatordominated market. The main revenue comes from the operators. There are a handful of media channels who are doing fairly good numbers in terms of downloads and revenues.

Which is the distribution model you use?
The typical distribution model is as follows:
On the left side we have media channels, operators and handset manufacturers. A bove Kiloo we have a content aggregator who is in contact with the same channels. You can say that we are competing with the same costumers, but it is a volume market and you can’t really consider them as competitors.
What you have to avoid when establishing a distribution network is to make sure that the aggregator is not aggregating content to other aggregators, because at the end of the day you get a split which is not a significant amount of money.
There are no systems in place to track where your content has been placed. It is a system which is based on trust between aggregators and content providers… It is important for content providers to be selective about who they are working with.

Which are the key territories?
In Europe the main territories are UK, Spain, Germany, Poland and France. It is a very fragmented distribution market with more than 40 major operators, media channels. Fragmentation means that they tend to have certain requirements in terms of how they want the content to be delivered.
In the US there are four major operators (Verizon, T-Mobile, AT &T, S print). The operators are working with different technologies and have their own walled garden.
In Asia the main markets are China, Australia, Indonesia, Philippines, Thailand, Korea and Japan. The last two countries represent significant markets, but extremely difficult to address because they have their own way of thinking content.

In which direction is the market going?
Juniper Research, a market research firm, estimates in its June 2006 «Mobile Games: Subscription & Download, 2006-2011» report that the worldwide market for mobile games will grow from $3.1 billion in 2006 to $10.5 billion in 2009, a compound annual growth rate of 50.2%. PWC predicts in a recent report average annual market growth rates of approximately 15% up to 2011.
Personally I do not see 50% of growth… What you hear from the market operators is that the growth is closer to 10-15%.
Another factor is that we have an extreme amount of consolidation in the market. Lots of companies are closing, others are merging… the market is very turbulent. From our perspective, we have been following the organic growth route since day 1. We do not feel the same turbulence of the market.
I think there is a need for more consolidation to get out of the turbulence.

Do you think that the model can be ad-sponsored?
Yes, I believe that the operators are not the right commercial partners for distributing content in the long term. Operators are technological facilitators, they know nothing about content. We need new commercial models in order to monetise the content. Ad-funded can be a good model to exploit content on mobile phones. You could have an ad at the beginning of your video and have a broader market, as the content would be delivered for free. Research shows that people are interested in content, but they are not really ready to pay for it. A lot of people play games on the phones, but ultimately they do not pay.

What are the technological challenges?
There is a battle between Flash and Java formats, like the one we experienced ten years ago between the same two formats. The advantage of Flash is that it is easier to develop and the budgets are smaller. I believe Flash will have a good position in the market in the next years.

What is the consequence of the handset fragmentation?
We have more than 500 devices, different displays and ways of navigation. When developing a game, we have to take this into consideration from the early stage of development. We face a real challenge to get the games on all handsets.

For content providers, do you need to have massive hits to have a profit?
Not necessarily. What you need to consider is the cost of having your content distributed on mobile phone. The most important thing is to have a feeling of the industry.

What is the profile of the users downloading the content?
Our audience is the younger generation, the ones that are using the phones. For a football game developed with SEGA, our audience is between 6 to 16. The industry lacks information on precisely who the audience is. It is a problem because you cannot tell potential advertisers who you are targeting. The big companies do have this kind of information, but this is not open to the public…

Cartoon Master Murcia, Spain, April 2008

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