Majesco Entertainment is announcing today that it is making a bigger investment in Facebook games with the coming launch of its Parking Wars 2. Like many other traditional game companies, publicly traded game publisher Majesco is pivoting into what’s hot.
It will be interesting to see if companies such as Majesco, which have been established in console and handheld video games for a long time, can make the leap into social and mobile games as new, faster-growing players emerge in those markets.
Majesco has a license to make a game based on the popular Parking Wars TV show on A&E. It hired Area/Code to make the game and will formally launch the game by May, said Jesse Sutton, chief executive of Edison, N.J.-based Majesco.
“As Facebook becomes more mature, we are making it part of our strategy,” Sutton said. “Our focus will be on brands, brands, brands” for casual audiences such as boys, girls, families and adult women.
Majesco makes popular games such as the Mama series of games for handhelds and consoles. It published Cooking Mama for Facebook in recent months and the game has spread to more than 1 million monthly active users. Sutton says the company has gotten the quality, retention and monetization figured out on that game and is applying those lessons to the new game.
The new Parking Wars 2 game is being published under unusual circumstances. Majesco commissioned New York-based Area/Code to develop the game. But Zynga agreed to acquire Area/Code in January. Area/Code will finish the game for Majesco, but the game will be published by Majesco, which has a much smaller base of users on Facebook than Zynga, the market leader on Facebook. Sutton said the Area/Code developers were committed to finishing the game and Zynga agreed that they could do so. At some point, Majesco may take over the full maintenance of the ongoing game after the formal launch.
The Area/Code deal highlights a growing problem for smaller publishers like Majesco. There are lots of Flash game developers making games for Facebook, but there aren’t many with a proven track record for making hits. Once a development firm becomes famous for its work, it is often acquired by one of the leaders in the social game or traditional game business. That’s making it tougher for Majesco and other publishers to find the talent to make good games, Sutton said.
“There are very few of these companies now,” Sutton said. “When they show a little success, they are acquired by someone.”
Sutton said his company hopes that brands will play a bigger role on Facebook in the coming years. Spending lots of money marketing original games on Facebook is how Zynga and other big players approach the market. But Majesco doesn’t have that kind of marketing firepower. So it relies on the brand deals. This year, Sutton hopes to establish a trio of titles with strong traffic on Facebook, measured in the millions of monthly active users. Majesco’s first Facebook game was Bananagrams, launched in 2009.
Sutton said Majesco will continue to invest in console and portable game devices such as the Nintendo 3DS, the Nintendo Wii and the Microsoft Xbox 360 with Kinect. One of the company’s big hits is the Zumba game for Kinect. Majesco may also expand into mobile games on the iPhone and Android platform.
Majesco has 85 employees, with internal game producers making games with teams of external developers. In the Parking Wars 2 game, you park your car on a street and feed the meter. Then you try to give your friends tickets. You can buy consumable items such as a brick to throw through the window of your friends’ cars. You can also buy virtual goods to customize your street or car.
In its last fiscal year, Majesco reported revenues of $75.6 million, down 20 percent from a year ago. The loss per share was 3 cents compared to 24 cents a year earlier. Clearly, the company needs to score big with its new initiatives.
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How is Elop going to address this by
using Windows OS? He has to do more than just charge more, he has
to produce better product at competitive prices, which keep getting
lower. Elop will have to license the Widows OS, which is an
expense, one that he would bear to nowhere near the same extent if
he used Android. I feel he mistakenly looks at this as Google
commoditizing the Android platform, in lieu of the more reasonable
perspective of Google commoditizing the entire portable computer
space.
Well, the answer has arrived. Microsoft is buying Xx% of Nokia for paying Nokia over $1 billion to product Windows Phone 7 hardware.
Nearly all of this money is undoubtedly going into R&D and
marketing. Nokia and Microsoft (their new defacto owners) invariably see
Google as the pre-eminent trheat and are pulling out all of the stops
to nullify said threat. This also answers the question of how Elop, the
Nokia CEO will be able to deal with the reduced margins of having to
buy OS licenses while competing with vendors who get Android for free –
Microsoft is not only footing the bill, but investing in the business
as well. You see, the drop in Nokia’s share price is highly unwarranted
and their is visible synergy in this deal. Nokia gets to remove the
costs of OS R&D from its line times, sunk costs that have apparently
had negative incremental returns as they have had their asses handed to
them by Apple and most definitely Google – who knocked them off of
their number one market share perch in just over a year.
Microsoft gets the economic benefits of an existing hardware platform
that happens to have the number one marketshare metric in the world,
and gets it for just over a billion dollars. This is a win-win
situation. The question is, will it win againt Google. Both companies
will still fail if they don’t execute on Google-time, who has compressed
development cycle years into months – literally!
From the Bloomberg article linked above:
Shrinking Margins (yeah, you’ve hear thist from me often enough)
Espoo, Finland-based Nokia needs to cut
costs to keep operating margins from narrowing further, after they
shrank to 4.9 percent last year from 19 percent a decade earlier. For
2011 and 2012, Nokia may cut its budget for research and development in
devices and services by about a third from last year’s spending of about
3 billion euros, said Sami Sarkamies, a Helsinki-based analyst with
Nordea Bank.
Microsoft spokeswoman Melissa Havel
declined to comment on the specifics of the agreement. Laurie Armstrong,
a spokeswoman for Nokia, said the final contract hasn’t been signed and
the company will share further details when they are complete.
Nokia’s royalty payments will help
Redmond, Washington- based Microsoft make a profit on the accord even
after the payments to Nokia, one person said. Some of the payment to
Nokia would be made before the company starts selling the phones,
meaning Microsoft bears some upfront cost in the partnership.
…
Microsoft shareholders want the company
to salvage its mobile-software business while also reining in costs. The
company doesn’t break out results for its mobile-software unit, and
instead groups them with the profitable Xbox video-game business, making it difficult to evaluate the financial performance of phone software.
Chief Executive Officer Steve Ballmer
has come under pressure from investors and his own board to improve
sales of mobile software after the company lost market share to Google
and Apple. Microsoft stock has declined 7.8 percent so far this year.
The agreement for the more than
billion-dollar payment was part of a campaign by Microsoft to keep Nokia
from choosing Google’s Android operating system, one of the people
said. Nokia also opted for Microsoft because Windows Phone software,
which is newer than Android and has a smaller number of handsets for
sale, gives Nokia a better chance to stand out, one of the people said.
The agreement also has Microsoft paying Nokia for the right to use its patent portfolio, one of the people said.
As part of the deal, Microsoft will use
Nokia’s Navteq mapping products for functions such as geolocation
services and selling local advertising and coupons tied to a user’s
position. If successful, that also could generate additional revenue for
Nokia, which will share in the sales. The two companies will also
divide revenue from services like search and advertising, Microsoft
President Andy Lees said last month.
I’ve been warning my subscribers about margin compression in this
space, and its about to get much uglier – to the extreme benefit of
consumers of personal and enterprise tech. Previous (and prescient)
posts from last year on this topic…
- Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet
- After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
- As
I Warned in June, DO NOT DISCOUNT Microsoft in This Mobile Computing
War! Their Marketing Campaign is PURE GENIUS! and it Appears as if
the Phone Ain’t Bad Either - Apple on the Margin
- How
Google is Looking to Cut Apple’s Margin and How the
Sell Side of Wall Street Will Enable This Without
Sheeple Investor’s Having a Clue
Monetizing the Mobile Computing Race
We have a pretty firm idea of who is in the pole position as of now,
but that position is both risky and volatile, not to mention medium to
long term in nature – see Navigating BoomBustBlog Subscription Material To Find The Google Valuation Drilldown.
A more risk averse strategy is to go long on the component vendors
who supply those battling for pole position. Last week we released the
document Long candidate #1 – Hardware: The Mobile Computing Wars
to subscribers that outlined who our number one pick was after an
initial scan. This is not necessarily the absolute final say on the
matter since we have yet to perform a full forensic analysis, but the
company does look good in comparison to over 120 peers. Non-subscribers
should reference The Potential Equity Investments Most Likely To Prosper From the Google/Apple/Microsoft Mobile Computing Battle.
I am releasing the draft of the full shortlist of prospective long
candidates as of now (17 pages, 5 companies) to subscribers. Please be
aware that is a draft document and work in progress, but it is quite
informative nonetheless. See Mobile Computing Vendor Long List Note WIP. Those who wish to subscribe should click here.
Click here to read up on all of Reggie Middleton’s Mobile Computing War opinion, analysis, and research.
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