Why Hollywood Should Turn to Mobile Gaming to Replace Dwindling DVD Revenue (Guest Blog)

“The most successful Hollywood-IP partnerships can generate $100 million+ of lifetime revenue,” writes Niccolo de Masi, chairman and CEO of Glu Mobile

At first glance, the gaming industry and Hollywood seem like unlikely bedfellows. However, falling under the same entertainment umbrella, gaming, be it mobile or otherwise has risen as a conduit for the extension of TV, film, music, and print brands.

In fact, Hollywood partnerships have proven successful for the mobile gaming industry at-large for quite some time. Titles such as Glu’s “Kim Kardashian: Hollywood,” Kabam’s “MARVEL Contest of Champions” and EA’s “Star Wars: Galaxy of Heroes” exemplify this de-risked approach to marrying popular IP with successful game engines.

During the feature-phone era, companies such as Jamdat (acquired by EA), Gameloft, Hands-On Mobile and Glu all competed to license Hollywood and console gaming IP. Companies were in the business of not building B2C skill sets, but rather B2B2C capabilities. They would interpret and translate existing IP for feature-phones, and port relatively simple experiences across thousands of different handsets. Mobile network operators would carry around 300 games, with only a small subset of these readily discoverable. Recognized IP was often a featuring determinant to a greater extent than core gameplay quality.

By today’s standards, the feature-phone experience was a long way away from being compelling. The total feature-phone opportunity was a small one — a large game like “Guitar Hero,” “World Poker Tour,” “World Series of Poker,” or “Tetris” would perhaps generate about $20 million per annum. Most titles based on feature films would not generate more than about $5 million per annum. At this scale, mobile gaming was at best a small part of the marketing department at a major Hollywood studio. They were not more than a rounding error on box office receipts and DVD sales.

The iPhone kick-started the mobile computing revolution, a transformation with enormous consumer benefits which may otherwise have taken another five years to get going. Despite persistent efforts by Microsoft, RIM, and Palm, they never cracked the wow factor at the right price point to trigger mass-market smartphone adoption.

Fast-forward to today and there are several smartphone/tablet games, which will generate well over $1 billion during their lifetimes. The most successful Hollywood-IP partnerships can generate $100 million+ of lifetime revenue. With the advent of streaming, DVD revenues can no longer be depended on to augment box office receipts at anywhere near the levels of a decade ago.

In absolute terms, I believe that mobile gaming is positioned as potentially an effective DVD replacer: systematic revenue that a film studio can generate ancillary to the box office. In addition to the direct revenues, the dominance of free-to-play as the business model for mobile gaming companies means that millions of users can enjoy interacting with IP they love without paying a dime. Mobile gaming serves as a powerful brand reinforcement mechanism and even outright brand extender.

I believe we are in fact just scratching the surface of what can be created in partnership between mobile gaming leaders and Hollywood studios. “Kim Kardashian: Hollywood” merges a virtual world with Mrs. Kardashian West’s real life — often mirroring locations she is visiting, and special occasions she is celebrating (such as vacations, Halloween, and her birthday party in Las Vegas). It is not impossible to believe that a digital TV series could be created in tandem with a mobile gaming franchise — with cross-promotion, additional plot lines, and character interactions all occurring in a coordinated fashion.

We are now in an era where the largest mobile games can be installed over 100 million times. Those are staggering numbers, which are arguably comparable to the box office viewers worldwide of a major movie blockbuster. Glu’s “Deer Hunter 2014” alone has been installed nearly 175 million times in the 2 years it’s been live globally. Imangi Studios’ “Temple Run” franchise has been downloaded more than 1 billion times on mobile devices since it hit the market in August, 2011. As Rovio evidenced with its “Angry Birds” IP and partnership with FOX the possibility already exists of brands being built through mobile gaming first and then being translated to video formats thereafter.

Hollywood and mobile gaming leaders have much to learn from each other. Major film studios have been masters of platform transitions — a number of them able to trace their roots to nearly a century ago. Building and monetizing IP, constantly delighting audiences, making smart acquisitions and optimizing their roadmap are just some of the examples of what mobile game companies can learn from the master content creators in tinsel town. Hollywood studios in turn can benefit from the interactive expertise and rapid development processes that mobile game companies — operating at the cutting edge of technology — are always navigating.