Glu CEO: Business will shrink 10% 15% in 2009: Wireless game maker muses on market for mobile entertainment

Glu Mobile Inc. limps into 2009 after enduring a brutal year that saw its stock tumble from nearly $5 a share to less than 40 cents. But while the company recently streamlined its operations and slashed jobs, its foot is still firmly down on the accelerator.
The San Mateo, Calif.-based firm unveiled an aggressive slate of eight titles set for launch in the first quarter of this year, all of which will be available on Java, BREW, BlackBerry and Windows Mobile platforms. The list includes two titles based on Glu’s own intellectual property, two based on hits from other platforms and, predictably, several licensed from franchises such as Bugs Bunny, superheroes and blockbuster Hollywood films.
The new lineup underscores Glu’s commitment to new, high-end handsets, continuing a trend that began when Glu started offering games for the iPhone. In addition to its support for BlackBerry and Windows Mobile, Glu will introduce new titles for N-Gage (Age of Empires III) and Android (Build-a-lot and Brain Genius Deluxe). Three of the titles will also be available for the iPhone and iPod Touch.
The ambitious agenda contrasts with the growing number of small mobile developers who have found success on a smaller scale by building games for specific devices.
“Really, this is the first quarter that Glu has had the chance to show its evolving strategy between the carrier business and some of the next-generation handsets we’re trying to transition some of our work onto,” said CEO Greg Ballard. “There’s no question about it; somebody focusing just on the iPhone avoids the complexity of having to support multiple devices. On the other hand, they give up all that revenue.”
Glu is hoping to leverage its efficiencies in porting games across a wide variety of handsets – a problem that has plagued publishers for years as gaming struggled to gain traction. It has moved much of its porting business to markets such as China and Brazil, Ballard said, allowing the company to address a broad swath of phones at a fraction of the cost it could have in years past. And the process has become easier thanks to manufacturer initiatives that established “families” of devices, allowing publishers to build one version of a title that can be played on several different models.
“Our cost of porting today is probably somewhere around 10% to 25% of what it was two or three years ago; as a cost basis, it’s much less than it was,” Ballard said. “But that’s only because we’ve been in this business so long, and we’ve got it down to a science.”
Which isn’t to say that Ballard is issuing rosy forecasts for 2009. Glu, which generates at least half its revenues in foreign markets, has been hurt as the strength of the dollar increases around the world, and the current economic slump will continue to make life difficult on game makers along with others. And the rise of ad-subsidized games has taken a toll – as Ballard has long predicted it would – by keeping the price of premium offerings down.
“I do think in Europe there’s been some erosion that’s been caused by the existence of free games,” he observed. While Glu has been able to raise prices in some markets to keep pace with the economy, “that’s not the case in Europe. We haven’t had the same ability to raise our prices there.”
Glu cut jobs and restructured its acquisition of Chinese publisher MIG last month in an effort to tighten its belt and ensure it had ample cash on hand to stay in business. And while this will be another tough year, the mid- to long-term future is bright, Ballard insisted.
“We expect 2009 to be a year in which our business is going to shrink 10% to 15% from ’08. Half of that is a retraction of the business per se, and half of that is sort of unique to us,” Ballard predicted. “But we think that’s a one-year phenomenon. We really look out two to three years and see a pretty robust business.”
Article updated Jan. 22 to include additional information.