Deal Radar 2010: PressOK Entertainment

In 2008, as readers will recall, the field of mobile games publishing underwent a dramatic change following the launch of the iPhone and its App Store, which disrupted the relationships between large, entrenched publishers and mobile operators and OEMs. Since that time, operators have launched their own versions app store, opening up their platforms to more developers. Mobile games took less of a hit in 2009 than other gaming segments, and SNL Kagan predicts that mobile games publishers will have revenues of $540 million in 2009, up from $382 million in 2006. Large publishers such as Electronic Arts, Gameloft, Digital Chocolate, and Chillingo still dominate the overall mobile games marketplace. But today’s Deal Radar company, PressOK Entertainment, believes that there is plenty of opportunity for small to medium-sized publishers that can develop and distribute their content on multiple platforms and feels that this is where it fits in.

PressOK Entertainment publishes mobile games and applications for multiple platforms including the iPhone, Android, BlackBerry, and BREW (Qualcomm’s Binary Runtime Environment for Wireless). PressOK has published the top ten iPhone game Finger Physics, as well as America’s Next Top Model, Tweet-Tweet, Bumper Stars, Gin Rummy, and Go Fish. The company’s goal is to develop and publish games people enjoy so much that they share them with friends and family.

A business unit of Mobliss, Inc., PressOK is headquartered in Seattle and has development offices in Moscow, Russia, and Minsk, Belarus. The CEO of Mobliss is Colin Prior, who was at Sun Microsystems in its pre-IPO days. He merged his second successful Seattle startup, Reaxion, with Mobliss in August 2008. With the merger, Prior formed two distinct business units, PressOK Entertainment and Reaxion. The PressOK Entertainment business unit is headed by Alex Koloskov and Ryan Morel, who have a combined 14 years in the mobile games industry.

The company spent a good part of 2009 updating its internal tool set to support the iPhone, Android, BlackBerry, and BREW from one code base. This enabled it to reduce the high cost of porting and increase its reach. PressOK is aware that most big publishers have similar, existing systems, but the company also feels that most small developers which have been around for the past 18 months or so will struggle with multi-platform support and thus limit their growth potential to the size of the App Store, or whichever single platform they are focused on. This is where PressOK, which develops between four and ten games and applications a year, believes that it has an advantage over similar-sized competitors.

The company’s current TAM is everyone who plays games on an iPhone or iPod Touch, BREW, BlackBerry, or Android. To break this down, Press OK estimates that there are 80 million iPhones or iPod Touch devices in the market, with approximately 80% of these users playing games for a total of 65 million users. For BREW, PressOK estimates 100 million devices with 8% to 14% of users playing games, for 8 million to 14 million users. There are approximately 32 million BlackBerries with about 15% of users, or 5 million people, playing games. Finally, about 80% of the 6 million to 8 million Android users play games on their devices, for a total of 4.8 million to 6.4 million users. Industry observers estimate that there will be 30 million Android devices in the market by the end of 2010, for a total of 24 million users.

In total, PressOK assumes between 100 million and 115 million total users by the end of this year, maybe more depending on how quickly distribution and discovery improve. The company will look to add support for other platforms such as Windows Mobile and Symbian. The percentages of BlackBerry and BREW users who have downloaded a game are clearly smaller than that of Android and iPhone users, but PressOK also expects these BlackBerry/BREW figures to grow as OEMs and operators again focus on this segment and make the discovery, purchase, and sharing of games easier for consumers. Today, PressOK’s two biggest targets are iDevice and BREW users. With BREW MP-enabled handsets set to launch on AT&T this year and a renewed focus from Qualcomm on the BREW platform, that market provides PressOK with the most projectable revenue. The App Store and iPhone/iPod Touch provide the company with the highest revenue upside, but this platform is also a hit-driven marketplace. The company believes that providing additional content to its existing user base over time will help it to mitigate some of the risk of operating in this buyer’s market.

The company has a two-pronged growth strategy. First, getting more games out on more platforms to not only mitigate downside risk, but also to increase upside potential. Second, selling additional content to existing users since it is much easier to sell a new game to an existing customer than to a new customer. For 2010, the company is adding features to its portfolio of games across all platforms to enable customers to easily discover additional content from PressOK within their existing gaming experience.

As it gained traction, PressOK had multiple successful titles on BREW, including America’s Next Top Model and Gin Rummy. The company believes that being successful on BREW requires not only technical ability but also existing relationships with operators and partners, which it has been cultivating for some time. But there wasn’t one title in particular that pushed the company over the hump in the BREW market. For the iPhone market, PressOK’s biggest success has come from Finger Physics, which, not unlike Tetris, requires players to assemble and manage geometric shapes. Released on October 5, 2009, Finger Physics has been downloaded approximately 2.8 million times and has over 500,000 active users. It was initially a slow burn that made its way up the iPhone apps charts methodically, a few spots each day, to reach number 1 in arcade games and number 6 in overall apps on December 6, 2009. It’s currently number 26 in arcade games.

With the existing system, which the company says has not yet been optimized, over 25,000 consumers downloaded both Finger Physics Free and America’s Next Top Model Free on the iPhone without PressOK making a concerted marketing effort. That’s approximately 10% of the Finger Physics Free install base, and PressOK believes that if it can get that rate closer to 20% across a variety of games and platforms, such an increase would help to jump-start sales of new titles. The company is also considering ways to offer customers incentives to download additional paid content. This can take a variety of forms, including digital goods, gifts, free content, and so forth.

PressOK was bootstrapped as a division of Mobliss following the merger of that company with Reaxion. PressOK had approximately $1.6 million in revenues in 2009. The company says it is close to profitability and is currently reviewing multiple funding options to grow the business, including existing cash reserves, becoming cash flow positive, and outside investment from either existing or new investors. PressOK expects to have this plan fully defined by the end of this calendar quarter.

The management team is not focused in an immediate exit, instead concentrating its efforts on building the business the right way, which for PressOK means further developing the strong portfolio of technical and creative IP along with valuable relationships and industry experience.

Recommended Readings
Deal Radar 2009: Social Gaming Network
Deal Radar 2009: Zynga
Deal Radar 2008: Playfish

This segment is a part in the series : Deal Radar 2010