ON ELECTRONICS ARTS BUYING JAMDAT MOBILE

GOING, GOING, GONE

Well, mobile games are going further mainstream.  Just announced after the closing bell, via the Wall Street Journal and AP:

Electronic Arts Agrees
To Buy Jamdat Mobile

Associated Press
December 8, 2005 5:35 p.m.

Videogame giant Electronic Arts Inc. agreed to acquire cellphone game publisher Jamdat Mobile Inc. in a deal valued at $680 million.

Electronic Arts said it will pay $27 in cash for each share of Jamdat stock and assume outstanding stock options. That would be a 19% premium over the $22.77 closing price Jamdat reached on the Nasdaq Stock Market before Thursday's deal was announced.

The acquisition, which is expected to close in early 2006, would quickly give the world's leading videogame publisher a stronger foothold in the growing and lucrative mobile game market, estimated to be about $1 billion globally.

Jamdat, based in Los Angeles with 350 employees world-wide, is a publisher of wireless entertainment software. Its portfolio includes hit cellphone games such as Tetris, Bejeweled, and Jamdat Bowling.

"We decided we wanted to move really fast on this, so we joined with the leader in North America to enable our content to be deployed on mobile phones more aggressively here and globally," said Larry Probst, EA chairman and chief executive officer.

EA, based in Redwood City, Calif., said it plans on publishing over 50 games for mobile phones during the first year of the acquisition.

Upon closing the deal, the mobile businesses of both companies would be combined into one team, and Jamdat Chief Executive Mitch Lasky is expected to lead EA's mobile games business worldwide, the companies said.

EA said it expects the acquisition to result in a one-time charge of 10 cents to 15 cents per share in its fiscal fourth quarter. Analysts polled by Thomson Financial were expecting the company to earn 28 cents per share for the fourth quarter on $749 million in revenue.

Good second exit for VC firm Benchmark , after having the company do a successful IPO last summer (...Congratulations all around.

In a way this is a vote for sports and "Casual" games on mobile hand-sets.  It's a category that's seeing increasing interest by consumers and by game publishers.  As Yahoo! uber-blogger Russell Beattie notes in a post today,

"Casual games rock. When I’m sick of PGR racing, WWII combat or Halo, puzzle games like Hexic are perfect. Actually it’s the other way around, most of the time I actually prefer puzzle games - Tetris, Lumines, Bejeweled, Polarium, etc. - rather than 3D action games."

Casual games are a bit different than what EA is used to...as this article in the HollywoodReporter notes,

"But there's still quite a difference between what it takes to build a tiny, 10-megabyte casual game and what it costs to develop a large "hardcore" -- or non-casual -- game.

The average casual game is built in nine months, often by a team of three to five people at a cost of about $100,000. Compare that to a triple-A title at a large publisher like Electronic Arts which can require hundreds of people working for 18 months at a cost similar to making a small movie.

If the casual game brings in $300,000, it's considered profitable. A hardcore game can rake in $50 million. Atari's blockbuster "Enter The Matrix," for example, sold 4 million copies and brought in $250 million worldwide.

Given the pint-size revenue that casual games generate, what do the largest distributors of the games find so enticing? Several things, actually, the primary one being return on investment (ROI). The distributors rarely pay developers an advance.

When the game is sold online -- typically at $19.95 -- the distributor can take as much as 75% depending on its contract with the developer. The distributor has no production or replication costs, no inventory expenses, minimal distribution costs, and no involvement with retailers."

It's important to note that mobile gaming are still at a very early stage.  Wireless broadband networks are just now being deployed in the US and overseas, and are SLOWLY being priced for mainstream consumer applications.

Handsets are getting more powerful, with faster processors and more memory, and as of this year, with iPod like hard drives. 

So the type of mobile games we'll see over the next few years will likely make today's mobile games look like Pong on a PC.