Merging Japanese content with a cheap Chinese labour force seems like a wise strategy. At least that is what BBMF is banking on. The company makes games for mobile phones and was founded by Antony Yip (founder of Myrice) and Han Lian (founder of Inphomatch Asia). Here the CEO, Han Lian, talks about the company's new Japanese investor, its Nasdaq listing and its strategic change of direction.
In an interview with us six months ago, you talked about a Nasdaq IPO. What's happened since?
We took the company public on the Nasdaq OTCB. We did that via a reverse takeover of a listed shell on Nasdaq. We are actually now a Japanese company and we now make original games. When we left off we were localizing games from Korea. Now we have an in-house ability to make a large number of games, that we can export to 18 countries. We currently make about 20-30 original games per month.
Where are the games made?
The games are made in China. However, the headquarters of the company are now in Japan. My CFO and I are based here as well as our entire Japanese unit. Some of the high spec games will be done from Japan - especially the design and the 3D graphics, which are used on games for 3G phones. We have a very steady production line in our games studio in Nanjing, so we can constantly churn out 20 to 30 games per month. Our strength is really to make games according to this sort of output and also be able to adapt them to 260 handset types worldwide. We have developed ways to do this, and that requires a lot of know-how.
We have now scheduled more than 10 titles for launch in Japan this fall via KDDI and Vodafone. By the end of the year we should be distributing to 30 countries.
And you have to localize these games, in terms of language etc?
Yes, we do. It is quite labour-intensive. But this is also where the mobile games industry is very different to the console games industry. The latter tend to be made on only three platforms and you only need to make 2-3 titles because each costs $60-70. So a lot of huge companies survive on a few brand name titles.
With mobile phone games, they are multi-platform. That means your handset is probably different to mine. I might use a Sony Ericsson, and you a Nokia. So for our game to run on your handset we have to adapt it or port it; meaning we make lots of different versions. We actually make 260 versions of each game so as they can run on every type of phone handset.
So because it is very labour-intensive, that plays to our China production base. Plus we are also making games for the handsets that are about to be released, because that's what the carriers and the manufacturers want.
How are you structured?
We have a team of 20 top managers. Our chief game designer is Canadian Chinese - and is ranked the number 16 Starcraft player in the world (which he could almost make a living from playing competitively). Our chief architect of our systems is ex-CTO of Chinadotcom.
All these 20 managers invested in the company. These 20 managers are responsible for our 200 people. We share equity so all are stakeholders and we are very conscious of costs. Our monthly costs are less than $80,000. A lot of managers and staff sleep in bunkbeds in our facility in Nanjing.
In Japan we are working to make alliances. The Atlus Group recently invested $1.1 million for a 2.4% stake. This is a Jasdaq listed developer of Playstation2 games, mobile games and photosticker machines. It owns the rights to lots of animation characters we can use in our mobile games. Its most famous branded game is Megami Tensei, which has sold over five million copies. It is itself owned by Takara, a leading toy manufacturer, which owns brands such as Transformers.
We want to forge more strategic equity alliances likes this, gaining new Japanese shareholders and becoming a truly Japanese company. Japan has a wealth of content, such as animation characters and Playstation titles, and very well made games. We want to distribute Japanese content worldwide via our mobile games.
Are you break-even, cash-burning or profitable?
We are going to be profitable by the end of the year. Right now we are more focused on increasing our distribution channels all over the world.
What led to the strategic changes since the last interview you did with FinanceAsia [six months ago]?
Survival. It's been tough. I don't want to say it is easy. It's a new business model, and it is not easy. We don't pay a lot of cash upfront for expensive licenses, such as movie titles, famous characters. But we control our cost through strategic partnerships with companies who own titles, characters and believe they can grow with us and our stock price.
We are like a machine gun, firing about 30 rounds per month. Of course, that means every day is firefighting and troubleshooting. We have the largest games studio in China with 200 people and the challenge is to make games at a constant quality level. It's easy to make games cheaply in China, but much more difficult to make them to a worldwide quality and distributing at a constant output.
Let's say we have 100 game engines. If we get a nice Japanese character we can put that into a lot of game engines. You might then get 50 new games. If you get 10 characters, that is 500 games. It doesn't take a lot of time to change the character on one of our games into a Japanese animation character. So we're advising a lot of Japanese companies to take strategic stakes in us.
Is it a problem to migrate console games onto mobile phones? Do they have enough buttons?
That's where knowing gameplay becomes important. We are all very familiar with the different Playstation platforms. One of our managers was an ex-executive of Playstation in China and spent over 10 years at Sony. We will thus break the games down into what is possible on a mobile.
What's the revenue model?
We get paid per download, and also a monthly subscription fee.
So are you hoping some of these games will become so addictive that people will keep playing throughout the year - like the online gamesplayers that NCSoft and Shanda have?
We're very focused on networking games, and by next year we should be pushing out about three per month. There is a big opportunity to build big multiplayer mobile communities next year. A lot of people in Japan already spend a large part of their time on handsets, checking emails, downloading ringtones and so forth. Next year they will spend even more time on their 3G phones and we already do games for three 3G handsets in Europe. In fact, our downloads have been very good.
For instance, two of our games had 10,000 downloads in just four days last week. They were sporting games that benefited from the Olympics. For mobile games you have to be in the market with the right games at the right time. Having had this success, I feel a lot better this week than last week.
How sophisticated are the networking games these phones can run? Is the hardware up to it?
We're not talking about realtime Playstation games where you can shoot me. That won't be possible for a while. That depends on the capacity of the network and the CPU speed.
What we do is turn-based games where people can compete. For example, one of our games is a soccer game. It's a simulation game, where you own a stadium and pick 30 players out of 300 and train your players and allocate money to building your stadium, and to how much time players train on dribbling, heading, shooting and so forth. Then you invite different owners for a match in your stadium and then you might or might not win. If I win I get money. You can become a soccer tycoon.
The match runs on our server in Nanjing and can go on for a while - around 15 minutes. It keeps you interested and addicted, especially as the community gets bigger. It's like tamagutchi. You could spend a lot of time on nurturing your team. And you can be playing people from anywhere, not just your own country.
What happens if you get a phone call in the middle of one of these games?
It stops. Then after the call the game just continues. It's all done off our server, so that's not a problem.
I believe the 1990s were the internet era and going forward will be the mobile era. I and a lot of my friends spend a significant amount of time looking at our handsets every day.
What's the five year business plan? How much profit do you expect this company to be making?
It is possible we could be making $100 million within five years. We believe our strategy is right and will yield a lot of profits in the long term.
Is your ultimate plan to do a full Nasdaq listing?
Yes, that's the plan. We want to do something next year. And that may involve raise new capital. Our current plan is to raise strategic capital in Japan from companies that have content and can add value - investors like Atlus.
In terms of money we have raised, the 20 managers all put their own money into this business - around $2 million. Our paid up capital is $4.9 million.
I am extremely confident we will be profitable by the end of the year.
