When Small Means Big

Published as part of our sister-site GamesIndustry.biz's widely-read weekly newsletter, the GamesIndustry.biz Editorial, is a weekly dissection of an issue weighing on the minds of the people at the top of the games business. It appears on Eurogamer after it goes out to GI.biz newsletter subscribers.

Who are the world's biggest games companies? It's a tougher question than it sounds. If you want an answer, first you need to narrow down your terminology - what do you mean by "big"? Are we referring to the number of games sold? To the annual turnover? To the market capitalisation or valuation?

This is a question which is somewhat trickier in the technology and entertainment arenas than it is in traditional businesses. Cars, for example, come with many different price tags but the majority fall within a single order of magnitude and manufacturers operate in broadly similar conditions - so there's usually a tight relationship between selling the most cars, having the highest turnover and even, market peculiarities permitting, having the highest valuation.

Game companies are different. Some make their profits from selling games for 59 pence. Others focus on markets ten times more expensive, but usually under £10. Still others - those whom we would generally consider "traditional" games companies - can sell games for ten times higher again. Depending on your perspective, some of those companies may be scarcely recognisable as games businesses. The enduring success of others may be utterly baffling to you.

I mention this, obviously, because plenty of people have seemed very baffled by the enormous price tag which was placed on mobile developer ngmoco earlier this week. The San Francisco based firm was picked up by Japanese social and mobile gaming giant DeNA, a name almost entirely unknown outside its native country, for an eye-watering $400 million.

Amid the storm of congratulations aimed at ngmoco, a company whose products and staff alike tend to be widely liked by industry peers, the acquisition has also raised some eyebrows - and even some hackles.

There's no denying, after all, that ngmoco fits the label of "upstart" rather nicely. The company was only founded two years ago and has mostly focused its efforts on the iPhone - a platform which is itself only three years old and which despite stupendous success as a gaming device still struggles for acceptance among the pastime's more vocal, traditional consumers.

In other words, some people - and I refer not only to gamers here, but to plenty of gainfully employed people within the industry itself - feel like ngmoco hasn't paid its dues. The industry is full of respected, aged companies which have laboured for years on core franchises, but whose valuation isn't even within spitting distance of ngmoco's nine-figure sum.

Since the deal was announced, I've heard people simply complaining that the sums involved don't seem fair. It's not the most mature of responses, but at least it's a little more intellectually honest than those who are disguising similar sentiments by sucking at their teeth and questioning whether DeNA has bought a turkey off the back of mobile gaming hype.

DeNA may not be a company which many people had heard about until this week, but it's hardly a lumbering corporate behemoth paying out over the odds to engage with a cool new market sector, and nor is it an inexperienced player hoodwinked by hype. It's tough to own a mobile phone in Japan for very long without running into DeNA's work - the firm operates the country's largest social and gaming mobile portal, boasting around 11 million users, which accounts for almost one in every 10 people in Japan. Its game catalogue is littered with success stories and with big domestic entertainment brands.