Rather than tell you, Dan Kranzler chooses instead to show you how he turned Mforma into a worldwide publisher of video games, ringtones and other hot downloads for mobile phones...
Rather than tell you, Dan Kranzler chooses instead to show you how he turned Mforma into a worldwide publisher of video games, ringtones and other hot downloads for mobile phones.
From his wallet, he produces five gold frequent-flier cards. With United Airlines alone, he achieved premier status midway through the year.
His point: To build a business, you have to go out and get it.
Mforma has spent the past several years getting itself in position to go after the billions spent on entertainment worldwide by working to bring some of it to the cellphone, a task that has become increasingly possible because of advancements in both handsets and wireless networks.
Now, with much of the groundwork done, the Bellevue company’s efforts may start paying off. Today, Mforma is announcing a partnership with Marvel, the comic-book maker, that could generate more than $100 million in revenues over the next four years a jaw-dropping amount for such a nascent industry.
The deal follows a string of activity for the company that includes raising $63 million in venture capital this year and acquiring almost a dozen companies worldwide.
Mforma’s business plan centers on gathering brand licenses to distribute and sometimes develop mobile content, including top-selling game titles such as “Top Gun.” In the next year, it plans to roll out ringtones, games and other content for many of Marvel’s characters, including The Incredible Hulk and Ultimate Spider-Man.
Huge challenges lie ahead. Developing content worldwide is complicated work, and other companies have made inroads, too. In addition and perhaps unique to Mforma the company has grown through acquisitions and must continue integrating all of the entities into one.
“We believe we have a chance to create a global media company that rivals traditional media companies,” said Mforma Chief Operating Officer John Brimacombe, who works in London. “These are the years a new media leader can be built. It is an immense challenge we set in front of ourselves.”
Huge new market
Estimates of how much this market will grow range across the board, but the important point, Kranzler said, is that “mobile content is the largest new market in a decade.”
In 2004, spending on mobile video games is expected to reach $345 million in the U.S., according to IDC, a research company. In four years, that number is expected to quadruple to about $1.5 billion.
The worldwide market is much more immense. The ARC Group, a London-based research company, projects mobile entertainment services to generate $27 billion globally by 2008.
A back-of-the-envelope calculation is enough to excite John Fisher, a managing director for Draper Fisher Jurvetson and a Mforma investor.
He said if a user is willing to spend $10 a month for entertainment content on a phone, and there are a billion people with phones in the world, that works out to $10 billion in revenue a month, or $120 billion a year.
“Venture capitalists get excited about a $1 billion market. When its $100 billion, you get very, very excited,” he said. Mforma “is one of the early companies that is seizing the opportunity.”
Driving this growth is the convergence of new technologies. Wireless carriers are supporting higher data speeds. Large color handset displays with high resolution have replaced postage-stamp-sized gray screens. The phones also have increasing memory capacity, so applications can be downloaded and played from the handset, not over the network, which is much slower.
There is a grab bag of opportunities. Specialized ringtones and video games based on movie releases are just the beginning.
These kinds of opportunities are what helps Kranzler muster the energy to crisscross the globe on a regular basis.
To be sure, it’s not the money. Kranzler’s annual salary is $1, and anything he might make off a potential sale of the company has been earmarked for charity.
Before starting Mforma, Kranzler founded eFund, a Kirkland venture-capital company that donates its profits to charity through his nonprofit Kirlin Foundation.
It was his pet project after making tons of money from two previous enterprises: Bellevue’s InfoSpace, which also develops mobile content, and Beepers Northwest, which became the Northwest’s largest paging company before it was sold to McCaw Cellular Communications, which later became AT&T Wireless.
“In 20 years, I’ve rarely seen a more passionate man who’s worked harder,” said Fisher, the Mforma investor. Of Kranzler, he said: “It isn’t about the money at all. It’s simply a side effect of achieving the vision.”
Origins in eFund
Mforma started when Kranzler combined four of eFund’s failing investments to create the company. He became the CEO, scaled back the four companies from 250 employees to 40 and refocused the enterprise.
Now it is a multinational company with the potential for huge revenues, he said. Today, Mforma has 200 employees, 20 of them in Bellevue. It has offices around the world, including in San Francisco and London, as well as China and South Korea.
The far-flung business includes partnerships with 100 wireless carriers that reach more than 300 million subscribers in 39 countries and involve 12 languages.
When talking about the future, Kranzler hints at initial public offerings, more acquisitions and more deals yet to be announced.
Mforma is not the only company recognizing the potential of the mobile entertainment industry. Other players include InfoSpace, Digital Bridges, with headquarters in Edinburgh, Scotland, and London; and Sorrent of San Mateo, Calif.
Calabasas, Calif.-based THQ Wireless recently announced a deal with Lucasfilm to develop and distribute “Star Wars”-branded content for mobile phones.
But perhaps the most visible competitor is Los Angeles-based Jamdat Mobile, which completed a $102.1 million public offering in October.
Jamdat, founded in 2000, has 215 employees and offices in Montreal, London, Tokyo and Hyderabad, India. Its two big games this year were “Jamdat Bowling II” and “Bejeweled,” a multiplayer adventure game.
During the first nine months of the year, Jamdat had revenue of $25 million. Put in perspective, Mforma’s Marvel deal alone has the potential to bring in that much each year for the next four years.
But it’s too early to designate a leader, said Michael King, an analyst at the Gartner research company, especially because large media companies such as Sony have yet to weigh in.
“In the longer term, they [the media companies] will either buy an Mforma or build functionality themselves,” he said. “Why would they use a middle man?”
Right now, King said, there’s a place for companies like Mforma because of all the grunt work it takes for content to be developed for the mobile phone. The number of tweaks needed for a game to work on every handset, on every network, in every country, is tremendous.
“It’s not whether or not this is going to be a lucrative market,” King said. “I think the issue is who is going to be there to take advantage of that, who will be the vendors, who will have the carrier relationships and the content for a critical mass. It’s still an extremely fragmented and young market.”
Tricia Duryee: 206-464-3283 or firstname.lastname@example.org