iDreamSky's Monte Singman wants to take Western hits to China (interview)

Disclosure: The organizers of ChinaJoy paid my way to Shanghai. Our coverage remains objective.

SHANGHAI — iDreamSky Technology, a Chinese third-party mobile game publishing platform, is one of those companies cashing in on China’s mobile game market, which is expected to grow 93 percent to $2.9 billion in 2014.

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Western game developers want nothing more than to cash in on that market. To date, Shenzhen-based iDreamSky has distributed worldwide blockbuster mobile game hits such as Temple Run, Fruit Ninja, Subway Surfers, Cookie Run, Doodle Jump, Brizzle, and Asphalt. The company has raised $10 million from Redpoint Ventures and Legend Capital. iDreamSky has several hundred employees. Tencent’s THL A19 is the largest shareholder in iDreamSky.

If you succeed in this cross-border transference, the rewards are huge. iDreamSky recently filed for an initial public offering on Nasdaq, with the purpose of raising $115 million. But navigating the market is hard. You may need a guy like Monte Singman, vice president of business development at iDreamSky and a veteran of Shanda Games and Zona Research. I met Singman a long time ago, and he has made it his business to figure out the right developers to know.

We talked to Singman recently about publishing in China at the ChinaJoy game trade show in Shanghai. Here’s an edited transcript of our interview.

GamesBeat: Can you give us a refresher course on iDreamsky’s history?

Monte Singman: The company was founded in 2009. Before, we were an outsourcing studio for mobile games.

GamesBeat: How quickly did your opportunities for publishing grow up?

Singman: It was Fruit Ninja that changed everything. Of the three founders – Michael, Anthony, and Jeff – Michael and Anthony were engineers. Jeff was a game industry guy from Hong Kong. It was Jeff who went to Australia and brought the game back.

GamesBeat: It was already becoming a hit, right?

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Singman: Yeah, it was already a global hit, everywhere else. I believe it was also a hit in China, but no one was receiving any benefit from that. iDreamsky paid for it and became the exclusive publisher. All the benefit from Fruit Ninja came to iDreamsky after that. That’s when iDreamsky became a publisher.

GamesBeat: And that helped draw in more games from elsewhere.

Singman: Right. That background of being an outsourcing studio, and also the fact that the cofounders were programmers, helped the company put together the teams to do proper adaptation for the local market.

GamesBeat: How quickly did China become such a big market? A couple of years ago, did it seem like this was going to happen?

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Singman: In 2012, there were less than 50 people at iDreamsky. We always have a year-end dinner, which is usually in February of every year. At the last year-end dinner, this February, there were around 450 people. And the year before there were 100. So the company quadrupled in that one year, and doubled the year before that. We’ll probably go above 1,000 employees by the end of this year.

GamesBeat: This year at ChinaJoy is the first year they’ve had this mobile focus. It seems like everyone is starting to realize that this might be the biggest market opportunity. Kevin Chu from Kabam was talking today about how mobile is the first chance for the creation of truly global gaming companies. Before, if you were a console game-maker, you were focused on Japan or the U.S. or western Europe. Now there’s a chance for more global companies. What does that mean to you?

Singman: I’d agree with that statement. We have a sort of unspoken policy, though. Anywhere that takes more than five hours of flight time to reach, we won’t set up our own office there. That comes from Jeff. It’s just hard to manage across that distance.

So we’re not going to set up, say, iDreamsky USA. But we will invest in companies in the U.S. Right now we’re focused on China. We’re stepping out into Hong Kong, Taiwan, and Macau. Those are low-hanging fruit. After that, maybe Korea and Japan. We’re in the process of setting up publishing units there.

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GamesBeat: That seems like a lot to chew on. The competition is severe. What would you say to people who aren’t familiar with the company? How will you differentiate yourselves from the competition?

Singman: Many Chinese publishers don’t pay minimum guarantees. They just want to license a game without paying anything up front. We’re one of the few companies that does pay up front. Also, we’re one of a very few companies that has an army of engineers that can adapt a game to local tastes. We don’t just integrate the payment API or the social SDK. A lot of times we do go in and change art or add content.

With a lot of games, if we didn’t do anything to them, they just wouldn’t work in China. We’re starting to take premium games, in fact, and convert them to IAP on our own. We’ve done that and we’re doing more of that.

GamesBeat: Are you getting better content coming in, better developers and publishers?

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Singman: Some of the games we’re talking to are in seven figures as far as minimum guarantees.

GamesBeat: How else would you make your pitch to western companies?

Singman: My pitch usually involves our past success. That past success puts us on top right now in China. Our approach is more holistic. It’s more about relationship-building. Tencent, for example, has a more mechanical approach. They scan the top ranking charts – the downloads, the top grossing, the DAUs – and go after the top 25. They have an army of testers to test everything. If they find something that fits their portfolio, they go after it.

I think you miss a lot of gems if you only scan the market mechanically. Sometimes a potential superstar doesn’t have a track record, but if you’re an industry veteran you can look at it and say, “Hey, this is going to do great.” We react favorably to deals like that and products like that. But I think we’re slowly going to become more like Tencent. We’re going to have a mechanical part of our product selection process. But we’re going to keep that holistic approach, which is more about gut feelings, experience, and relationship-building. Our content providers, we’re usually very close to them.

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GamesBeat: Is triple-A content from the west going to be welcomed in China?

Singman: Yes. That’s what we’re looking for. The only trouble is—For example, I’m looking at some western games that make fantastic amounts of money, but certain kinds of content just don’t fit very well in China. They don’t get past the government. No gangsters, no Mafiosi.

GamesBeat: They seem to have loosened up more than in the past. I think the skeletons in World of Warcraft were a problem at one point?

Singman: Yes. But zombies are still a problem.

GamesBeat: Does that leave you with a more targeted list of things to go after?

Singman: It’s still a pretty wide range. iDreamsky is the strongest in casual games. We’re branching out into mid-core and hardcore. We have certain genres that we’re going after, high-average revenue per paying user (ARPPU) games like action-RPGs.

GamesBeat: When you bring a game in, where do you take it? Where does your content do the best as far as channels?

Singman: We’re close with Tencent. They’re our biggest shareholder. We also work very well with 360 and Baidu, the major Android portals.

The interesting thing about iDreamsky, though, is that we don’t let go of the smaller channels and game centers. When I go into the channels department within iDreamsky, it looks like it’s as big as R&D. It’s more than 100 people. We work with big channels, medium channels, and even small channels. When you add it all up, it’s still very sizable.

GamesBeat: Do you have an ambition to find another Angry Birds, to spot that kind of hit early?

Singman: The aspiration is there. Michael Chen, our CEO, has told me to look for those, because that gives you the best return on investment. But we also understand that it’s not going to be that easy. You’re going to find a lot of duds. The majority of games that we select are already proven successes.

GamesBeat: How many games are you doing deals with each year?

Singman: We signed five games in July, just in my department. We have three departments – my department covers the U.S. and Europe, then there’s one for Korea and Japan, and one for the domestic market, China. Our portfolio is growing rapidly.

GamesBeat: In the next few years, if you could predict what’s going to happen, are there some things that are obvious to you or some things that are still a little murky?

Singman: We’re enthusiastic about smart TVs. We’re enthusiastic as well as very curious about consoles in China. We’re not so interested in packaged goods, but we’re interested in the digital distribution market. Packaged games are going to try to make a comeback in China, but that’s not going to be our focus.

GamesBeat: I’ve been talking to a lot of people about the consoles, and some of them aren’t sure they’re going to be allowed to do digital distribution, because of some things that the government has concerns about.

Singman: If that’s the case, then we won’t be touching it. It’s hard to predict. We’re sitting on games like Subway Surfer and Fruit Ninja. It’s low-hanging fruit. Some of these games are on XBLA already, so it would be easy for us to start with those.

As far as other trends, I’m not going to predict anything, but this is what I’ve observed: For the first time in China, content providers, game developers, have become a scarce commodity. The cost of game production is going up. People can’t hire game developers fast enough. Developers are getting paid a lot of money, to the point where the cost of getting a Chinese mobile game is higher than the cost of a western mobile game. That gives iDreamsky an advantage, I think.

Some VCs in China invest only in game developers, because making a game and selling it to iDreamsky or Tencent has become a gamble that Chinese VCs love to go for. They get to see the results right here. Anyway, I talked to one of these VCs, and I said, “What’s faster? I go and sign a deal, or you go and make a game?” They said, “Well, that’s not fair. You’re more connected in the west.” But that’s my view. There will be a lot of licensing deals, because even if we’re talking about tens of thousands of mobile game developers in China, there’s still not enough. A lot more Chinese companies will go to Korea or Japan or the U.S. to license IP and games. We may see more acquisitions.

GamesBeat: Do you have any news about the IPO from iDreamsky?

Singman: They’re in New York working it out right now. I’ve heard it’ll be August 7, on the NASDAQ. We’re trying to raise $100 million to $120 million. It’s not a big chunk of the company. We hope to use it to acquire more companies and license more games. We’ll expand our business.

The caliber of the games we’re getting is going up. Like I said, we’re talking about seven-figure minimum guarantees. In a couple of years it’ll probably be eight. If you look at Supercell’s games and how much revenue they generate, it’s not unfathomable that they’d go to seven figures.