Bart Decrem explains why he sold Tapulous to Disney

Bart Decrem scored big this week as Disney agreed to buy his iPhone music game company Tapulous. Disney was drawn to Tapulous‘ big hits, such as Tap Tap Revenge and Riddim Ribbon.

Decrem, who co-founded Tapulous with Andrew Lacy, will serve as a senior vice president at Disney, heading all mobile games and reporting directly to Steve Wadsworth, head of Disney Interactive Media Group. The price of the deal hasn’t been disclosed, but Decrem said that the return was satisfying for investors and the team. I talked with Decrem about the deal and why he decided to hook up with Disney. Here’s the transcript of the conversation.

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VB: Why did you decide to do the deal?

BD: We have done very well on the App Store as you know. In the last few months, we have been watching the space. A couple of things have happened. It’s fair to say that Apple has knocked the cover off the ball in terms of execution, innovation and market momentum. The adoption of its devices has been phenomenal. Android is looking really good as well. With that, everyone is realizing the stakes here are very high. The opportunity is very big. You see people lining up in aggressive positions. Ngmoco has raised a lot of money. Booyah has too. Zynga has just launched FarmVille on the iPhone. Electronic Arts and Gameloft are aggressively investing in the iPhone and iOS. As we looked at that landscape, we had to decide what it would take for us to really execute. We realized it would require significantly more resources. We spent the last few months talking to potential investors and partners. Along the way, we started talking to Disney. We felt we had a shared vision.

VB: How are you going to fit in with the rest of Disney?

BD: We are part of Disney Interactive Media Group, headed by Steve Wadsworth. He has said from the beginning that their first principle for acquisitions is “do no harm.” Disney really likes what we have built. They like the innovation, the spirit, the team. They like that we are based in Silicon Valley and are part of the ecosystem here. None of that is going to change. They will give us autonomy, and Disney has a very good track record of doing that, whether it is with Pixar, Club Penguin and other companies they have integrated over the years. Tapulous will be a business unit in Palo Alto that will grow quite aggressively. We will be able to execute faster. We will keep doing music games like Tap Tap Revenge. We will double down on it and tap into the power of Disney with its brands. We want to do that. Our music games like Riddim Ribbon are strong. We have been talking about doing a broader portfolio of social games on the iPhone. The first of those is under development now.

The second part of the agenda is that my new position is senior vice president and general manager for mobile at Disney. In addition to running the Tapulous unit, we will also be running mobile more generally for Disney. Disney already has dozens of games on the App Store and teams in Hungary, Beijing and Burbank, Calif. We will provide some input to them, and over time we will look for ways to integrate the two. The focus will be next-generation entertainment products. That means social is a big part of that. You will see me spend time with Tapulous and execute against the billion-dollar opportunity here for Disney.

VB: Financially, this works out well for you? You raised a very small amount of money for Tapulous.

BD: We have not disclosed the financial terms. We raised $2.8 mil from angel investors. We have been profitable for a year, and probably for the life of the company. That puts us in a good place. We have done very well as an independent company, and we are very pleased with the returns that we were able to provide to our shareholders.

VB: So it made sense not to take venture capital?

BD: I think it worked out very nicely for us. What I like about the way that we did this company is that it is part of a shifting landscape. There have been so many disruptions. The landscape has changed in three years. We had paid products and free products and the iPad and now iAds. Each one of those things is disruptive. Because we were angel funded, we have been flexible and have been forced to be scrappy. That has paid off nicely in the middle of a recession. And with that comes a capitalization table that is very friendly to investors and the team. As you look at the space, now it takes more resources to win than it did when we started the company.That’s part of our logic now.

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VB: Will you have better access to brands and music labels now? Was it a struggle as a smaller company to get their attention?

BD: I’m very proud of Tim O’Brien, our vice president of business development. He has done a remarkable job working with the labels. Two weeks ago, we announced a deal with Warner Music Group. If you recall the history, they walked away from Rock Band and Guitar Hero. This was their first major announcement where they came back to music gaming. We have deals with all four of the major labels and all the major publishers and artists. I’m really proud of that. It took us a year and a half of work. We invested a lot in those relationships. We have sheer momentum on our platform. We now have access to Disney’s licensing resources. We can project more easily into different parts of the world. Disney has a record label with Hannah Montana/Miley Cyrus and the Jonas Brothers. We have access to that. If you look at our user base, 55 percent of our users are on the iPod Touch, and many are quite young. So that music will work really well for us.

VB: Will you have your hands full executing on Disney brands, or will you continue as a cross-platform, cross-brand company?

BD: We will first execute across the Tapulous opportunity. Disney is very excited about what we have. They like our DNA. They are excited about social gaming and our plan. That will be our top priority. They really see the Tapulous business as the spearhead for mobile gaming for Disney.

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VB: Electronic Arts has been saying that brands matter a lot on the iPhone and that will only become bigger in terms of what game fans buy. Did you see that happening?

BD: Absolutely. Social gaming is a really exciting category. The first generation of games has very simple game mechanics. What you will see as the industry matures is higher production values, more branded content. That’s why EA bought Playfish, and that will happen in mobile too. Disney has music brands, Marvel Comics, Pixar, ABC, and ESPN. They have great content and you will see a lot of action around marrying great games, brands, and social gaming mechanics. I use social to mean games that are social. What is striking in the last few months, and sitting at the Steve Jobs keynote speech for the iPhone 4, things are changing. When I started Tapulous, we thought about the iPhone as the beginning of the mobile decade. But as the iPad came out, with the iOS operating system, it’s not just about mobile phones. It’s the iOS decade and the Android decade. It’s a variety of devices that use a common platform. The iOS has the head start right now. The question I ask myself is that — there is a big new computing platform with 100 million devices out there — what will be the killer app? The PC had the word processor. Then the internet. The killer category of apps in this era will be social entertainment. That’s the centerpiece of all of this stuff. Facebook, YouTube, playing games. It’s all about social connections. We want to build fun apps and games for these platforms. The game mechanics are an excuse for meeting new people.

VB: Are you going to expand now?

BD: We have 30 people at Tapulous and have added 6 or 7 in the past two months and we will maintain our growth rate. The platform is on fire. Apple is executing so nicely and Android is coming on.