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Hit Kardashian Video Game Lifts Glu Mobile From E-List

By Caitlin McCabe
July 10, 2014 4:37 PM EDT 14 Comments
Kim Kardashian earned $28 million in the past 12 months, Forbes estimated last month.
Photographer: Pascal Le Segretain/Getty Images
Kim Kardashian earned $28 million in the past 12 months, Forbes estimated last month.

Kim Kardashian, the reality-TV star whose empire has expanded to include clothing, jewelry and cosmetics, now has a video game, and it’s a hit.

Since its June 25 release, Kim Kardashian: Hollywood has risen as high as second among most-downloaded free-to-play games at Apple Inc. (AAPL)’s U.S. App Store, and the well-reviewed title yesterday was third. Its success has driven shares of creator Glu Mobile Inc. (GLUU) up 42 percent.

“It might be our biggest game of the year,” Chief Executive Officer Niccolo de Masi said in an interview. “We’re not surprised. Kim is a one-of-a-kind talent with an incredibly precise fit to the game engine that we tailored but already had in the company.”

The bump in Glu Mobile’s stock, while rewarding investors, heightens pressure on the company to keep developing titles that can sustain its revenue growth. Competitors including Zynga Inc. (ZNGA) have fallen prey to a boom-bust cycle triggered by a reliance on a handful of games that fade in popularity.

The Kardashian game takes users inside Hollywood, guided by a virtual Kim who offers advice on how to become an A-list celebrity, starting from the so-called E-list. “Dating famous people will get you more fans, too,” instructs Kardashian, who in real life is married to rap singer Kanye West.

Anytime, Anywhere

While the game is free to play, the goal is to get users hooked on in-app purchases such as clothing or a burst of energy needed for traipsing through Hollywood. Users can spend as much as $99.99 for 175,000 virtual dollars. A trip to Beverly Hills costs 4 game “dollars,” while 400 will buy a necklace.

Kardashian’s voice guides the uninitiated through casting calls and parties, while users dodge surly tweets from rivals.

The game gives Kardashian’s most fervent fans a new way to satisfy their appetites, de Masi said.

“Whether you’re following Kim on Twitter, Facebook, Instagram or watching her show, with this game, you can play all the time,” de Masi said. “You can get your Kim interaction anytime you choose.”

Glu Mobile, based in San Francisco, fell 1.7 percent to $5.37 at the close in New York. The company, which went public in March 2007 at $11.50, peaked in June of that year at $14.67. In 2011 and again in 2012, the stock approached $6.

Five Stars

Annual revenue from Kim Kardashian: Hollywood may reach $200 million, estimates Douglas Creutz, an analyst with Cowen & Co. in New York, who has the equivalent of a buy rating on Glu Mobile and expects the stock to rise to $6 in the next year.

It’s the only title among the top 10 in the App Store with a five-star rating, the highest possible, based on thousands of user reviews.

“There’s no such thing as bad publicity, right?” Creutz said. “Obviously, Kim Kardashian’s brand has driven people to download the game. But at this point, the game has taken on a life of its own.”

Kardashian was unavailable for comment, according to Ina Treciokas, her publicist. The 33-year-old earned $28 million in the past 12 months, Forbes estimated last month.

If revenue for the game approaches Creutz’s projections, Glu Mobile will get a significant boost. Sales are projected to rise 52 percent this year to $160.5 million, the average of eight estimates compiled by Bloomberg.

The company publishes 12 to 14 mobile games a year, all of which are free to play. Its Deer Hunter ranks No. 52 at the App Store.

Mobile games are a growing market, projected by researcher TechNavio to more than double to $24.3 billion globally by 2016, from $9.3 billion in 2012.

Concentrated Sales

The challenge for the free-to-play segment is to get users to make in-app purchases -- just 3 percent to 4 percent do, according to Creutz. Glu Mobile’s in-app smartphone purchases jumped 18 percent to $79.2 million in 2013. The rest came from advertising and other services.

Another danger is a dependence on a single hit. King Digital Entertainment Plc (KING), Glu Mobile’s much-larger competitor with $1.9 billion in 2013 revenue, relied on a single title, Candy Crush Saga, for 78 percent its bookings last year. The company, which saw its shares tank after going public in March, is developing new titles to broaden its revenue sources. The stock recovered to close at an all-time high of $22.53 last week.

Big games provide lasting revenue, according to Creutz.

“Some are huge hits for three or six months, some for a year, but they all have a long tail for meaningful monetization,” Creutz said. “Even if it tails off by 50 percent, this game is still a huge needle mover for this company.”

Tracie Egan Morrissey, a reviewer for the blog Jezebel, wrote on the site that she spent $494.04 on the game, which she played obsessively for days.

“I’m part of what’s wrong with modern American culture,” wrote Morrissey, who couldn’t be reached for additional comment. “But at least in Kim’s realm I’m an A-list celebrity with 50 million fans -- after nearly $500 of in-app purchases, of course.”

To contact the reporter on this story: Caitlin McCabe in New York at cmccabe11@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net; Anthony Palazzo at apalazzo@bloomberg.net Ben Livesey

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