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Dialing for Dollars
Jamdat made the top level in cell-phone videogames by targeting the market before there was one.
By Matthew Maier

(Business 2.0) – A simple bowling simulation played on tiny LCD screens wouldn't normally generate excitement about a young software company. Yet by combining hypnotically simple games with a seasoned management team, Los Angeles-based Jamdat has taken an early lead in the race to create compelling—and profitable—content for cell phones.

Jamdat, which focuses on developing games for mobile phones, has been in the black for three consecutive quarters since it went public last October. Revenue should hit $80 million this year, and since January the company's stock price has climbed 37 percent to $28. Jamdat Bowling, one of the best-selling mobile games of all time, is the big hit—it's garnered more than 6 million downloads at $7.50 apiece.

The 300 million videogame-capable phones in use worldwide today are burdened with small screens and cumbersome keypads, but they're the leading edge of a mobile-content marketplace that's poised to become larger than PC and console gaming combined. Research firm ARC Group estimates that consumers will spend nearly $2.6 billion on games for mobile phones worldwide this year. By 2010 that number could quadruple.

A shrewd understanding of the U.S. wireless market helped Jamdat become North America's leading mobile-game publisher. A trip to the Tokyo Game Show in September 1999 convinced Jamdat CEO Mitch Lasky that videogames would soon migrate to mobile phones. At the time, Lasky was an executive vice president at videogame publisher Activision. A year later he joined Jamdat, which was founded in early 2000 by two Activision alums. To round out the team, the company also hired Tom Ellsworth, a former Sprint executive who understood what kind of content U.S. wireless carriers would require to generate revenue from their next-generation networks.

"Jamdat was at the party before it even started," says Mark Argento, an analyst with investment bank ThinkEquity Partners. Indeed, when Sprint and Verizon launched upgraded networks in the fall of 2002, the company was ready with eight mobile games, including Jamdat Bowling.

Today, with Jamdat holding 25 percent of the domestic market, rivals are moving onto the scene. In addition to mobile-gaming startups like Sorrent and MForma, Jamdat also faces competition from giants like $3 billion Electronic Arts, which recently unveiled a lineup of 20 mobile-phone games it plans to launch over the next year.

That's why Jamdat is moving quickly to create more hit titles. In April it paid $137 million for an exclusive 15-year license to develop Tetris games for phones. Jamdat has also established partnerships in China with an eye toward gaining a long-term foothold in the world's largest wireless market. The games may be tiny, but the opportunities for Jamdat are growing bigger by the day. — MATTHEW MAIER