Games Keynote

Contact: tim.merel@digi-capital.com

www.digi-capital.com

Authorised and regulated by the Financial Conduc...
The games market is undergoing massive transformation
Mobile/Online

Casual

Hardcore

Console/PC

2
Driven by mobile internet – the most disruptive long term force
Estimated range of economic impact by disruptive technolog...
Leveraging massive industry and consumer investment
Well developed, global mobile tech stack
Devices/OS

Cross-platform
de...
Games dominate mobile app usage, downloads and revenue
iOS/Android (Mobile/Tablet) Usage
Health &
Fitness
1%

News
2%

Lif...
Free-to-play and communal gameplay changing sector dynamics
Communal Gameplay

Communal vs standalone gameplay user/revenu...
With long term mobile migration to free-to-play business models
Global mobile app downloads (B)

Global mobile app revenue...
The Big V is accelerating the split into Value and Volume markets

Value

Volume

(large long-term niche)

(mass market gr...
Asia’s potential dominance accelerating vs Western markets
Global Video Games Sector Revenue ($B)
90
80
70
60
50
40
30
20
...
Games investment gap in 2013, M&A at record $5.2B to date
6,000

180
160

5,000
140
4,000

120
100

3,000
80
2,000

60
40
...
With a changing pyramid of potential consolidators

8 of the10 largest M&As to Q3
2013 had Chinese, Japanese
or South Kore...
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Digi-Capital - NOAH13 London

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Games Keynote - Presentation by Tim Merel, Founder & CEO of Digi-Capital at the NOAH 2013 Conference in London, Old Billingsgate on the 14th of November 2013.

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Digi-Capital - NOAH13 London

  1. 1. Games Keynote Contact: tim.merel@digi-capital.com www.digi-capital.com Authorised and regulated by the Financial Conduct Authority © Digi-Capital 2013
  2. 2. The games market is undergoing massive transformation Mobile/Online Casual Hardcore Console/PC 2
  3. 3. Driven by mobile internet – the most disruptive long term force Estimated range of economic impact by disruptive technology in 2025 ($ Trillion annual) 0 2 4 6 8 10 Mobile Internet Mobile Internet Automation of knowledge work Mobile Internet to create up to $11 trillion value across industries* annually in 2025 Internet of things Cloud Advanced robotics Autonomous and non-autonomous vehicles Next-generation genomics Energy storage 3-D printing Advanced materials Advanced oil and gas exploration and recovery Renewable energy 3 Source: McKinsey Global Institute, May 2013 (estimates adapted) * Across all industries, not just games
  4. 4. Leveraging massive industry and consumer investment Well developed, global mobile tech stack Devices/OS Cross-platform development Global smart devices with mobile connection (B) 4.0 Mobile web development 3.5 3.0 2.5 2.0 Programming languages Development kits 1.5 Mobile Enterprise App Platforms 1.0 0.5 0.0 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F 2017F Smartphone Tablet/Other Mobile Global mobile data traffic (PB/Month) Global mobile broadband subscriptions (B) 6 14,000 5 12,000 10,000 4 8,000 3 Large and rich mobile app, game and tech potential on top of underlying growth 6,000 2 4,000 1 2,000 - 0 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2018F Smartphone Tablet/Other Mobile 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2018F Smartphone 4 Tablet/Other Mobile * Sources: ITU, Ericsson, Cisco , Gartner (estimates adapted)
  5. 5. Games dominate mobile app usage, downloads and revenue iOS/Android (Mobile/Tablet) Usage Health & Fitness 1% News 2% Lifestyle 1% 25 Other 5% Utilities 10% Games 43% Entertainment 10% 20 Games monetise ~4x more effectively than all other mobile app types 15 Social Network 26% Note: Games = 67% tablet usage Games = 72% revenue Productivity 2% Global mobile apps/games revenue ($B) 10 Top 5 mobile app countries (revenue) 5 0 2010 2011 Non-games mobile app revenue 5 2012 2013F Mobile games revenue * Sources: Flurry, AppAnnie, Gartner
  6. 6. Free-to-play and communal gameplay changing sector dynamics Communal Gameplay Communal vs standalone gameplay user/revenue uplift (competitive/collaborative) Subscription MMO Free-to-play MMO 13x OTT+ 12x >10x Social 10x Paid Tech/Gamification 8x Free To Play 6x 4x Mobile/tablet 2x +7% Casual online 0x Paying users Single Player Single player 6 ARPPU PvE* only PvP* only ARPU PvP and PvE Sources: Companies, Kongregate * ARPPU = average revenue per paying user, ARPU = average revenue per user, , LTV = lifetime value, PvE = Player vs environment, PvP = Player vs player + Over-the-Top
  7. 7. With long term mobile migration to free-to-play business models Global mobile app downloads (B) Global mobile app revenue ($B) 350 80 70 300 60 250 50 55% of revenue 200 40 150 30 100 20 50 0 2010 45% of revenue 10 2011 2012 2013F Free-to-play 2014F 2015F 0 2010 2016F 2011 2012 Paid download Paid 7 2013F 2014F In-App purchase Source: Gartner 2015F 2016F Advertising
  8. 8. The Big V is accelerating the split into Value and Volume markets Value Volume (large long-term niche) (mass market growth) Europe China America Mobile/ tablet Japan India Console South Korea Subscription MMO Brazil Mobile-social Over-the-Top Free-to-play MMO Tech/gamification Social/casual online Users: thousands to tens of millions ARPU: $-$$$ Costs: $ millions to tens of millions Operating profit: negative to 20%+ Growth rates: negative to <10% Business model: unit sales, subscriptions, virtual goods Users: thousands to hundreds of millions ARPU: ¢ - $$ Costs: $ tens of thousands to millions Operating profit: negative to 70%+ Growth rates: negative to 100%+ Business model: unit sales, free, virtual goods, ads 8
  9. 9. Asia’s potential dominance accelerating vs Western markets Global Video Games Sector Revenue ($B) 90 80 70 60 50 40 30 20 10 0 2007 2008 2009 2010 Console 2011 Online 2012 Mobile 2013F PC 2014F 2015F 2016F 2015F 2016F Advertising Regional Mobile/Online Games Revenue ($B) 50 40 30 20 10 0 2007 2008 2009 2010 North America 2011 2012 Europe 2013F Asia Pacific 9 2014F Latin America Sources: PWC (excludes hardware revenue), Companies * Note: Pure console excludes MMO † Note: Online includes MMO, casual and social games ** Average Revenue per User
  10. 10. Games investment gap in 2013, M&A at record $5.2B to date 6,000 180 160 5,000 140 4,000 120 100 3,000 80 2,000 60 40 1,000 20 - 0 2005 2006 Investment Value 2007 2008 2009 M&A Value 2010 2011 Investment Volume 10 2012 2013P (projected from Q3) M&A Volume Sources: CapitalIQ (excludes Vivendi Activision and Vivendi Universal Publishing deals), NPD Group, Charttrack, GfK, Activision Blizzard, Companies, Bloomberg, VentureBeat, NY Times Note: Funds raised/transaction value only includes disclosed or estimated amounts, including announced earn outs where applicable * Note: IPO market capitalisation estimates + Excludes Shanda take private, LucasArts component of Disney/Lucas Film, Microsoft/BesTV JV, Forgame IPO, Activision-Blizzard/Vivendi
  11. 11. With a changing pyramid of potential consolidators 8 of the10 largest M&As to Q3 2013 had Chinese, Japanese or South Korean buyers Today’s growth companies could become tomorrow’s consolidators 11 Note: Companies are for illustrative purposes only

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