Digi-Capital Global Games Investment Review 2013 Executive Summary. Full Review and individual Sector Revews are available at http://www.digi-capital.com/reports.html. If you have any questions, ...
Digi-Capital Global Games Investment Review 2013 Executive Summary. Full Review and individual Sector Revews are available at http://www.digi-capital.com/reports.html. If you have any questions, please contact tim.merel @ digi-capital.com
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3Contents (of full Games Investment Review and individual Sector Reviews)Executive summarySector Reviews(dynamics, trends, 2013*/2012/2011/2010 investments and M&A, public company comparables and sector indices+)– Mobile/tablet– Social/casual– Massively Multiplayer Online (MMO)– Console/PC– Enabling tech/gamification– AdvertisingAbout Digi-Capital* As at 29th March 2013+ As at 29th March 2013. No public company comparables/indices for enabling tech/gamification or advertising425568098119136141
4Executive summary
5Games investment market transition in 2013Online/mobile games continue to deliver strong growth and returns Online/mobile games could grow total video games market size to $83B and take >55% revenue share at $48B in 2016F (12.2% CAGR 12-16F) Games market M&A + IPO* returns > 6x investment value (2005-2012) Games IPOs have followed a 2 year cycle since 2005, with potential in 2013/2014 after no substantial games IPOs in 2012Games M&A beat all records in 2012 Record $4.2Bx M&A in 2012: +22% transaction value, -26% transaction volume (84 transactions), +64% average transaction size ($50M) vs prior record 2011 ($3.4B) Games M&A transaction value led by Social/Casual (31%), MMO** (27%), Mobile (26%), Enabling Tech/Gamification (13%), Console/PC (4%) and Advertising (<1%) Games M&A transaction volume led by Mobile (27%), MMO (20%), Social/Casual (20%), Enabling Tech/Gamification (19%), Console/PC (12%) and Advertising (1%)There could be a games investment gap in the medium term $868M investment in 2012 (similar to 2010): -56% transaction value, +9% transaction volume (166 transactions+), -56% average size ($5M) vs record 2011 ($2B) Games investment transaction value led by Enabling Tech/Gamification (34%), Mobile (33%), MMO (18%), Social/Casual (7%), Console/PC (7%) and Advertising (1%) Games M&A transaction volume led by Mobile (40%), Enabling Tech/Gamification (29%), Social/Casual (10%), Console/PC (10%), MMO (9%) and Advertising (2%) Decline of >$1B in social games investment = 94% of decline from 2011 as VCs abandoned social games investment (excluding mid-core & social gambling) Kickstarter complements, not replaces, VC: <6% of all investment ($49M***), concentrated on PC games (63%), hardware (23%), with 87% value in ~7% of projectsThere was significant games public market volatility during 2011/2012 Digi-Capital All Games Index declined to 87++ from start of 2011, with Console Index decline countering online/mobile Indices growth Significant volatility across individual Game Sector Indices (high/low++): Mobile/Tablet (179/80), Social/Casual (141/86), MMO (137/96), Console (103/61) There is potential for mispricing of both public and private games market assets in 2013Games consolidators are changing towards Asia and a new generation of acquirers 8 of the 10 largest games M&As in 2012 were made by Chinese, Japanese or South Korean buyers Today’s growth companies could become tomorrow’s consolidators Knowledge and relationship gaps remain for M&A/investment between Asian/Western markets and across games market sectorsChanging industry dynamics at an unprecedented rate Free-to-play could deliver 55% of mobile/tablet app revenue and 93% of mobile/tablet app downloads in 2016F Basis of competition across games market sectors moving towards free-to-play, communal (competitive/collaborative) games and business models Gamification attracting significant early stage investment, although much development remains for the market to achieve its potentialConsolation prize: 8th console cycle could start to reinvigorate the console market in 2013 The console games market declined in 2012, but 8th console cycle could start to revitalise the market if Sony and Microsoft join Nintendo in 2013 Basis of console games competition could become more free-to-play, communal (competitive/collaborative) and cross-platform than 7th generation* IPO estimates+ Kickstarters below $500k not listed individually** MMO = Massively Multiplayer Online games++ 31 December 2010 base = 100*** Video games only, excludes board gamesx Excludes Shanda take private ($740M) and LucasArts componentof Disney/Lucas Film ($4B)
6The video games market is in transition across sectorsCasual online Simple single player online/download games Played on browser or downloaded to PC Example company: Big Fish GamesSocial web Simple multiplayer online games Played on social networks Example company: ZyngaMobile/tablet Single player mobile games Played on smartphones/tablets Example company: RovioFree-to-play MMO Millions of simultaneous player games Played on PC/browser Example company: TencentMobile-social Multiplayer mobile games Played on smartphones/tablets Example company: GreeConsole Retail/digital download console games Played on PS3, XBox360, Wii, Wii U, 3DS, PSP Example company: EASubscription Massively Multiplayer Online (“MMO”) Hundreds of thousands of simultaneous player games Played on PC Example company: Activision-BlizzardEnabling tech/gamification Games technology/gamification platforms Software as a Service B2B business model Example company: Unity
7As online/mobile games growth and fragmentation accelerateSources: PWC, Companies, Casual Gaming Association,TechCrunch, Inside NetworkNote: Online includes MMO, casual and social games. Total revenueexcludes hardware revenue*WoW = World of WarcraftOnline/mobile games are growing scale and share 2012P $31B revenue = 49% of global video games revenue 2016F $48B revenue = 57% of global video games revenueAs they fragment consumer markets Apple, Google grew mobile /tablet market (>65B Apps downloaded) Gree, DeNA grew mobile-social market (170M+ users) Zynga, Big Fish Games grew social/casual online market (1B+ users) Activision-Blizzard grew subscription MMO market (>10M WoW*subscribers) Tencent, Nexon, NCSoft grew free-to-play MMO market (Ms of peakconcurrent users) Nintendo, Sony, Microsoft grew home console market (>170M sold)Leveraging profitable business models Best companies growing revenue 100%+ annually while alsogenerating 20-50+% EBITDA margins App stores: paid and free-to-play, virtual goods, advertising World of Warcraft: $12.99-$14.99 monthly fee Zynga: free-to-play, virtual goods, advertising DeNA: free-to-play, virtual goods, advertising Nexon: free-to-play, virtual goodsUsing specific skills and approaches Multiple, parallel game development business platforms (not “onegame” hit driven companies) Multiple distributors across platforms and geographies Rapid, low cost game development and continuous dailyredevelopment cycles for rapid market response Fast failure (cut commercial losers, back commercial winners) Strong analytics (to maximise commercial returns) Aimed at delivering true scalability and category leadership, withprofit margins increasing as revenue growsConsole/PCWeb/MobileCasualHardcore
Value(large long-term niche)Volume(mass market growth)ChinaJapanSouth KoreaIndiaBrazilAmericaEuropeMobile/tabletMobile-socialFree-to-play MMOOnline/mobile enabling techSocial/casual onlineConsoleSubscription MMOUsers: thousands to tens of millionsARPU: $-$$$Costs: $ millions to tens of millionsOperating profit: negative to 20%+Growth rates: negative to <10%Business model: unit sales, subscriptions, virtual goodsUsers: thousands to hundreds of millionsARPU: ¢ - $$Costs: $ tens of thousands to millionsOperating profit: negative to 70%+Growth rates: negative to 100%+Business model: unit sales, free, virtual goods, adsWith the Big V splitting games into Value and Volume markets8
9The basis of competition is transforming across games sectorsSources: Companies* ARPPU = average revenue per paying user, LTV = lifetime valueEnabling techSingle PlayerCommunal Gameplay(competitive/collaborative)FreeToPlayPaidSubscription MMOSocialWebMobile/tabletCasual onlineFree-to-play MMOFree-to-play MMO Tencent’s League of Legends delivers 31M monthly,12Mdaily and 3M peak concurrent users Smilegate’s Crossfire delivers >4M peak concurrent usersSubscription MMO Major MMOs (e.g. Star Wars: The Old Republic) switchingto free-to-playMobile-Social Supercell’s Clash of Clans generates >$500k per day, andtogether with Hay Day makes it bigger than EA on iOSMobile/tablet Natural Motion’s CSR Racing raised the quality bar forfree-to-play iOS games and generated >$12M revenue inits first monthSocial web Kixeye’s mid-core Backyard Monsters, Battle Pirates andWar Commander deliver higher ARPPU* and LTV* thanweak communal social gamesConsole 8th generation gameplay could become increasinglycollaborative and free-to-play to competeCasual online Traditional casual paid download market continues tomigrate towards free-to-play online modelsEnabling tech Online/mobile enabling tech increasingly leveragingfreemium business models
010203040502007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016FNorth America Europe Asia Pacific Latin America10Asia, not America, could dominate the global games marketSources: PWC (excludes hardware revenue), Companies* Note: Pure console excludes MMO† Note: Online includes MMO, casual and social games** Average Revenue per UserOnline† and mobile gamescould grow total video gamesmarket size to $83B and take>55% revenue share at $48B(12.2% CAGR 12F-16F). Thehistorically strong pureconsole* sector is ex-growthAsia and Europe could take87% revenue share for onlineand mobile games (China 32%,Europe 21%, South Korea12%, Japan 10% in 2015F).North America remainsimportantRegional Online/Mobile Games Revenue ($B)Global Video Games Sector Revenue ($B)Chinese, Japanese and SouthKorean domestic strength hasproduced high volume (up to20M peak concurrent users),low ARPU**, cost efficientgames businesses with up to50%+ operating margins,enabling significantinvestment in foreign markets01020304050607080902007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016FConsole Online Mobile PC Advertising
11Games M&A broke all records in 2012, investment similar to 2010Sources: CapitalIQ (excludes Vivendi Activision and Vivendi Universal Publishing deals), NPDGroup, Charttrack, GfK, Activision Blizzard, Companies, Bloomberg, VentureBeat, NY TimesNote: Funds raised/transaction value only includes disclosed or estimated amounts, includingannounced earn outs where applicable* Note: IPO market capitalisation estimates+ Excludes Shanda take private ($740M) and LucasArts component of Disney/Lucas Film($4B)Games M&A exceeded $4B for the first time M&A value grew 22% to $4.2B+ M&A volume declined 26% to 84 transactions Average M&A deal size grew 22% to $50MInvestment similar to 2010 levels after social bubble bursts Investment value declined 56% to $868M Investment volume grew 9% to 166 transactions Average investment deal size declined 56% to $5.2M Decline of >$1B in social games investment = 96% of investment decline from 2011 asVCs abandoned social games investment (excluding mid-core & social gambling)Games continue to deliver strong return on investment Games market M&A + IPO* returns > 6x investment value (2005-2012) Games IPOs have followed a 2 year cycle since 2005, with IPO potential in 2013/2014There could be an investment gap in the medium term Post-Zynga IPO, some VC games investors have exited the games market completely There could be a medium-term mismatch between investment demand and supply There could be mispricing across both private and public games markets in 2013And global consolidation reflects a changing balance US Console – US Social/Casual: Electronic Arts/Popcap $1.3B US Media – US Social/Casual: Disney/Playdom $763M South Korean MMO – South Korean MMO: Nexon/NCSoft (14.7%) $685M US Gambling – US Social/Casual: IGT/Double Down Interactive $500M South Korean MMO – Japanese Mobile: Nexon/Gloops $468M US Console – Europe Social/Casual: Electronic Arts/Playfish $400M Japan Mobile – US Mobile: DeNa/NgMoco:) $400M China Social/Casual/MMO – US MMO: Tencent/Riot Est. $350M-$400M Japan Console – US Enabling Tech: Sony/Gaikai $380m China MMO – US MMO: Tencent/Epic (40%) $330M US Finance – US Enabling Tech: Visa/Playspan $190M US Social/Casual – US Social/Casual: Zynga/OMGPOP $180M Japanese Mobile – Japanese Mobile: Gree/Pokelabo $173MGlobal video games investment (ex-IPOs) ($M)Global video games investment (incl-IPOs*) ($M)020406080100120140160180-5001,0001,5002,0002,5003,0003,5004,0004,5002005 2006 2007 2008 2009 2010 2011 2012Investment Value M&A Value Investment Volume M&A Volume-101030507090110130150170-2,0004,0006,0008,00010,00012,00014,0002005 2006 2007 2008 2009 2010 2011 2012Investment Value M&A Value IPO Market Cap (Est)Investment Volume M&A Volume
-2004006008001,0001,2001,4000 5 10 15 20 25-501001502002503000 10 20 30 40 50 60 7012M&A/investment in 2012 changed after 2011 social bubble burstSources: Companies, Bloomberg, VentureBeat, TechCrunchNote: Funds raised/transaction value only includes disclosed or estimated amounts, includingannounced earn outs where applicable+ At 31 December 2012Sector investments 2012 Sector M&A 2012*See individual Sector Reviews for detailed investments, M&A, and public company valuations+Selected M&A*Selected investments*Date Target AcquirerDealvalueSectorDate Target InvestorsDealvalueSectorMMOMobileConsole/PCEnabling TechSocial/CasualTransaction VolumeTransactionValue($M)MMO MobileAdvertisingConsole/PC Enabling TechSocial/CasualTransaction VolumeTransactionValue($M)Advertising08 Jun 12 $685m21 Jun 12 $11mMMOMobile19 Jun 12 $330mMMOMobile 02 Apr 12 $14mMobile 19 Apr 12 $20m13 Jan 12 $500mSocial/CasualMMO 19 Jan 12 $85mEnabling Tech/Gamification08 May 12 $20m 02 May 12 $210mMobile30 May 12 $25mEnabling Tech/Gamification(14.7%)ENTRÉECAPITAL01 Oct 12 $468mMobile30 Jun 12 $380mEnabling Tech/Gamification(40%)
13With the market to Q1 2013 reflecting a year in transitionSources: Companies, Bloomberg, VentureBeat, TechCrunchNote: Funds raised/transaction value only includes disclosed or estimated amounts,including announced earn outs where applicable+ At 29 March 2013*See individual Sector Reviews for detailed investments, M&A, and public company valuations+Selected M&A*Selected investments*Date Target AcquirerDealvalueSectorDate Target InvestorsDealvalueSector-100200300400500600700800-1 1 3 5 7 9 11 13 15Sector M&A to Q1 2013MMOMobileAdvertisingConsole/PCEnablingTechSocial/CasualTransaction VolumeTransactionValue($M)-204060801001201401601802000 2 4 6 8 10 12 14 16Sector investments to Q1 2013MMOMobileConsole/PCEnabling TechSocial/CasualTransaction VolumeTransactionValue($M)Advertising04 Feb 13<$100m(est)06 Mar 13 $11.5mConsole/PCEnabling Tech/Gamification04 Mar 13 $400mMobileMobile 20 Feb 13 $5mMobile 28 Mar 13 $3.8m07 Jan 13 $26.6mConsole/PCMobile 18 Feb 13 $2mEnabling Tech/Gamification13 Jan 13 $15m29 Jan 13 $20mConsole/PC18 Jan 13 $13.5m28 Mar 13$100m(est)Mobile26 Mar 13 $265mMobile17.72 million shares(24.9%)GxYzEnabling Tech/Gamification
14Kickstarter became a complement to (not replacement for) VC• Kickstarter projects are generally project funding pre-orders, not equity investments• $49M* invested in video games Kickstarter projects <6% total games market investment• Sector concentration on PC games (63% value/73% volume) and hardware (23% value/1% volume)• Value concentration on few, large projects (projects >$500k account for >87% value/~7% volume)• Project delivery in 2013 could determine medium term potential of games crowdfunding0%10%20%30%40%50%60%70%0% 20% 40% 60% 80%Share of volumeShareofvalueVideo games Kickstarters by sector 2012MMOOtherMobileCross-platform(mobile& PC)GamesHardwarePC0%5%10%15%20%25%30%35%40%45%50%0% 20% 40% 60% 80%Share of volumeShareofvalueVideo games Kickstarters by value range 2012<$100K$100Kto $500K$500Kto $1M>$5M$1Mto $5MSources: Kickstarter, Companies* Video games only, excludes board games
15There has been significant public market volatilityGlobal games public market sector indices (base = 100)See individual Sector Reviews for individual sector indices and data by companySources: Factset, Lazard507090110130150170190Mobile Games Index Social/Casual Games index MMO Games Index Console Games Index All Games Index
With a changing pyramid of potential consolidators168 of the10 largest M&As in2012 had Chinese, Japaneseor South Korean buyersToday’s growth companiescould become tomorrow’sconsolidatorsNote: Companies are for illustrative purposes only
17Online/mobile independents could exit now or invest for growth* Note: some outlier deals may occur, e.g. Microsoft/Massive acquisitionConsolidation Curve by SectorSectorLaunchSector Growthfor ScaleSectorConsolidationSectorEquilibriumSectorConsolidationLowHighMediumAdvertisingMobile/tabletSocial/Casual OnlineConsole/PCExpectedDealActivity*- VC Investment- Some small M&A- Limited M&A/investment- Cost focus- Alliances or spinoffs- Growth equity investment- High volume, mid-marketstrategic M&A- Leveraged buyouts- Low volume, large scalestrategic M&AFree-to-play MMOEnabling Tech Mobile-SocialSubscription MMO
18There are potential growth and consolidation opportunities*Sector Mobile/tablet Social/Casual MMO Console/PC Enabling tech/gamificationAdvertisingOpportunities Small to mid-market tacticaltuck-in or strategicroll-up M&A Selective largescale M&A forinternationalgrowth platformsor to bring leadingIPs into strongdomestic markets Avoid large, valuedestroying M&A Organic investmentin mobile andmobile-social, withfocus on cross-platform (iOS,Android, Facebook,Tencent, Renren,Gree, DeNA, other) Leverage IPs frommobile to cross-platform mobile-social Commercialpartnerships withbrand owners forlicensed mobileand mobile-socialgames Invest in game fund Small to mid-market tacticaltuck-in or strategicroll-up M&A Highly selectivelarge scale M&A forinternationalgrowth platformsor to bring leadingIPs into strongdomestic markets Avoid large, valuedestroying M&A Organic investmentin social, with focuson cross-platformand mid-core Leverage IPs fromsocial to cross-platform mobile-social Commercialpartnerships withbrand owners forlicensed social/casual games Invest in game fund Highly selectivelarge scale M&A forinternationalgrowth platformsor to bring leadingIPs into strongdomestic markets Mid-marketstrategic roll-upM&A Avoid large, valuedestroying M&A Focused new IPinvestment in free-to-play MMO,preferablyleveraging existingIPs Commercialpartnerships withbrand owners forlicensed MMOs Invest in game fund Acquireeconomicallychallenged AAAindependents torepurpose for highquality online/mobile games Avoid large, valuedestroying M&A Mid-marketonline/ mobileenabling techstrategic roll-upM&A Small tacticalM&A to deepentechnologyplatform and/orcut costs Invest in gamefund Limited organicinvestment Small strategicM&A Avoid large,value destroyingM&AFor major online/mobile games companies* Note: opportunities are for illustrative purposes only
19There are potential growth and consolidation opportunities*Sector Mobile/tablet Social/Casual MMO Console/PC Enabling tech/gamificationAdvertisingOpportunities Small to mid-market M&A Avoid large, valuedestroying M&A Organic investmentto leverage existingIPs in mobile andmobile-social withfocus on cross-platform Commercialpartnerships withbrand owners forlicensed mobileand mobile-socialgames Invest in gamefund Small to mid-market tacticaltuck-in or roll-upM&A Avoid large, valuedestroying M&A Organic investmentto leverage existingIPs in social/casual with focuson cross-platformand mid-core Commercialpartnerships withbrand owners forlicensed social/casual games Invest in gamefund Highly selectivelarge scale M&A forinternationalgrowth platformsor to bring leadingIPs into strongdomestic markets Avoid large, valuedestroying M&A Mid-marketstrategic M&A Focused new IPinvestment in free-to-play MMO withfocus on cross-platform potential,preferablyleveraging existingIPs Commercialpartnerships withbrand owners forlicensed MMOs Invest in gamefund Core franchiseorganic investment Limited new IPinvestment until 8thgenerationconsoles Avoid large, valuedestroying M&A Acquireeconomicallychallenged AAAindependents tocontrol internalcosts or repurposefor high qualityonline/mobilegames Commercialpartnerships withbrand owners forlicensed consolegames Strategic review ofunderperformingassets withpotentialredeployment toonline/mobile ordisposals throughM&A Mid-marketstrategic online/mobile enablingtech roll-upM&A Small tacticalM&A to deepentechnologyplatform or cutcosts Invest in gamefund Limited organicinvestment Small strategicM&A Avoid large,value destroyingM&AFor major console games companies* Note: opportunities are for illustrative purposes only
20There are potential growth and consolidation opportunities*Sector Mobile/tablet Social/Casual MMO Console/PC Enabling tech/gamificationAdvertisingOpportunities VC or growthequity fundraising Exit to majorgames consolidator Organic investmentin mobile andmobile-social, withfocus on cross-platform Leverage IPs frommobile to cross-platform mobile-social Commercialpartnerships withbrand owners forlicensed mobileand mobile-socialgames VC or growthequity fundraising Exit to majorgames consolidator Private equitybuyout Organic investmentin social/casualwith focus oncross-platform andmid-core Leverage IPs fromsocial/casual tocross-platformmobile-social Commercialpartnerships withbrand owners forlicensed social/casual and mobile-social games VC or growthequity fundraising Exit to majorgames consolidator Private equitybuyout Focused new IPinvestment in free-to-play MMO withfocus on cross-platform potential,preferablyleveraging existingIPs Commercialpartnerships withbrand owners forlicensed MMOs Exit to majorgames consolidator Strategic review ofunderperformingassets withpotentialredeployment toonline/mobile ordisposals throughM&A Core franchiseorganic investment(if possible) Limited new IPinvestment until 8thgenerationconsoles Commercialpartnerships withbrand owners forlicensed consolegames Mid-marketstrategic online/mobile enablingtech roll-upM&A VC or growthequityfundraising Exit to majorgamesconsolidator Private equitybuyout Small tacticalM&A to deepentechnologyplatform and/orcut costs VC or growthequityfundraising Exit to majorgamesconsolidator Mid-marketstrategicadvertising roll-up M&A Small tacticalM&A to deepentechnologyplatform and/orcut costsFor independent games companies* Note: opportunities are for illustrative purposes only
21There are potential growth and consolidation opportunities*Sector Mobile/tablet Social/Casual MMO Console/PC Enabling tech/gamificationAdvertisingOpportunities Strategic M&A toleverage corebrands,distributionplatforms andtechnology Avoid large, valuedestroying M&A Commercialpartnerships withgames companiesfor licensed mobileand mobile-socialgames Avoid standaloneorganic investmentdue to differentcore competencies Invest in gamefund Strategic M&A toleverage corebrands,distributionplatforms andtechnology Avoid large, valuedestroying M&A Commercialpartnerships withgames companiesfor licensedsocial/casualgames Avoid standaloneorganic investmentdue to differentcore competencies Invest in gamefund Strategic M&A toleverage corebrands,distributionplatforms andtechnology Avoid large, valuedestroying M&A Commercialpartnerships withgames companiesfor licensed MMOgames Avoid standaloneorganic investmentdue to differentcore competencies Invest in gamefund Strategic review ofunderperformingassets withpotentialredeployment toonline/mobile ordisposals throughM&A Commercialpartnerships withgames companiesfor licensedconsole games Limited organicinvestment Small tacticalM&A to deepentechnologyplatform or cutcosts Invest in gamefund Small tacticalM&A to deepentechnologyplatform or cutcosts Avoid large,value destroyingM&A Limited organicinvestmentFor major media, technology and telecoms companies* Note: opportunities are for illustrative purposes only
22For venture capital firms* Note: opportunities are for illustrative purposes onlyThere are potential growth and consolidation opportunities*Sector Mobile/tablet Social/Casual MMO Console/PC Enabling tech/gamificationAdvertisingOpportunities Portfolio companyM&A to majorgamesconsolidators Investment in earlyto late stage mobileand mobile-social,with focus oncross-platform Investment inmobile and mobile-social strategicroll-ups Follow-oninvestments inportfoliocompanies pivotingfrom mobile tocross-platformmobile-social Portfolio companyM&A to majorgamesconsolidators Investment in earlyto late stagesocial/casual withfocus on cross-platform and mid-core Investment insocial/casualstrategic roll-ups Follow-oninvestments inportfoliocompanies pivotingfrom social/casualto cross-platformmobile-social Portfolio companyM&A to majorgamesconsolidators Investment in earlyto late stage free-to-play MMO withfocus on cross-platform Investment in free-to-play MMOstrategic roll-ups Portfolio companyM&A (if any) tomajor gamesconsolidators Portfoliocompany M&Ato major gamesconsolidators Investment inearly to latestageonline/mobileenabling techand gamificationwith focus oncross-platform Investment inonline/mobileenabling techand gamificationstrategic roll-ups Portfoliocompany M&Ato major gamesconsolidators Selectiveinvestment inadvertisingplatforms
23For private equity firms* Note: opportunities are for illustrative purposes onlyThere are potential growth and consolidation opportunities*Sector Mobile/tablet Social/Casual MMO Console/PC Enabling tech/gamificationAdvertisingOpportunities Portfolio companyM&A to majorgamesconsolidators Selective growthequity investmentsin mobile andmobile-social, withfocus on cross-platform Selective growthequity investmentsin mobile andmobile-socialstrategic roll-ups Portfolio companyM&A to majorgamesconsolidators Growth equity orLBO investment insocial/casual withfocus on cross-platform and mid-core Growth equityinvestment insocial/casualstrategic roll-ups Portfolio companyM&A to majorgamesconsolidators Growth equity orLBO investment infree-to-play MMOwith focus oncross-platform Growth equityinvestment in free-to-play MMOstrategic roll-ups Portfolio companyM&A (if any) tomajor gamesconsolidators Portfoliocompany M&Ato major gamesconsolidators Selective growthequityinvestment inonline/mobileenabling techand gamificationwith focus oncross-platform Selective growthequityinvestment inonline/mobileenabling techand gamificationstrategic roll-ups Portfoliocompany M&Ato major gamesconsolidators
241. Executive summary (pages 4-24)a) Games global market overviewi. Market segmentation, dynamics and basis of competitionii. Global games revenue by sector (2007 - 2016F)iii. Online/mobile games revenue (2007 - 2016F)b) Games global investment and M&A market overviewi. Global games investments (2008 - Q1 2013*)ii. Global games M&A (2008 – Q1 2013*)iii. Games IPO estimates (2008 - 2012)iv. Global games investments by sector (2012)v. Global games investments by sector (to Q1 2013*)vi. Global games Kickstarter investments by sector and valuerange (2012)vii. Global games M&A by sector (2012)viii. Global games M&A by sector (to Q1 2013*)ix. Global games public market sector indices (2011 – Q1 2013+)x. Potential games market consolidatorsxi. Games market consolidation curve by sectorc) Potential games sector investment/M&A opportunities**i. By sector (mobile/tablet, social/casual, MMO, console/PC,enabling tech/gamification, advertising)ii. By company type (major online/mobile games, major consolegames, independent games, major technology, media andtelecoms, venture capital, private equity)2. Mobile/tablet sector review (pages 25-55)a) Global sector sizei. Mobile games revenue (2007 - 2016F)ii. Smartphone/tablet sales by OS (2010 - 2015F)iii. Mobile broadband subscribers (2006 - 2011F)b) iOS/Android usage (mobile/tablet)c) Mobile/tablet usage by game genred) Sector segmentatione) Free-to-play vs paid app revenue and downloads (2010 - 2016F)f) Mobile user Lifetime Value economicsg) Mobile user acquisition approachh) iOS vs Androidi. Mobile device sales by iOSii. iOS vs Android revenue and downloads (Jan - Oct 2012)iii. Games share of Top 300 apps (US paid and free)iv. Game genre sharei) DeNA and Gree analysisi. Revenue, EBITDA, usersj) Public company comparables* including 2012A and 2013E, 2014Eand 2015E enterprise value/sales, enterprise value/EBITDA andprice/earnings multiples (Com2Us, DeNA, G5 Entertainment,Gameloft, Gamevil, Glu Mobile, Gree, Gungho, Klab, Taomee)k) Global mobile games public company index 2011 – Q1 2013+(Com2Us, DeNA, G5 Entertainment, Gameloft, Gamevil, Glu Mobile,Gree, Gungho, Klab, Taomee)l) Sector M&A transactions (2010, 2011, 2012, Q1 2013*) includingtarget, acquirer and deal value (where available)m) Sector investment transactions (2010, 2011, 2012, Q1 2013*)including target, acquirer and deal value (where available)n) Potential games sector investment/M&A opportunities** bycompany type (major online/mobile games, major console games,independent games, major technology, media and telecoms, venturecapital, private equity)Detailed contents (of full Games Investment Review and individual Sector Reviews)* As at 29th March 2013+ As at 29th Match 2013. No public company comparables or indices for enablingtech/gamification or advertising** For illustrative purposes only
253. Social/casual sector review (pages 56-79)a) Sector sizei. Global social games revenue (2010 - 2014E)ii. Casual players vs payers male:female ratioiii. Social player age profile (UK)b) Sector segmentationi. Leading Facebook social games company (>1M DAU) market shareii. Social network average developer revenue shares (Facebook,Tencent, RenRen, Sina Weibo, Mixi)iii. Total games portfolio DAU vs average DAU per game (leadingFacebook games publishers >1M DAU)c) Zynga analysisi. Major game DAU curvesii. Financials vs usersd) Paying players in social games analysis (average spend, share of revenue,share of paying players)e) Value chainf) Tencent analysisi. Games revenueii. Chinese games market shareg) Public company comparables* including 2012A and 2013E, 2014E and2015E enterprise value/sales, enterprise value/EBITDA andprice/earnings multiples (Electronic Arts, Real Networks, Zynga, Gamania,Neowiz, Tencent, YY)h) Global social/casual games public company index 2011 – Q1 2013*(Electronic Arts, Real Networks, Zynga, Gamania, Neowiz, Tencent, YY)i) Sector M&A transactions (2010, 2011, 2012, Q1 2013*) including target,acquirer and deal value (where available)j) Sector private placement transactions (2010, 2011, 2012, Q1 2013*)including target, acquirer and deal value (where available)k) Potential games sector investment/M&A opportunities** by company type(major online/mobile games, major console games, independent games,major technology, media and telecoms, venture capital, private equity)4. MMO sector review (pages 80-97)a) Sector market sharei. By gameii. By genreb) Sector segmentationc) MMO business models hierarchyd) Nexon analysisi. Revenueii. Revenue vs EBITDAiii. Game franchise lifetime revenuesiv. Regional revenuese) Public company comparables* including 2012A and 2013E, 2014Eand 2015E enterprise value/sales, enterprise value/EBITDA andprice/earnings multiples (Activision Blizzard, Asiasoft, ChangYou,Electronic Arts, Giant Interactive, Kingsoft, NCSoft, Netease, Nexon,Perfect World, Shanda Games, Tencent, Webzen)f) Global MMO games public company index 2011 – Q1 2013*(Activision Blizzard, Asiasoft, ChangYou, Electronic Arts, GiantInteractive, Kingsoft, NCSoft, Netease, Nexon, Perfect World, ShandaGames, Tencent, Webzen)g) Sector M&A transactions (2010, 2011, 2012, Q1 2013*) includingtarget, acquirer and deal value (where available)h) Sector private placement transactions (2010, 2011, 2012, Q1 2013*)including target, acquirer and deal value (where available)i) Potential games sector investment/M&A opportunities** bycompany type (major online/mobile games, major console games,independent games, major technology, media and telecoms, venturecapital, private equity)Detailed contents (of full Games Investment Review and individual Sector Reviews)* As at 29th March 2013+ As at 29th Match 2013. No public company comparables or indices for enablingtech/gamification or advertising** For illustrative purposes only
265. Console sector review (pages 98-118)a) Sector sizei. Global console games revenue by region (2007-2016F)b) Console games economicsi. Development costs vs salesii. Major franchise salesiii. Publisher economicsiv. Financing modelsc) Value chaind) Sector segmentatione) Public company comparables* including 2012A and 2013E, 2014Eand 2015E enterprise value/sales, enterprise value/EBITDA andprice/earnings multiples (Activision Blizzard, Electronic Arts,Gamestop, Take Two Interactive, Capcom, Konami, Namco Bandai,Nintendo, Sega Sammy, Square Enix, Gameloft, Ubisoft)f) Global MMO games public company index 2011 – Q1 2013*(Activision Blizzard, Electronic Arts, Gamestop, Take TwoInteractive, Capcom, Konami, Namco Bandai, Nintendo, SegaSammy, Square Enix, Gameloft, Ubisoft)g) Sector M&A transactions (2010, 2011, 2012, Q1 2013*) includingtarget, acquirer and deal value (where available)h) Sector private placement transactions (2010, 2011, 2012, Q12013*) including target, acquirer and deal value (where available)i) Potential games sector investment/M&A opportunities** bycompany type (major online/mobile games, major console games,independent games, major technology, media and telecoms, venturecapital, private equity)6. Games enabling tech/gamification sector review(pages 119-135)a) Enabling Tech Value Chainb) Gamification industry sectorsc) Sector M&A transactions (2010, 2011, 2012, Q1 2013*) includingtarget, acquirer and deal value (where available)d) Sector private placement transactions (2010, 2011, 2012, Q12013*) including target, acquirer and deal value (where available)e) Potential games sector investment/M&A opportunities** bycompany type (major online/mobile games, major console games,independent games, major technology, media and telecoms, venturecapital, private equity)7. Games advertising sector review (pages 136-140)a) Sector sizei. Global games advertising revenue (2007-2016F)b) Sector M&A transactions (2010, 2011, 2012, Q1 2013*) includingtarget, acquirer and deal value (where available)c) Sector private placement transactions (2010, 2011, 2012, Q1 2013*)including target, acquirer and deal value (where available)d) Potential games sector investment/M&A opportunities** bycompany type (major online/mobile games, major console games,independent games, major technology, media and telecoms, venturecapital, private equity)Detailed contents (of full Games Investment Review and individual Sector Reviews)* As at 29th March 2013+ As at 29th Match 2013. No public company comparables or indices for enablingtech/gamification or advertising** For illustrative purposes only
ReportsGlobal Games Investment Review 2013 (143 pages) $999(includes all individual Sector Reviews below)Individual Sector Reviews(dynamics, trends, 2013*/2012/2011/2010 investments and M&A, public company comparables and indices+)Mobile/Tablet Games Review 2013 (30 pages) $499Social/Casual Games Review 2013 (23 pages) $499MMO Games Review 2013 (17 pages) $499Console/PC Games Review 2013 (20 pages) $499Games Enabling Tech/Gamification Review 2013 (16 pages) $249Games Advertising Review 2013 (4 pages) $99* As at 29th March 2013+ As at 29th March 2013. No public company comparables/indices for Enabling Tech or Advertising27Full Games Investment Review and individual Sector ReviewsBuy NowBuy NowBuy NowBuy NowBuy NowBuy NowBuy Now
28About Digi-Capital
Digi-Capital is a digital investment bank focused on games• Focused on high growth games companies across America, Asia (China, Japan, South Korea) and Europe• Video games, digital media, digital services, mobile, software and media industry specialist• Regulated by the Financial Conduct Authority with US SEC Regulation 15a-6 coverage• UK and China, US operating relationshipManaging high growth digital companies’ and investors’ investment banking needs• Fundraising/investment• Exit/sale• Merger/acquisition• Strategic ReviewLeveraging broad experience• Investment banking, software engineering and corporateWorking with leading clients and high growth independents29About Digi-CapitalMarket leading online games Global mediaMedia, communications, techfocused private equityGlobal growth private equityGlobal video games Browser based MMOMobile-social gamesGlobal mediaGlobal businessmediaiPhone/iPad games and apps Cross-platform MMO games Console/OnlineGames
Tatiana Issaeva
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Blog: www.digitalcapitalist.blogspot.com
Twitter: @digicapitalist 2 years ago