Digi-Capital Global Games Investment Review 2014 Q2 Update
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Digi-Capital Global Games Investment Review Q2 2014 Summary. Full Review and individual Sector Revews are available at www.digi-capital.com. If you have any questions, please contact info @ ...

Digi-Capital Global Games Investment Review Q2 2014 Summary. Full Review and individual Sector Revews are available at www.digi-capital.com. If you have any questions, please contact info @ digi-capital.com

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Digi-Capital Global Games Investment Review 2014 Q2 Update Digi-Capital Global Games Investment Review 2014 Q2 Update Presentation Transcript

  • Global Games Investment Review 2014 Q2 Update Summary Contact: info@digi-capital.com © Digi-Capital 2014www.digi-capital.com Authorised and regulated by the Financial Conduct Authority
  • 2 Disclaimer This document has been produced by Digi-Capital Limited and is furnished to you solely for your information and may not be reproduced or redistributed, in whole or in part, to any other person. No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein and, accordingly, Digi-Capital Limited does not accept any liability whatsoever arising directly or indirectly from the use of this document. In particular, the inclusion of any financial projections are presented solely for illustrative purposes and do not constitute a forecast. The recipient should independently review the underlying assumptions of the financial projections. This document is intended for initial contact with individuals and entities known to Digi-Capital Limited. This document is intended for use by the individual to whom it is sent, it is confidential and may not be reproduced in any form, further distributed to any other person, passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose without the prior written consent of Digi-Capital Limited. In the event that you are not the recipient indicated and you have inadvertently received this document, please delete it immediately. This document does not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to purchase, subscribe for, or otherwise acquire any securities nor shall it or any part of it nor the fact of its distribution form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any investment decision should be made solely on final documentation, and then only after review of the diligence materials and consideration of all relevant risks. Digi-Capital Limited does not have any responsibility for the information contained herein and does not make any representations or warranties, express or implied, as to the adequacy, accuracy or completeness of any statements, estimates or other information contained in this document. The information contained herein, while obtained from sources believed to be reliable, is not guaranteed as to its accuracy or completeness. This document may include forward-looking statements, including, but not limited to, statements as to future operating results and potential acquisitions and contracts. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “anticipates”, “aims”, “could”, “may”, “should”, “expects”, “believes”, “intends”, “plans” or “targets”. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. No assurances can be given that the forward-looking statements in this document will be realised. Digi-Capital Limited does not intend to update these forward-looking statements. No securities regulatory authority has approved or expressed an opinion about Digi-Capital Limited’s business prospects or any related securities. Any such securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or any other state or federal securities laws and may not be offered or sold in the United States of America absent registration under the Securities Act or an exemption from the registration requirements thereof. Digi-Capital Limited and any entity referred to in this document have not and will not be registered under the United States Securities Exchange Act of 1934, as amended or the US Investment Company Act of 1940, as amended, and any related securities may not be offered or sold or otherwise transferred within the United States or to, or for the account or benefit of, U.S. persons except under circumstances which will not require Digi-Capital Limited or any associated entity to register in the United States in accordance with the foregoing laws or any other law. Digi-Capital Limited is authorised and regulated by the Financial Conduct Authority. Digi-Capital Limited is the copyright owner of this document and does not grant you any licence to copy, adapt or distribute it, in whole or in part, without Digi-Capital Limited’s written permission to do so.
  • 3 Contents (of full Review) Executive summary (free download) Sector Reviews (economics, dynamics, trends, M&A and investments 2010 – Q2 2014, public company comparables and sector indices*) – Mobile/tablet – Social/casual – Massively Multiplayer Online (MMO) – Console/PC – Tech/gamification – Advertising Growth and consolidation opportunities+ About Digi-Capital 10 24 65 90 111 137 159 164 171 * As at 30th June 2014. No indices for tech/gamification or games advertising + For illustrative purposes only BUY FULL REVIEW Available in full Review only
  • 4 1. Executive summary (pages 10-23) a) Global games market economic overview i. Major global games market economic trends ii. Global revenue forecast by games sector (2011 - 2017F) iii. Mobile/online games revenue forecast by region (2011 - 2017F) b) Global games M&A and investment overview i. Global games M&A transaction value and volume (2005 – Q2 2014) ii. Global games investments transaction value and volume (2005 – Q2 2014) iii. Global games IPOs by country (2005 – Q2 2014) iv. Global games M&A summary by sector in last 12 months v. Global games M&A summary by sector to Q2 2014 vi. Global games investments summary by sector to Q2 2014 vii. Global games public market sector indices* (2011 – Q2 2014) c) Games industry trends/highlights i. Games subsectors overview ii. Games market segmentation/competition overview iii. Games Value vs Volume markets by sector and geography iv. Mobile apps/games usage 2013 v. Mobile apps/games revenue (2010 - 2013), including revenue split vi. Free-to-play/communal gameplay trends/economics vii. Trade consolidator/acquirer overview viii. Games sector consolidation curve Table of contents (of free download) * As at 30th June 2014. No indices for tech/gamification or games advertising BUY FULL REVIEW
  • 5 2. Mobile/tablet sector review (pages 24-64) a) Mobile games/apps economic analysis i. Mobile games/apps revenue forecast (2011 - 2017F) ii. Smartphone/tablet sales forecast by OS (2013 - 2017F) iii. Mobile broadband subscription forecast by smartphone and tablet (2011 - 2019F) b) iOS/Android usage by app type (mobile/tablet) c) Mobile/tablet game usage by game genre d) Mobile game sector segmentation and highlights e) Global mobile app download forecast (2011 - 2017F), including free vs paid split f) Mobile app revenue forecast (2011 - 2017F) including paid, in-app purchases and advertising revenue split g) Mobile user Lifetime Value economic analysis h) Mobile user acquisition approach and cost analysis i) Apple case study j) iOS vs Android analysis i. Apple App Store vs Google Play apps, downloads and relative monetization analysis ii. Global Android app store analysis including downloads, apps and average download per app (Amazon, Anzhi, AppChina, D.cn, gFan, Google Play, HiAPK, Lenovo, Mobango, Opera Mobile, SlideME, SK T-Store, Tencent) k) Mobile messaging app market share analysis, including share of domestic top 100 iPhone games (Kakao Talk, LINE, Weixin) l) Mobile games 2012 to Q2 2014 IPO analysis (Colopl, Forgame, IGG, King, Ourpalm) m) Public company comparables* including 2013A, 2014E, 2015E, 2016E enterprise value/sales, enterprise value/EBITDA and price/earnings multiples (Ateam, Colopl, Com2Us, Crooz, Cyberagent, DeNA, Drecom, Forgame, G5 Entertainment, Gameloft, Gamevil, Glu Mobile, Gree, GungHo, IGG, King, Klab, NHN Entertainment, Taomee, Voltage) n) Global mobile games public company index 2011 – Q2 2014* (Ateam, Colopl, Com2Us, Crooz, Cyberagent, DeNA, Drecom, Forgame, G5 Entertainment, Gameloft, Gamevil, Glu Mobile, Gree, IGG, Klab, NHN Entertainment, Taomee, Voltage)x o) Sector M&A transactions (2010 – Q2 2014) including target, acquirer, transaction value and revenue/EBITDA multiples (where available) p) Sector investment transactions (2010 – Q2 2014) including target, acquirer and transaction value (where available) q) Potential games sector investment/M&A opportunities+ by investor/acquirer type (major online/mobile games, major console games, independent games, major technology, media and telecoms, venture capital, private equity) * As at 30th June 2014. + For illustrative purposes only Table of contents (of full Review) BUY FULL REVIEW
  • 6 3. Social/casual sector review (pages 65-89) a) Social games economic analysis i. Global social games revenue forecast (2010 – 2014F) ii. Casual players vs payers male:female ratio iii. Social player age profile (UK) b) Sector segmentation i. Leading Facebook social games company (>1M DAU) market share ii. Social network average developer revenue shares (Facebook, Tencent, RenRen, Sina Weibo, Mixi) c) Social games paying players economic analysis (average spend, share of revenue, share of paying players) d) Social games development approach overview e) Zynga case study i. Bookings, revenue and EBITDA (Q1 2011 - Q3 2013) ii. Daily Active Users (DAU), Monthly Active Users (MAU) and Monthly Unique Users (MUU) (Q1 2011 - Q3 2013) f) Facebook user analysis for leading social games companies >1M DAU (total games portfolio DAU vs average DAU per game) g) Social/casual games value chain analysis and sector highlights h) Public company comparables* including 2013A, 2014E, 2015E, 2016E enterprise value/sales, enterprise value/EBITDA and price/earnings multiples (Boyaa, Electronic Arts, Real Networks, Zynga, Gamania, Neowiz, NHN Entertainment, YY) i) Global social/casual games public company index 2011 – Q2 2014* (Boyaa, Electronic Arts, Real Networks, Zynga, Gamania, Neowiz, NHN Entertainment, YY) j) Sector M&A transactions (2010 – Q2 2014) including target, acquirer and transaction value (where available) k) Sector investment transactions (2010 – Q2 2014) including target, acquirer and transaction value (where available) l) Potential games sector investment/M&A opportunities+ by investor/acquirer type (major online/mobile games, major console games, independent games, major technology, media and telecoms, venture capital, private equity) * As at 30th June 2014 + For illustrative purposes only Table of contents (of full Review) BUY FULL REVIEW
  • 7 4. MMO sector review (pages 90-110) a) MMO games market share analysis i. By game ii. By genre b) Sector segmentation and highlights c) MMO business models hierarchy d) Nexon case study i. Overview ii. Revenue growth (2001 - 2013) iii. Revenue, EBITDA and EBITDA margin (2008 - 2013) iv. Major game franchise lifetime revenues v. Regional revenues (China, Korea, Japan, other) e) Tencent case study i. Overview ii. Revenue, EBT and EBT margin (2008 - 2013) iii. Overall Chinese games sector market share by game typex f) Public company comparables* including 2013A, 2014E, 2015E, 2016E enterprise value/sales, enterprise value/EBITDA and price/earnings multiples (Activision Blizzard, ActozSoft, Asiasoft, ChangYou, Electronic Arts, Giant Interactive, Joymax, Kingsoft, Khongzhong, NCSoft, Netease, Nexon, NHN Entertainment, Perfect World, Shanda Games, Tencent, The9, Webzen, WeMade, YD) g) Global MMO games public company index 2011 – Q2 2014* (Activision Blizzard, ActozSoft, Asiasoft, ChangYou, Electronic Arts, Giant Interactive, Joymax, Kingsoft, Khongzhong, NCSoft, Netease, Nexon, NHN Entertainment, Perfect World, Shanda Games, Tencent, The9, Webzen, WeMade, YD) h) Sector M&A transactions (2010 – Q2 2014) including target, acquirer and transaction value (where available) i) Sector investment transactions (2010 – Q2 2014) including target, acquirer and transaction value (where available) j) Potential games sector investment/M&A opportunities+ by investor/acquirer type (major online/mobile games, major console games, independent games, major technology, media and telecoms, venture capital, private equity) x Overall market – not Tencent specific * As at 30th June 2014. + For illustrative purposes only Table of contents (of full Review) BUY FULL REVIEW
  • 8 5. Console sector review (pages 111-136) a) Console games sector overview b) Global console games hardware and software revenue forecast (2011 - 2017F) c) 8th console generation analysis (Sony PS4 vs Microsoft Xbox One) d) Console games economics i. Development costs vs sales analysis ii. Major console games franchise sales summary iii. Console publisher economic analysis iv. Game development financing model overview e) Console games sector value chain analysis f) Sector segmentation and highlights g) Public company comparables* including 2013A and 2014E, 2015E, 2016E enterprise value/sales, enterprise value/EBITDA and price/earnings multiples (Activision Blizzard, Electronic Arts, Game Digital Gamestop, Take Two Interactive, Capcom, Konami, Namco Bandai, Nintendo, Sega Sammy, Square Enix, Gameloft, Ubisoft) h) Global MMO games public company index 2011 – Q2 2014* (Activision Blizzard, Electronic Arts, Gamestop, Take Two Interactive, Capcom, Konami, Namco Bandai, Nintendo, Sega Sammy, Square Enix, Gameloft, Ubisoft) i) Sector M&A transactions (2010 – Q2 2014) including target, acquirer and transaction value (where available) j) Sector investment transactions (2010 – Q2 2014) including target, acquirer and transaction value (where available) k) Potential games sector investment/M&A opportunities+ by investor/acquirer type (major online/mobile games, major console games, independent games, major technology, media and telecoms, venture capital, private equity) * As at 30th June 2014. + For illustrative purposes only Table of contents (of full Review) BUY FULL REVIEW
  • 9 6. Games tech/gamification sector review (pages 137-158) a) Games technology value chain analysis b) Gamification industry subsectors overview c) Sector M&A transactions (2010 – Q2 2014) including target, acquirer and transaction value (where available) d) Sector investment transactions (2010 – Q2 2014) including target, acquirer and transaction value (where available) e) Potential games sector investment/M&A opportunities* by investor/acquirer type (major online/mobile games, major console games, independent games, major technology, media and telecoms, venture capital, private equity) 7. Games advertising sector review (pages 159-163) a) Games advertising sector overview b) Games advertising revenue forecast (2011 - 2017F) c) Sector M&A transactions (2010 – Q2 2014+) including target, acquirer and deal value (where available) d) Sector investment transactions (2010 – Q2 2014) including target, acquirer and deal value (where available) e) Potential games sector investment/M&A opportunities* by investor/acquirer type (major online/mobile games, major console games, independent games, major technology, media and telecoms, venture capital, private equity) 8. Growth and consolidation opportunities* (pages 164-170) a) By investor/acquirer type (major online/mobile games, major console games, independent games, major technology, media and telecoms, venture capital, private equity) b) By sector (mobile/tablet, social/casual, MMO, console/PC, enabling tech/gamification, advertising) Note: no public company comparables or indices for games tech/gamificationor games advertising * For illustrative purposes only Table of contents (of full Review) BUY FULL REVIEW
  • 10 Executive summary
  • 11 Mobile driving revenue to $100B, $12.5B M&A in last 12 months Mobile could drive total games software industry revenue to $100B by 2017  Mobile/onlinegames could grow to ~$60B revenue (23.7% CAGR 11-17F)  Mobile/onlinegames could take 60% games software market share by 2017  Total global games software revenue could grow to ~$100B revenue by 2017 Mobile, MMO and tech drove games to record $12.5B M&A in last 12 months, with record $6.6B M&A in first half of 2014  Record $12.5B games M&A in last 12 months, dominated by large transactions  Record $6.6B games M&A in first half of 2014, at >2x the rate of M&A compared to previous record $5.6B M&A for full year 2013  Mobile, tech and MMO dominated games M&A in the first half 2014 Asia the biggest growth driver of economic value in mobile/online games  Asia and Europe could take >80% combined revenue share for mobile and online games  9 of the top 10 games M&As of 2013 had Asian buyers, up from 8 out of 10 in 2012  Global and pan-regional M&A deals significant in 2013 and 2014 – pan-regional relationships remain critical for trade exits  13 out of 15 games IPOs in 2011-2013 were by Chinese, Japanese or South Korean companies, King IPO impact to be determined 6% decline in games investment in first half of 2014 versus 2013 run rate, historic high early stage investment gap  $472M games investments in first half 2014 (excluding King and Game Digital IPOs, and Asian games fund commitments)  6% decline in game investments in first half of 2014 versus 2013 run rate, with early stage investment gap at highest historic level  Mobile games dominated investment in first half of 2014 Games dominate mobile app usage and revenue – messaging apps a new disruption  Games took 32% of 2013 mobile app usage (blended iOS/Android tablet/smartphone) - 67% of tablet usage  Games took ~74% of 2013 mobile app revenue and ~40% of mobile app downloads  Asian messaging platforms disrupting mobile games in domestic markets – Kakao Talk, WeChat and LINE taking significant share 8th generation console cycle beginning to address decline, but questions remain  8th console generation (PS4, Xbox One, Wii U) beginning to address long term decline  Questions about potential new installed bases, transition from 7th generation and mobile cannibalization Sources: See sources and details by section
  • 0 20 40 60 80 100 120 2011 2012 2013 2014F 2015F 2016F 2017F Dedicated hardware Console software Online Mobile PC Advertising 0 10 20 30 40 50 60 2011 2012 2013 2014F 2015F 2016F 2017F Asia Pacific EMEA North America Latin America 12 Mobile to take games software to $100B – Asia the growth engine Sources: PWC, Gartner, AppAnnie, Digi-Capital, Companies † Note: Online includes MMO, casual and social games * Note: Console excludes MMO ** Average Revenue per User Mobile and online† games could grow to ~$60B revenue (23.7% CAGR 11-17F), take 60% games software market share and grow the games software market to ~$100B revenue. The console* sector is important but ex-growth Asia and Europe could take >80% combined revenue share for mobile and online games. North America remains an important mobile and online market Regional Mobile/Online Games Revenue ($B) Global Video Games Sector Revenue ($B) Chinese, Japanese and South Korean domestic strength has produced high volume, low ARPU**, cost efficient games businesses with up to 50%+ operating margins, enabling significant investment in foreign markets © Digi-Capital 2014 © Digi-Capital 2014
  • 13 Record $12.5B M&A in last 12 months, 2014 M&A >2x 2013 rate Record $12.5B M&A in last 12 months, with $6.6B M&A to Q2 2014  Record $12.5B games M&A in last 12 months, dominated by large transactions  Record $6.6 B games M&A to Q2 2014, >2x 2013 M&A run rate  H1 2014 M&A volume down by 14% from 2013 rate to 38 transactions  Average H1 2014 M&A deal size grew 172% from 2013 to $173.8M  Mobile, tech and MMO dominated games M&A by value to Q2 2014 6% decline in games investment to Q2 2014 vs 2013 run rate  $472M games investments to Q2 2014 (excluding King and Game Digital IPOs and Asian games fund commitments)  H1 2014 investment value down by 16% from 2013 run rate  H1 2014 investment volume down by 49% from 2013 run rate  Early stage games investment gap at highest historic level to Q2 2014  Mobile games dominating investment to Q2 2014 Asian IPOs continued to deliver exits for investors  Games IPOs in the last decade have been a largely Chinese, Japanese and South Korean phenomenon  13 out of 15 games IPOs in 2011-2013 were by Asian companies  Impact of King IPO in Q1 2014 to be determined, Chukong IPO postponed Asia increased its domination of games M&A again in 2013  9 of the top 10 games M&As in 2013 had Asian acquirers  8 of the top 10 games M&As in 2012 had Chinese, Japanese or South Korean acquirers  Global and pan-regional M&A deals significant in last 12 months: pan- regional relationships remain critical for trade exits  Large domestic deals in China, Japan and South Korea a major factor Global video games M&A/investment (ex-IPOs) ($M) Games IPOs (number by country of origin) Sources: See sources and details by sector Note: Funds raised/transaction value includes only disclosed or estimated amounts, including announced earn outs where applicable. Activision-Blizzard/Vivendideal not included in charts on this page 0 20 40 60 80 100 120 140 160 180 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 To Q2 2014 Investment Value M&A Value Investment Volume M&A Volume 0 1 2 3 4 5 6 7 2005 2006 2007 2008 2009 2010 2011 2012 2013 To Q2 2014China Japan South Korea US UK Investmentgap © Digi-Capital 2014 © Digi-Capital 2014
  • 14 “Consolidation Crush”: 5 drivers of $12.5B acquisitions in LTM* * LTM = Last 12 Months to 30 June 2014 Images adapted from images copyright Bandai Namco Games Inc. Mobile growth  $33B mobile games 2017F revenue (vs $16B 2013)  Acquirers buying into large, high growth market  E.g. Tencent/C J Games (28%) $500M, Ourpalm/ Playcrab $285M Mobile cannibalization  Mobile cannibalizing console, PC, MMO, social, web  Acquirers stopping mobile insurgents from eating their lunch  E.g. Zynga/Natural Motion $527M Regional realignment  Mobile/online games to $60B in 2017  Asia $38B, Europe $13B, America still important  Pan-regional acquirers leveraging strength to dominate at home and abroad  E.g. Softbank/Supercell (51%) $1.5B Legacy pivots  Disruption by new platforms pushes legacy companies to buy their way into the future  E.g. Smilegate/Sundaytoz (20%) $112M Market cycle  Public/private games valuations trending downwards  $472M investment to Q2 2014 (vs $2B full year 2012)  2 UK games IPOs (King, Game Digital), Chukong IPO reported to be postponed due to valuation concerns  Acquirers taking advantage of investment cycle phase  E.g. Giant Interactive take-private $1.6B Mobile growth Mobile cannibalization Market cycle Legacy pivots Regional realignment Mobile $4.6B Tech $2.8B MMO $4.0B Console $1.0B © Digi-Capital 2014 “Consolidation Crush”: $12.5B games acquisitions in last 12 months
  • - 500 1,000 1,500 2,000 2,500 0 2 4 6 8 10 12 14 - 50 100 150 200 250 300 350 0 2 4 6 8 10 12 14 16 18 15 Mobile, tech and MMO doubled rate of M&A to Q2 2014 vs 2013 Games sector M&A Q2 2014 MMO Mobile Advertising Console/PC Tech Social/Casual Transaction Volume TransactionValue($M) Games sector investments Q2 2014 MMO Mobile Console/PC Tech Social/Casual Transaction Volume TransactionValue($M) Advertising Sources: See sources by sector Note: Funds raised/transaction value only includes disclosed or estimated amounts, including announced earn outs where applicable. King IPO and announced Asian games investment funds not included © Digi-Capital 2014 © Digi-Capital 2014
  • 16 Public markets driven by mobile and Asia Global games public market sector indices (base = 100) Sources: Factset, Bloomberg, Lazard Note: Social/Casual Games Index composition changed since prior quarter 0 50 100 150 200 250 300 31-Dec-10 30-Apr-11 31-Aug-11 31-Dec-11 30-Apr-12 31-Aug-12 31-Dec-12 30-Apr-13 31-Aug-13 31-Dec-13 30-Apr-14 Mobile Games Index Social/Casual Games index MMO Games Index Console Games Index All Games Index © Digi-Capital 2014
  • 17 Disruption from industry transition across all market sectors Casual online  Simple single player online/download games  Played on browser or downloaded to PC  Example company: Miniclip Social online  Simple multiplayer online games  Played on social networks  Example company: King Mobile/tablet  Single and multi-player mobile games  Played on smartphones/tablets  Example company: Supercell Free-to-play MMO  Millions of simultaneous player games  Played on PC/browser  Example company: Tencent Messaging mobile-social  Multiplayer mobile-social games  Played on mobile messaging platforms  Example company: Kakao Talk Console/PC  Retail/digital download console/PC games  Played on PS3/4, Xbox360/One, Wii/U, 3DS, Vita, PC  Example company: EA Subscription Massively Multiplayer Online (“MMO”)  Hundreds of thousands of simultaneous player games  Played on PC  Example company: Activision-Blizzard Tech/gamification  Games technology/gamification platforms  Software as a Service B2B business model  Example company: Unity
  • 18 As competition intensifies to capture growth Note: selected companies Console/PC Mobile/Online CasualHardcore Mobile and online games competition increasing Fewer major console games competitors into 8th generation © Digi-Capital 2014
  • Value (large long-term niche) Volume (mass market growth) China Japan South Korea India Brazil America Europe Mobile/ tablet Mobile-social Free-to-play MMO Tech/gamification Social/casual online Console Subscription MMO 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 With the Big V having split games into Value and Volume markets 19 Over-the-Top © Digi-Capital 2014
  • - 5 10 15 20 25 2010 2011 2012 2013 Other app categories Mobile games Games dominate mobile app usage, downloads and revenue iOS/Android (Mobile/Tablet) Usage * Sources: Digi-Capital, Flurry, AppAnnie, Gartner20 Global mobile apps/games revenue ($B) Note: Games = 67% tablet usage Top 5 mobile app countries (revenue) Games monetise ~4x more effectively than all other mobile app types Games=~74%revenue Games 32% Social Networking 24% Browser 20% Entertainment 8% Utility 8% News 2% Productivity 2% Other 6% ©Digi-Capital2014
  • 0x 2x 4x 6x 8x 10x 12x Paying users ARPPU ARPU Single player PvE* only PvP* only PvP and PvE 21 Free-to-play and communal gameplay changing sector dynamics 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-Topmobile messaging platform (e.g., LINE, Kakao Talk, WeChat) Tech/Gamification Single Player Communal Gameplay (competitive/collaborative) Free To Play Paid Subscription MMO Social Mobile/tablet Casual online Free-to-play MMO Single player vs communal gameplay monetization comparison 1.07x >10x 13x OTT+ © Digi-Capital 2014 ©Digi-Capital2014
  • With a changing pyramid of potential consolidators 22 9 of the top 10 M&As in 2013 had Asian buyers Today’s growth companies could become tomorrow’s consolidators Note: Companies are for illustrative purposes only © Digi-Capital 2014
  • 23 Online/mobile independents - exit now or invest for growth * Note: outlier deals may occur + Over-the –Top mobile messaging platform (e.g. LINE, Kakao Talk, WeChat) x For illustrative purposes only Consolidation Curve by Sector Sector Launch Sector Growth for Scale Sector Consolidation Sector Equilibrium Sector Consolidation Low High Medium Advertising Mobile/tablet Social/Casual Online Console/PC Expected Deal Activity* - VC Investment - Some small M&A - Limited M&A/ investment - Cost focus - Alliances or spinoffs - Growth equity investment - High volume, mid-market strategic M&A - Leveraged buyouts - Low volume, large scale strategic M&A Gamification Mobile-Social Subscription MMO Tech OTT+ Free-to-play MMO © Digi-Capital 2014
  • 24 About Digi-Capital
  • 25 About Digi-Capital Digi-Capital advises mobile, games and digital clients across America, Asia (China, Japan, South Korea) and Europe Sell-side M&A Buy-side M&A Fundraising Investment Board Advisory Strategic Consulting Industry Analysis Selected Clients
  • Global Games Investment Review 2014 Q2 Update Summary Contact: info@digi-capital.com © Digi-Capital 2014www.digi-capital.com Authorised and regulated by the Financial Conduct Authority