Update Jim Perkins Director Corum Group May 2013 Introduction Jim Perkins Digital Media Specialist Corum Group Ltd Entertainment software entrepreneur Jim Perkins is directly responsible for publishing some of the industrys biggest franchises including Unreal Duke Nukem Wolfens ID: 726969
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Slide1
Gaming Mergers & AcquisitionsUpdate
Jim Perkins
Director,
Corum
Group
May 2013Slide2
Introduction
Jim Perkins
Digital Media Specialist
Corum Group, Ltd.
Entertainment software entrepreneur Jim Perkins is directly responsible for publishing some of the industry’s biggest franchises, including Unreal, Duke Nukem, Wolfenstein, Doom, Hunting Unlimited, and Driver. A well-known senior executive with a 22-year track record of publishing such bestselling hits, he founded and grew two highly successful software publishing companies (FormGen and ARUSH) from start-ups to multi-million dollar enterprises.
Jim also launched Radar Group, the first Transmedia Incubation Company to monetize entertainment franchises across all media, including film and television. His success and extensive experience in software production, marketing and public relations, packaging, online and retail distribution and software M&A, uniquely qualify him as an expert in building value and realizing wealth. Jim joined Corum Group, the world’s leading software M&A firm, with a specific focus on educating and helping prospective sellers maximize the value of their digital media companies.Slide3
Agenda
Background: Digital Game Trends
Spotlight: China, Japan, South Korea
Review of Recent M&A
Case Study: Asian NotablesConclusionsLooking AheadSlide4
Game TrendsSlide5
Digital Game Sales Growth
Digital Game & Downloadable Content +33% year-over-year in the US and EU
Digital content 40% of total game spend in US
Asia projected to dominate online and mobile games by 2016
Chinese gamers are younger, 37% under 18Mobile game spending in China will exceed $1 billion in 2013Mobile game spending in US @ $2.1 billion in 2012
Source: NPD, iResearch & Digi-CapitalSlide6
Global Video Game RevenueSlide7
Shift to Tablets
Source: Juniper Research
Tablet-based In-App
g
aming purchases to jump from $301 million in 2012 to $3 billion in 2016Far East/China will generate 3x the In-App revenue on tablets than North America by 2016
Asia is overtaking North America as a key revenue producing marketAn ongoing shift to mid-core gaming is increasing the importance of tablets“Dual Launch” on Google Play and App Store will become the standard instead of launching App Store followed by AndroidSlide8
All About Apps
iOS Mobile Gaming Revenue Q4 2012
35%
Asia
40% North America
Google Play Mobile Gaming Revenue Q4 201260% Asia20% North America
Source: App AnnieSlide9
China, Japan, South KoreaSlide10
Chinese Mobile Gaming
425 million new smartphone installs this year
Mobile gaming revenue growth 50%+ through 2015
Carrier billing increases will allow monetization
Fragmentation
Ecosystem: Android 70%+ (counterfeit Android)
App Store: > 500 App Stores
Content: Action, Puzzle, MMO – no leader
Launch Strategies
Focus on Android
Develop relationships with App Store Operators
Launch with a Local Partner to
Help localize titles
Cut through Chinese bureaucracy
Source: ufert.seSlide11
Japanese Gaming
Japanese gamer profiles similar to European & North American players.
Older players = higher monetization rate
$4.16 billion social gaming market in 2012
ARPPU = @ $50/month
Ecosystem = 55% Android, 36% iOS, 9% Other
Culture Counts
No foreign mobile/social gaming company is really successful in Japan
Do not try to sell in Japan unprepared
Source: ufert.seSlide12
South Korean Mobile Gaming
2011: South Korea deregulates review of App Store games
2012: Mobile gaming surges
2012: Kakao Games, mobile gaming network launch, $51.6 million revenue within 3 months
2013: 41% mobile gaming growth forecast
2013: Gamevil revenue forecast at $100 million; its revenue increased 64% in 2012
2017: Market stabilizes at 12-18% year-over-year growth
Source: ufert.seSlide13
Game M&ASlide14
Top Strategic Acquirers: 2012Slide15
Game M&A - 2012
Game acquisitions set a new record in 2012 - $3.2B disclosed, estimated $4 billion total transaction value
15% increase
from 2011Number of deals declined by 12%
Average transaction size rose 60% to approx. $50 million7 of top 10 deal buyers were from South Korea, China or Japan
Source: 451 Research, Digi-CapitalSlide16
Game M&A Transaction Value - 2012
Source: Digi-CapitalSlide17
Game M&A Transaction Volume - 2012Slide18
Game M&A HistorySlide19
Game Investment - 2012
Game investment transactions were up 9%
Average game investment transaction value was down 57%
Average size of investment - $5 millionMore mobile game studios were funded, but the money needed to fund the studios was smaller
Kickstarter accounted for 6% of all investmentsSource: Digi-CapitalSlide20
Game Investment Transaction Value - 2012
Source: Digi-CapitalSlide21
Game Investment Transaction Volume - 2012
Source: Digi-CapitalSlide22
Asian Game M&ATransactions Past 12 Months
Aeria Games & Entertainment (Japan)
Gamepot - Online & social network games
Aspect Gaming (China)
Longshot Interactive - Baccarat game for Facebook users in AsiaChangYou.com (China)7Road - MMORPG game, DDTank
Chengdu B-Ray Media Co. (China)Gamegoo Information Tech - Online video games in ChinaSlide23
Asia Game M&ATransactions Past 12 Months
Giant Interactive (China)
Backward Heroes - Online marketing and video services
Gree (Japan)
Pokelabo, Inc. – Japanese mobile video gamesAppAnt Studios – Android video game, Dino LifePaprika Lab – Facebook games + iOS quiz game
GungHo Online Entertainment (Japan)Grasshopper Manufacture – Console and mobile video gamesKog Corporation (South Korea)Kill3rCombo – MMORPG games for consumers globallySlide24
Asian Game M&ATransactions Past 12 Months
Mobcast, Inc. (Japan)
Entercrews Co. – Web and mobile role-playing games
Nexon (Japan)
gloops, Inc. – Mobile and social networking gamesinBLue, Inc. – Mobile and social networking games
Sega Corp. (Japan)Relic Entertainment – Canadian PC and console-based gamesSony Computer Entertainment (California)Gaikai – Videogame delivery network operatorWebzen (South Korea)Gala Networks – Online MMO game, gPotatoSlide25
Case Study – Asian NotablesSlide26
Asian Notables
Giant
Interactive Group, Inc. was founded in 2004 and listed on the NYSE in 2007.
Gree, Inc. is a social gaming for mobile phones pioneer, founded in 2004.
NEOWIZ Game Corporation is an internet and online game service company founded in 1997.
Nexon Co. Ltd. was founded in 1994 and an early adopter of free-to-play online games. Slide27
Asian Notables
Source: Financial TimesSlide28
Asian Notables
Source: Capital IQ & 451 Research
9Slide29
Asian Notables“M & A Outlook”
All companies are trying to increase their mobile presence via:
M&A
Partnerships
Internal DevelopmentNexon’s strong earnings and its 2012 purchases suggest it will continue buying in 2013
Giant announced M&A will be one of its avenues to develop its mobile offeringsSlide30
Conclusions and Looking ForwardSlide31
General Game Sector Tech M&A Outlook
2013
off to a slower start than 2011 & 2012:US tax law changes accelerated some M&A into 2012
Seasonality - larger deals usually land in H2
Less sophisticated buyers tempted by mass denial of how hard to build Frothy social games market got ahead of itselfSlide32
Potential Drivers of a Double Top
Platform rotation
: tablets, console cycle
Software/design innovation: tools, wild cardsLegal changes such as equity
crowdfunding:- Kickstarter already nearly $50M without equity- Pressurizes market, brings new buyersUS Android games market growth
- Google Play games services announced- Speaking of which …Slide33
Arrival in Force of
Top-Tier,
Sophisticated Buyers
Yahoo, Google, etc.
Tech-sophisticated, deep expertise at handRealistic about need to buyDisciplined, established M&A processesAble to factor in costs of hiring
and training Deep pockets and long-term outlookStrategically aware and drivenSlide34
Conclusion
An incredible
industry with Asia uniquely positionedAn incredible year of M&A, with more to
come
Tech, talent and growth drive demandStrategic players arrivingOpportunities aboundSlide35
Thank you
Jim Perkins
jimp@corumgroup.com