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Digi-Capital Ideas
February 2011
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Digi-Capital Ideas
Contents
Executive summary
Market analysis
– Massively Multiplayer Online (MMO)
– Casual/Social Online
– Mobile
– Console
– Online gambling and skill based
– In-game advertising
About Digi-Capital
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2 Note: Thank you to Graham Smith for his kind assistance
Digi-Capital Ideas
Executive summary
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3
Digi-Capital Ideas
The rise of online/mobile, China and the time to invest for growth
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4 +Note: Pure console excludes MMO
Digi-Capital
**Average Revenue per User
Ideas ++Massively Multiplayer Online
Games investment has fundamentally shifted to online/mobile
Video games investment has changed fundamentally Global video games private placements
VC games investment approached 2007 levels in 2010 in terms of funds raised, but $1,200M 140
number of investments declined
Top 10 investments accounted for ~60% of total games investment in 2010, with a $1,000M 120
fundamental shift to online/mobile games company investments
100
General VC market weakness and limited knowledge and relationships across $800M
complex, fast moving online/mobile games sectors still make generalist VC games 80
investment challenging $600M
60
$400M
Major console publishers struggle to adapt to online/mobile 40
Major console publishers are focused on existing large console games franchises, as
$200M 20
the console games market is flat to down, with declining profitability
Major publishers’ core competencies focus on management of $20m+ serial, high $0M 0
risk, complex developments, launches and commercialisation 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Online/mobile games require rapid, multiple, small scale parallel development
platform investments, completely different to major publishers’ business cultures Funds raised Number of investments
Major publishers are not driving online/mobile games investment
Major publishers are wary of large scale online/mobile video games M&A in early
stage, fragmented markets where market dominance is not yet clear Global video games mergers and acquisitions
$3,000M 80
Quality investment demand still exceeds supply 70
High quality, high growth (100% annual revenue growth, 20-50% operating $2,500M
margin) online/mobile games companies are seeking investment to accelerate 60
growth $2,000M
50
Outside the major investment deals, online/mobile games companies still find it
$1,500M 40
challenging to find high quality investors
30
$1,000M
Despite major publisher/media consolidation 20
Console publisher/online: Electronic Arts/Playfish $400M $500M
10
Media/online: Disney/Playdom $763M
Online/mobile: DeNa/Ngmoco $400M $0M 0
Major online/online: Tencent/Riot Est. $350M-$400M 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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5 Companies, Bloomberg, VentureBeat
Digi-Capital Ideas Note: Funds raised/transaction value only includes disclosed or estimated
amounts
China, not America, could dominate the global games market
Raising funds to accelerate growth prior to consolidation strategic M&A strategic M&A - Alliances or
Joint ventures and strategic partnerships to enter major foreign markets spinoffs
(particularly from and to China, Japan and South Korea)
Exit to take advantage of strong M&A market and valuations
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*Note: some outlier deals may occur, e.g. Microsoft/Massive acquisition
Ideas
Conglomerates subsidising change, harder for console pureplays
Console game investment is accelerating Console games are hit driven, with investment no guarantee of success
Average game development costs have grown:
XBox360, PS3: $15-30m
120 18
Wii: $5-7M
16
Strong development project management is crucial 100
14
Marketing costs can equal development costs or more 80 12
Retail, distribution and hardware royalties are significant
M Units
10
$M
30-40% of retail turnover 60
8
500K to 1M units just to break even (ex-overheads) 40 6
4
20
Although video games now rival Hollywood 2
0 0
Hardware: $22B Revenue*
Software: $55B Revenue*
Total $77B video games vs $85B film global revenue*
Up to $60 per game sold vs $10-20 per cinema ticket/DVD
Console games are flat to down, with console growth hoped Development Cost ($M) Sales (M Units)
for from next console hardware cycle in 2014-2016
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8 LA Times, NTV, Digital Battle, IGN, Time Magazine, Forbes, MontrealTechWatch,
Digi-Capital Ideas
Newsday, Gamesindustry.biz, Wired
Note: Development Cost excludes marketing and distribution
* Global revenue figures from 2009
Market trends: fundraising, investment
M&A and JV opportunities
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Digi-Capital Ideas
The video games market is changing across sectors
Online gambling
Online versions of offline gambling (illegal in US)
Played on PCs or smartphones
Example company: Betfair
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10
Digi-Capital Ideas
As online/mobile games grow and fragment the market
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11 TechCrunch, Inside Network
Digi-Capital Ideas *Note: Online includes MMO, casual and social games
+Note: MAU is total monthly active users, not unique users
With opportunity for online/mobile games growth capital funds
With a clear investment strategy to manage risk and optimise returns Game Fund
$10M average investment ($5-15M range) $100M+ funds committed
Focus on growth capital investment returns (30%+ IRR, 3-5x money multiple) 4 year investment period
Working capital (debt convertible into equity via convertible loan notes) 7 year fund lifetime
Pure equity capital
Equity capital plus bank debt
Direct European and Chinese investments
US investment with Tier 1 co-investment partners
Clear exit paths via trade sale to strategic video game and media corporates as market consolidates
IPO potential for later stage investments depending on market conditions General Partners
Source, invest in, oversee
Growth capital fund structure and exit portfolio companies
$100M+ committed funds
2011-2014 investment period (aim to invest 75%+, remainder for follow on rounds)
2011-2017 fund lifetime
Committed funds fee basis
2% annual management fee 2011-2104, reducing to 1.5% in 2015-2017 Portfolio Companies
20% General Partners carry
Return of funds invested before carry
Return of fees before carry
8% hurdle return before carry, with catch-up
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12 + Not pure console, retail MMO or online gambling due to investment risk
Digi-Capital Ideas
There are clear investment, M&A and JV opportunities
For Major Video Games Companies
Sector Console MMO Casual/ Mobile Online Skill Based In-game
Social Gambling Advertising
Investment, Core franchise Invest in Invest in Invest in Avoid due to Mid-market Small strategic
M&A and JV organic growth capital growth capital growth capital distance from strategic M&A M&A
Opportunities investment game fund game fund game fund core video Avoid large, Avoid large,
Limited new IP Mid-market Mid-market Small strategic games value value
investment until strategic M&A strategic M&A M&A competencies destroying destroying
8th generation Avoid large, in subscription Avoid large, M&A M&A
consoles value /micro- value Focused new Limited
Avoid large, value destroying transaction destroying IP investment organic
destroying M&A M&A and M&A in extending investment
Acquire Focused new middleware Focused new skill based due to small
economically IP investment markets IP investment model to core market size
challenged AAA in non-fantasy Avoid large, in parallel, low franchises
independents to MMO market value cost mobile
control internal growth destroying game
costs Focused new M&A development
JV with major IP investment Focused new JV with major
media for in casual/ IP investment media for
licensed games/ social in parallel low licensed
marketing subscription/ cost mobile games
investment micro- subscription/ marketing/
Explore strategic transaction micro- investment
options for MMO market transaction
underperforming JV with major game
assets media for development
licensed MMO JV with major
marketing/ media for
investment licensed
casual/social
marketing/
investment
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13
Digi-Capital Ideas
There are clear investment, M&A and JV opportunities (cont)
For Independent Video Games Companies
Sector Console MMO Casual/ Mobile Online Skill Based In-game
Social Gambling Advertising
Investment, Organic Organic VC fundraising VC fundraising VC fundraising Growth equity VC fundraising
M&A and JV investment (if investment for Exit to major for online buyout Exit to major
Opportunities possible) for new IP in subscription/ video games gambling Exit to major video games/
Exit to major non-fantasy micro- company technology video games/ media
video games MMO market transaction JV with major and niche/ media company
company growth (if and media for geographic company
JV with major possible) middleware licensed online JV with major
media for VC markets mobile games gambling media for
licensed games/ fundraising Growth equity marketing/ Growth equity licensed
marketing/ for buyout for investment buyout for marketing/
investment casual/social subscription/ gambling investment
Restructure to subscription/ micro- technology
focus on self micro- transaction and niche/
publishing, transaction market geographic
downloadable non-fantasy Exit to major online
content, casual/ MMO market video games/ gambling
social or mobile Growth media LBO for large
markets, with equity buyout company generic
parallel for JV with major gambling
development and casual/social media for franchises
low cost/ subscription/ licensed JV with major
offshoring micro- casual/social media for
transaction games licensed
MMO market marketing/ marketing/
JV with major investment investment
media for
licensed
MMO
marketing/
investment
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14
Digi-Capital Ideas
There are clear investment, M&A and JV opportunities (cont)
For Venture Capital and Private Equity Firms
Sector Console MMO Casual/ Mobile Online Skill Based In-game
Social Gambling Advertising
Venture Avoid pure Invest in Invest in Invest in Invest in Selective Invest in in-
Capital console casual/social casual/social parallel, low online investment in game
investments due subscription/ subscription/ cost mobile gambling new niches advertising
Investment technology
to risk profile and micro- micro- game Avoid technology
Opportunities providers
sector transaction transaction development investment in Avoid in-game
Invest in
consolidation non-fantasy and already advertising
niche/
MMO market middleware consolidated agencies due
geographic
Avoid markets online parts of the to business
hardcore Avoid pure gambling sector model
MMO market advertising franchises
due to risk supported Avoid generic
profile market gambling
because of franchises due
business to sector
model consolidation
Private Equity Avoid pure LBO in Growth equity Develop sector Growth equity Growth equity Develop sector
Buyout console buyouts hardcore buyout in relationships buyout of buyout relationships
due to risk profile MMO market casual/social in anticipation online in anticipation
Opportunities gambling
and sector Growth subscription/ of sector of sector
consolidation equity buyout micro- maturity technology maturity
providers
in transaction
Growth equity
casual/social and
buyout of
subscription/ middleware niche/
micro- markets geographic
transaction Avoid pure online
MMO market advertising gambling
supported franchises
market LBO of large
because of generic
business gambling
model franchises
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15
Digi-Capital Ideas
There are clear investment, M&A and JV opportunities (cont)
For Major Technology, Media and Telecoms Companies
Sector Console MMO Casual/ Mobile Online Skill Based In-game
Social Gambling Advertising
Investment, JV with major/ Invest in Invest in Invest in JV with JV with Small strategic
M&A and JV independent growth capital growth capital growth capital independent independent M&A to build
Opportunities video games game fund game fund game fund online video games internal
companies for JV with JV with major/ JV with major/ gambling companies for capability for
licensed games/ major/ independent independent companies for licensed significant IP
marketing/ independent video games video games licensed online marketing/ portfolios and
investment video games companies for companies for gambling investment leveraging
Strategic M&A of companies for licensed licensed marketing/ Mid-market client
independent licensed MMO casual/social mobile games investment strategic M&A relationships
studios to build marketing/ games marketing/ Avoid organic to build Avoid large,
internal investment marketing/ investment investment internal value
capability for Mid-market investment Small strategic and M&A due capability for destroying
significant IP strategic M&A Mid-market M&A to build to different significant IP M&A
portfolios and to build strategic M&A internal core portfolios and Avoid
leveraging internal to build capability for competencies leveraging standalone
marketing capability for internal significant IP marketing organic
platforms significant IP capability for portfolios and platforms investment
Explore strategic portfolios and significant IP leveraging Avoid due to
options for leveraging portfolios and marketing standalone different core
underperforming marketing leveraging platforms organic competencies
assets platforms marketing Avoid investment
Avoid large, platforms standalone due to
value Avoid organic different core
destroying standalone investment competencies
M&A organic due to
investment different core
due to competencies
different core
competencies
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Digi-Capital Ideas
Massive Multiplayer Online (“MMO”) Sector
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Digi-Capital Ideas
The MMO sector is both high growth and consolidated
share) has prompted many copycat offerings, with 35+ males the largest World of
RuneScape, 6%
player demographic Warcraft, 60%
There appears to be significant untapped potential for MMOs in other game Aion, 12% Fantasy, 95%
genres, suggesting a “Blue Ocean Strategy” approach to opening new
genres (as with Nintendo Wii in the console market)
Yet opening a new segment is not without risk: RealTimeWorlds raised
>$100M in total, then went into administration after launch of APB
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18
Digi-Capital
Note: data not publically available for all MMOs
Ideas
Yet remains an early stage market with evolving dynamics
Subscription
Casual Hardcore
Tencent/Riot
Tencent continues its
international expansion
with purchase of League
Virtual items/micro-transactions of Legends developer
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Digi-Capital Ideas
And a clear hierarchy of successful business models
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Digi-Capital Ideas
MMO is helping to deliver strong public company valuations
Activision Blizzard, Inc. 11.07 87.5% 13,351 (3,508) 9,843 2.30 x 2.21 x 2.46 x 13.1 x 9.9 x 6.4 x
Changyou.com Limited 36.83 92.7% 1,899 (351) 1,548 5.79 x 4.73 x 3.78 x 9.2 x 7.6 x 6.4 x
Giant Interactive Group, Inc. 7.83 94.9% 1,781 (873) 908 4.58 x 4.61 x 3.75 x 6.6 x 7.4 x 6.1 x
NCSoft 204.28 82.5% 4,038 (534) 3,504 6.13 x 5.99 x 6.04 x 15.3 x 14.7 x 11.8 x
NetEase.com, Inc. 44.48 94.9% 5,776 (1,339) 4,437 7.77 x 5.54 x 4.55 x 13.5 x 10.9 x 8.9 x
Perfect World Co., Ltd. 21.42 50.8% 1,074 (229) 844 2.59 x 2.28 x 1.98 x 4.8 x 5.3 x 4.7 x
Shanda Games Limited 6.07 68.7% 1,732 (486) 1,246 1.71 x 1.87 x 1.71 x 4.2 x 5.3 x 4.8 x
Shanda Interactive Entertainment Ltd. 43.46 87.4% 2,502 (939) 1,563 1.96 x 1.90 x 1.62 x 4.4 x 7.7 x 6.2 x
Sohu.com Inc. 83.84 92.7% 3,181 (575) 2,605 5.06 x 4.25 x 3.41 x 11.7 x 10.2 x 8.3 x
Tencent Holdings Ltd. 26.75 98.2% 49,116 (2,055) 47,061 24.88 x 15.89 x 11.88 x 48.6 x 29.1 x 21.6 x
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Digi-Capital Ideas
MMO M&A activity is increasing
Selected M&A
Deal Revenue EBITDA Target
Date Target Acquirer Comments
value multiple multiple description
Developer of Lord of the Rings Warner Bros. acquisition moves it further into
20 Apr 10 n.a. n.a. n.a.
Online the free to play micros-transactions MMO sector
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Digi-Capital Ideas
The MMO sector is ripe for investment
Selected private placements
Deal Target Deal Target
Date Target Investor Date Target Investor
value description value description
Develops and licenses MMO tech
13 Dec 10 Stelt Holding NV $10m MMO developer and publisher $3m
15 Dec 09 platform and develops third party
racing games
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Digi-Capital Ideas
With clear investment, M&A and JV opportunities
Firm Type Major Independent Venture Capital Private Equity Major Technology,
Video Games Video Games Media & Telecoms
Investment, M&A Invest in growth capital Organic investment Invest in casual/ LBO in hardcore Invest in growth
and JV game fund for new IP in non- social subscription/ MMO market capital game fund
Opportunities Mid-market strategic fantasy MMO market micro-transaction in Growth equity buyout JV with major/
M&A growth (if possible) non-fantasy MMO in casual/ social independent video
Avoid large, value VC fundraising for market subscription/ micro- games companies for
destroying M&A casual/social Avoid hardcore MMO transaction MMO licensed MMO
Focused new IP subscription/micro- market due to risk market marketing/
investment in non- transaction non- profile investment
fantasy MMO market fantasy MMO market Mid-market strategic
growth Growth equity buyout M&A to build internal
Focused new IP for casual/ social capability for
investment in casual/ subscription/ micro- significant IP
social subscription/ transaction MMO portfolios and
micro-transaction non- market leveraging marketing
fantasy MMO market JV with major media platforms
JV with major media for for licensed MMO Avoid large, value
licensed MMO marketing/ destroying M&A
marketing/investment investment
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Digi-Capital Ideas
Casual/Social Online Sector
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Digi-Capital Ideas
Casual/social online games are growing extremely rapidly
Casual/social online games have two primary forms
Casual/social online games require little experience or time commitment, with
Explosive growth – Cityville after 41 days
simple rules and gameplay accessed through a web browser 100M
Most casual/social games offer a free element, coupled with subsequent game
purchase, in-game virtual item purchase, subscriptions or advertising
80M
With multiple business models Social players: older (so wealthier) than expected
Subscription and in-game item sales (micro-transactions) models most profitable 25%
Advertising supported models are cyclical, with generally lower margins 20%
Bigpoint (browser “core” – between hardcore and pure casual gameplay): free, 15%
subscription and in-game item sale, limited advertising
10%
Zynga (social): free, in-game item sales (micro-transactions)
5%
Spil (casual): free, advertising supported, micro-transactions
Big Fish Games (casual): try before you buy, downloads, retail, multi-platform 0%
Casual/social game development costs of less than $500k are much lower than <18 18-21 22-29 30-39 40-49 50-59 60+
console game development costs
Sources: Casual Games Association, DFC Intelligence, Inside Network, ISG (US/UK age
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26 statistics 2010)
*Note: Casual Gaming Association includes casual/social games played on mobile, iPhone,
Digi-Capital Ideas
social networks, PC, Mac and Xbox LIVE Arcade platforms, using different definitions to
the earlier PWC definitions
+Note: MAU is total monthly active users, not unique users
Social games market dynamics are changing
Social games are the leading social applications Top 40 Facebook app publishers MAU* (M)
~70% of the Monthly Active Users for top 40 Facebook application publishers come
Daily Telaxo 7 Social Zoosk 7 50 Cubes 6
from games Horoscope 8
Cie Games 8
Graph 7 Myspace 6
Funzio 6
HTC 6
GSN 8
Half of the top 40 Facebook applications are games Frases Boyaa 9
Photobucket 7
Diarias 9 Kabam 9
Digitware MindJolt 9
Conduit 9 Zynga
Driven by the nature of social networks 9 Yelp 10
LOLapps 10
278
TubeYou 10
Cross-promotion using social networks and social games platforms is critical to the Yahoo! MiniMax 11
11
growth of social games RockYou! 14
SNAP 15
Investment in “on platform” cross-promotion and marketing generally produces Popcap 15
Wooga 16
much higher return on investment than “off platform” Microsoft 16
The strongest social games are built around game design focused on acquiring Social Point 16
RootMusic 17
users, generating revenue from virtual items and increasing user engagement and Digital Chocolate 19 CrowdStar
42
lifetime Badoo 40
AppBank 19 @Apps 21
Electronic Arts 36
Causes 26
Takeoff Monkey 23
But the social networks also pose a significant challenge 6 Waves 25 Playdom 25
The major social networks dominant positions make them excellent marketing and
distribution partners Broader distribution
Social games companies which are primarily dependent on one social network have
more limited leverage in commercial negotiations
70:30 revenue split between games developers and social networks is not
uncommon, but there are market rumours of more extreme splits in favour of some
social networks
Social networks’ commercial policies can have significant impact across both social
games developer and middleware sectors Fewer More
games games
So a portfolio of distribution and games is needed
As in any industry, reliance on one product or one distribution channel poses
potential risks
Diversified social games companies with a portfolio of games and distribution
channels generally have the greatest control over the destiny of their businesses,
and hence lower long term risks
Narrower distribution
Source: InsideNetwork
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27 *Monthly Active Users Feb 2010
Digi-Capital Ideas
Online/mobile games middleware offers another way to play
Today’s online/mobile games middleware market: disparate, unintegrated solutions
Services Games Virtual item Measure and Optimize game Deliver games Distribution on Payment Anti-fraud,
delivered development (micro- analyse key performance across social/casual/ across anti-piracy,
engine/SDK transactions), online/mobile across platforms browser based platforms and revenue
virtual game metrics multiple and mobile geographies assurance
currency, for continuous platforms platforms
subscription, feedback loop
in-game
advertising,
and sales tools
Example Multiple
company independent
firms
Across casual, social, browser based, smartphone, set-top box, connected console, PC, including all major platforms and devices
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Digi-Capital Ideas
There are opportunities across the casual/social value chain
More Zynga acquisitions? Disney and GameStop buys Next after Playfish/Playdom? Chinese major investments? Middleware consolidation
Zynga ‘s series of acquisitions in Disney buys Playdom for $763M Zynga, Bigpoint and GameForge Chinese games companies set to Visa’s acquisition of Playspan and
2010 to leverage its position may and GameStop buys Kongregate are subject to constant accelerate foreign investment in Google’s acquisition of Jambool may
continue in 2011 speculation about IPO or exit 2011 in line with 12th 5 year plan lead to more early stage consolidation
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29
Digi-Capital Ideas
Particularly for integrated online companies like
Tencent is the greatest games company may not know well
China has 29% internet penetration, but 382M users Tencent Games quarterly revenue (RMB M)
China forecast to reach 56% internet penetration (754M users) by 2015
Tencent holds dominant or leading stakes in many Chinese online/mobile markets (IM,
2,500
games, eCommerce, search, mobile services)
Tencent’s Chinese games market share was 20% in 2009 with forecast 27% by 2012
2,000
Total peak concurrent users across all games categories of ~20M
Tencent’s market cap is substantially more than Activision Blizzard, Electronic Arts, Casual/social online
1,500
GamesStop, Take2, THQ, Atari, Game Group and Ubisoft combined
Board & chess
1,000
Tencent’s integrated model is where the market is headed
Tencent generates ~50% operating margin 500
MMO
Online/mobile games (MMO, board & chess, casual/social) generate >40% revenue
Business model appears to be migrating from virtual items (higher Average Revenue per -
User) to subscriptions (short term revenue reduction, but lower volatility) 3Q09 4Q09 1Q10 2Q10E 3Q10E 4Q10E
Integrated model with upgrades/privileges across online, mobile and offline (not just
games) is a significant advantage for customer acquisition, development and retention
Enhanced capabilities to cross-promote, upsell and cross-sell
Tencent Chinese revenue leadership ($M)
Tencent will be in your market soon, if it isn’t already
Tencent is growing through domestic partnerships:
China Unicom (fixed line, 3G, operations, “QQ Wallet”)
Hunan TV (talent, animation, online/mobile games)
China Merchants Bank (financial services)
Tencent is expanding with international partnerships/investments:
Riot Games (League of Legends MMO)
Digital Sky Technologies (Facebook, Zynga, Mail.ru investor)
Vina Games (Vietnamese online games/internet)
MIH India Global Internet (licensed software, content & trademarks)
Naspers (36% Tencent investor) with global reach in high growth markets
$760M investment fund, including games focus
Relationships
30 News, Reuters, People’s Daily
Digi-Capital Ideas
Casual/social games are driving larger company valuations
US and Europe
Electronic Arts Inc. 19.28 95.3% 6,446 (1,971) 4,475 1.18 x 1.20 x 1.15 x n.m. 17.2 x 8.1 x
G5 Entertainment AB 3.58 84.8% 27 (0) 26 17.71 x n.a. n.a. n.m. n.a. n.a.
GigaMedia Ltd. 1.22 36.5% 68 (37) 30 0.19 x 0.48 x 0.83 x 7.6 x n.a. n.a.
RealNetworks Inc. 4.04 74.7% 548 (334) 214 0.38 x 0.53 x 0.60 x n.m. n.m. 7.0 x
Asia
Asiasoft Corporation 0.33 88.1% 100 (27) 73 1.49 x 1.55 x 1.48 x 7.0 x 5.0 x 4.7 x
Astro Corporation 1.81 74.0% 120 (3) 117 6.34 x 11.13 x 10.27 x n.m. n.a. n.a.
Gamania Digital Entertainment Co., Ltd. 1.47 71.7% 244 (30) 214 1.22 x 1.21 x 1.11 x 7.1 x n.a. n.a.
InterServ International Inc. 2.04 37.3% 57 (23) 35 3.67 x n.a. n.a. 14.4 x n.a. n.a.
IPVG Corp. 0.03 58.9% 21 9 30 1.02 x n.a. n.a. 14.0 x n.a. n.a.
Kingsoft Corporation Ltd. 0.55 63.9% 622 (198) 424 2.73 x 2.60 x 2.25 x 6.5 x 6.4 x 5.2 x
NetEase.com, Inc. 44.48 94.9% 5,776 (1,339) 4,437 7.77 x 5.54 x 4.55 x 13.5 x 10.9 x 8.9 x
Perfect World Co., Ltd. 21.42 50.8% 1,074 (229) 844 2.59 x 2.28 x 1.98 x 4.8 x 5.3 x 4.7 x
Shanda Games Limited 6.07 68.7% 1,732 (486) 1,246 1.71 x 1.87 x 1.71 x 4.2 x 5.3 x 4.8 x
Shanda Interactive Entertainment Ltd. 43.46 87.4% 2,502 (939) 1,563 1.96 x 1.90 x 1.62 x 4.4 x 7.7 x 6.2 x
Tencent Holdings Ltd. 26.75 98.2% 49,116 (2,055) 47,061 24.88 x 15.89 x 11.88 x 48.6 x 29.1 x 21.6 x
Knowledge
Relationships
31
Digi-Capital Ideas
Generating substantial M&A
Selected M&A
Deal Revenue EBITDA Target
Date Target Acquirer Comments
value multiple multiple description
US-based developer of social and Zynga New York will form part of Zynga’s
21 Jan 11 n.a. n.a. n.a.
branded games continuing growth across social and mobile games
US-based developer of
22 Oct 10 n.a. n.a. n.a. WonderHill becomes Kabam’s San Francisco studio
social games
Social Gold virtual currency Google extends its presence in the games sector
13 Aug 10 Est. $70m n.a. n.a.
platform with Jambool’s monetization platform
Relationships
32
Digi-Capital Ideas
Generating substantial M&A (continued)
Selected M&A
Deal Revenue EBITDA Target
Date Target Acquirer Comments
value multiple multiple description
Knowledge
Relationships
33
Digi-Capital Ideas
And attracting significant investment
10 Feb 11 $15m Gamer social network 09 Feb 10 Offers a social networking website
$3m
To be invested
Tencent investment fund,
24 Jan 11 in next 2-3 $760m including games focus Allows employees to connect and
03 Feb 10 $10m share by posting messages
years
Multi-platform casual-games
10 Nov 10 $16m platform, with expertise in PC, n.a. Develops and publishes social
25 Jan 10 games in Russia
online and mobile
25 Mar 10 Develops social web games Undisclosed Develops, publishes, and operates
n.a. 24 Nov 09 $5m free to play online games
investor
Relationships
34 Reuters, People’s Daily
Firm Type Major Independent Venture Capital Private Equity Major Technology,
Video Games Video Games Media & Telecoms
Investment, M&A Invest in growth capital VC fundraising for Invest in casual/ Growth equity buyout Invest in growth
and JV game fund subscription/micro- social subscription/ in casual/ social capital game fund
Opportunities Mid-market strategic transaction and micro-transaction subscription/ micro- JV with major/
M&A in subscription/ middleware markets and middleware transaction and independent video
micro-transaction and Growth equity buyout markets middleware markets games companies for
middleware markets for Avoid pure Avoid pure licensed casual/
Avoid large, value subscription/micro- advertising advertising social games
destroying M&A transaction market supported market supported market marketing/
Focused new IP Exit to major video because of business because of business investment
investment in parallel games/media model model Mid-market strategic
low cost subscription/ company M&A to build internal
micro-transaction game JV with major media capability for
development for licensed casual/ significant IP
JV with major media for social games portfolios and
licensed casual/social marketing/ leveraging marketing
marketing/investment investment platforms
Avoid large, value
destroying M&A
Avoid standalone
organic investment
due to different core
competencies
Knowledge
Relationships
35
Digi-Capital Ideas
Mobile Sector
Knowledge
Relationships
36
Digi-Capital Ideas
Mobile games have been reinvigorated by smartphone growth
8
Driving mobile games revenue growth
Global mobile games market forecast to grow to >$13B by 2014 6
Relationships
37
Digi-Capital
* Note: Online includes MMO, casual and social games
Ideas
Attracting major corporates and multiple independents
Japan's DeNa $400m EA claims market leadership Microsoft
Ngmoco acquisition But 40% of mobile games revenue still and Nokia
DeNA acquisition to leverage from “feature” phones, not smartphones To address
Mobage globally “burning platform”
questions, the
Public
giants are joining
forces against
Apple and Google
Mobile Multi-
pure- Platform
play Lupis Labs
THQ smartphone
focus
THQ sells THQ
Wireless
Operations and
Global Carrier
CLAPFOOT
GAMES division to focus on
smartphones
iPhone/Android App stores
revolutionise independents Private
Independents now sell direct via
App stores, bypassing operators
Relationships
38
Digi-Capital Ideas
Apple is aiming to be the mobile/tablet entertainment company
Apple is far down the path of migrating from electronics and software to mobile communications and entertainment
Apple’s strength is providing all components of the mobile entertainment value chain in elegantly integrated consumer products and services,
including hardware, software, eCommerce, applications and content
iPad is the next stage of Apple’s mobile entertainment strategy, already spawning many imitators. This may change the video games market in
ways that are likely to have greater impact, but take much longer to occur, than anticipated. The tablet/smartphone browser market remains early
stage, with significant room for commercial development as 46M tablets are forecast to be sold in 2011E
300,000
150,000
100,000
Macbook-Air Macbook
50,000
Nov-08
Nov-09
Jan-09
Jan-10
Jul-08
Jul-09
Jul-10
May-09
May-10
Mar-09
Mar-10
Sep-08
Sep-09
Sep-10
iMac
Entertainment functionality
Relationships
39
Digi-Capital Ideas
But Google and Apple are fighting for market dominance
Apple remains the dominant mobile games platform in the US Mobile Applications 2010 (US)
Apple has >2x more mobile apps than Android
Android apps growth rate 5x Apple apps growth rate
Apple mobile apps are paid for at twice the rate of Android apps 350,000 600%
55% of the top 100 iPhone paid and free apps are games 300,000 500%
But Google is threatening its global position 250,000
400%
Global smartphone sales grew substantially in 2010 to 297M units (+72% on 2009)
200,000
Global smartphone marketshare changed dramatically in 2010 compared to 2009: 300%
Nokia 38% (-20%), Google 23% (+482%), RIM 16% (-20%), Apple 16% (+9%), 150,000
Microsoft 4% (-52%) 200%
100,000
• Apple’s tablet marketshare dropped from 95% to 75% between Q3 and Q4 2010 due to
Android tablets (particularly Samsung), with Android tablets forecast to increase share 50,000 100%
Game genre share (revenue/volume) and average price (US) Games share of top 100 apps by platform (US)
25% $9 60%
$8
50%
20% $7
$6 40%
15%
$5
30%
$4
10%
$3 20%
5% $2
10%
$1
0% $0 0%
iPad iPhone RIM Nokia Palm Microsoft
e
ia
rd
d
ce
Pl g
o
n
Ad de
d
ds
l
le
g
n
gy
ily
ic
na
ur
sin
t
ar
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iv
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or
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i
ca
te
nt
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at
Tr
Bo
io
ay
W
Ac
Sp
Pu
Ca
Fa
M
ra
ve
at
Ar
ul
R
St
m
uc
Paid Free
le
Si
Relationships
40
Digi-Capital Ideas
Mobile games have both strong valuations and M&A
Public company valuations
USD millions, except per share data Enterprise Value Multiples
Price % of 52 Market Net Enterprise Revenue EBITDA
Company (18-Feb-11) Week High Cap Debt Value CY2009 CY2010 CY2011 CY2009 CY2010 CY2011
Com2uS Corporation 9.81 56.5% 93 (34) 59 2.08 x 2.36 x 1.48 x 10.4 x 15.6 x 5.1 x
G5 Entertainment AB 3.58 84.8% 27 (0) 26 17.71 x n.a. n.a. n.m. n.a. n.a.
GameLoft SA 6.46 86.3% 483 (34) 449 2.58 x 2.36 x 2.10 x 19.8 x 12.1 x 9.7 x
GAMEVIL Inc. 23.35 70.5% 129 (38) 91 4.15 x 3.55 x 2.75 x 7.3 x 6.4 x 4.6 x
Glu Mobile, Inc. 4.11 99.2% 213 (11) 203 2.55 x 3.15 x 3.82 x n.m. n.m. n.m.
Hudson Soft Company 3.73 69.9% 108 (54) 54 0.27 x n.a. n.a. 2.7 x n.a. n.a.
Tose Co. Ltd. 7.11 87.2% 53 (26) 27 0.41 x 0.45 x 0.36 x 5.3 x n.a. n.a.
Developer of music games for the Strengthens Disney’s portfolio of games and
01 Jul 10 n.a. n.a. n.a.
iPad, iPhone, and iPod Touch entertainment offerings in mobile
Relationships
41
Digi-Capital Ideas
And early-stage investments are accelerating
Selected private placements
Deal Target Deal Target
Date Target Investor Date Target Investor
value description value description
A pioneering service providing Offers videogames, Internet platform
console games without a console 06 May 10 Accredited $5m and Internet/mobile gaming for flash
08 Feb11 $40m and smartphone
using the internet investors
Publishes lifestyle and children's Online platform, engages in
11 Jan 11 $6m content, including applications for 08 Apr 10 19 investors $3m aggregating, promoting, and
iPad and iPhone delivering mobile entertainment
content directly to members
Operates as a mobile social $2m Develops massively multiplayer
08 Nov 10 $9m 06 Apr 10 online (MMO) mobile games
network
Provides a mobile service that
Owns and operates a gaming 27 Mar 10 Angel $10m mixes social, locative, and games
20 Oct10 $12m portal that offers mobile phone elements
video games
Nominal Develops mobile games for social
Develops a 3D MMO games for 16 Feb 10 Debt networks
30 Sep10 n.a. amount
Apple's suite of mobile products
Relationships
42
Digi-Capital Ideas
With clear investment, M&A and JV opportunities
Firm Type Major Independent Venture Capital Private Equity Major Technology,
Video Games Video Games Media & Telecoms
Investment, M&A Invest in growth capital VC fundraising Invest in parallel, low Develop sector Invest in growth
and JV game fund Exit to major video cost mobile game relationships in capital game fund
Opportunities Small strategic M&A games company development anticipation of sector JV with major/
Avoid large, value JV with major media maturity independent video
destroying M&A for licensed mobile games companies for
Focused new IP games marketing/ licensed mobile
investment in parallel, investment games marketing/
low cost mobile game investment
development Small strategic M&A
JV with major media for to build internal
licensed mobile games capability for
marketing/investment significant IP
portfolios and
leveraging marketing
platforms
Avoid large, value
destroying M&A
Avoid standalone
organic investment
due to different core
competencies
Knowledge
Relationships
43
Digi-Capital Ideas
Console Sector
Knowledge
Relationships
44
Digi-Capital Ideas
Console games are no longer driving market growth
A consolidated sector driven by hardware cycles Worldwide pure console* software market
Wii dominates current 7th generation console unit sales globally with 46% of
consoles sold to date, followed by Xbox360 at 28% and PS3 at 26%. 2010 sales of
$40B
Xbox 360 were 42% higher than 2009, driven by 8M Kinects sold in its first 60 days
Market forecast of $37B revenue by 2014E, fuelled by North American and European $35B
growth from anticipated 8th generation platforms (2014-2016). Asia-Pacific growth
limited by piracy and high share of MMO/casual/social online games $30B
Console games profits for Sony/Microsoft come from software, as consoles generally
$25B
sold at a loss. The lower cost Wii has generated hardware profits for Nintendo
Software pureplays can be highly cash generative, but decline in packaged goods $20B
retail sales has led to challenges (e.g. EA’s last profitable year in 2007, Activision
Blizzard profitable driven by console and MMO franchises, but revenue guidance $15B
Colour TV game
Knowledge
Relationships
45 Sources: PWC, VGChartz, Companies
Majors have multiple in-house Major publishers and banks Major publishers often Physical retail continues to
game development studios finance game development distribute their own games, be challenged by web
globally Ancillary services such as although Take-Two sold its retailers such as Amazon
Independents receive market research, advertising distributor Jack of All Retailers such as market
advances from Majors for and technology assistance Games to Synnex leader GameStop make
game development to cover provided more profit from used than
costs, with royalties after Game bonders Shift to digital new software sales
agreed sales target reached increasingly carry distribution likely to
Technology providers license completion risk reduce the role of Used sales
game engines, motion capture, Console physical cannibalise new
facial animation etc manufacturers charge distributors in the sales
Third-party independent publishers a royalty medium term Majors using
studios often used for licensed for each game Digital distribution downloadable
IP games and assistance on in- manufactured at time growing through content to combat
house development of manufacture Xbox Live Arcade, used market
For example, BioShock 2 was Publishers carry Playstation Downloadable
developed for Take-Two by inventory risk Network, Wii Ware, content share
inhouse and outsourced Due to increasing marketing OnLive and major growing with fast
developers budgets and consumer focus independent broadband
Inhouse: 2K Marin, 2K on hits, major publishers are distributors such as
Australia, 2K China reducing the number of Valve’s Steam Downloadable add-on game
Outsourced: Digital games published modules generate post-
Extremes (multiplayer) Project management is Independent publishers launch sales
Arkane Studios (level provided to manage quality rely on third party Retail remains highly
design assistance) control and risks distributors such as Synnex seasonal, with almost
and Ingram Micro half of all sales in Q4
Relationships
46
Digi-Capital Ideas
Although the console market is still driven by major publishers
Integrated Publisher
PS4 in 2014-16?
Sony has announced development of an 8th generation Microsoft Kinect
console for potential launch in 2014-16 Controller without a
controller generates
8M sales in first 60
days
Niche Diversified
Game Game
Portfolio Portfolio
Console to digital
OnLive goes live
Major console publishers
The console without a console
trying to adapt to online/
launches, with the impact of
mobile. Diversified
Independent market challenging console game delivery over
conglomerates such as
Many independents have sold to large broadband to be tested in the
Disney and Microsoft more
consolidators, some have ceased market in 2011
able to support reinvestment
trading, others are repurposing to
online/mobile, some quality AAA Independent Developer
independent studios still performing
Relationships
47
Digi-Capital Ideas
But sector economics are increasingly risky
VAT/Sales Tax
15%
Publisher
Gross Profit
35% Retail
Margin
25%
Distribution
Margin
5% Hardware
Manufacturer
Royalty
20%
For major AAA $60 retail console game, 1-2M unit sales are needed to break even*
200
150
100
$M
50
-
0.5 1.0 1.5 2.0 2.5 3.0
Units Sold (M)
-50
Retail Revenue Publisher Retail Profit Publisher Gross Profit Publisher Net Profit
Relationships
48
Digi-Capital Ideas
And development financing is becoming like film financing
Complex financing structures to effectively manage risks, with significant transaction costs
Royalties
Co-pub/distribution
agreement
Parent Company/ Publisher/
Developer Distributor
IP
Milestone Game development and delivery
Approvals of Gold Master Candidate
Bank First
priority
Loan of budgeted
Borrower/Developer costs including Completion
(via Special transactional costs Guarantee
IP
(payable per
Purpose Vehicle) Agreement
milestone)
Reporting
Cost reporting
Specialist Auditor
(e.g. Games Audit)
Due diligence, development progress
monitoring and milestone approvals
Relationships
49
Digi-Capital Ideas
So valuations reflect a mature industry in transition
US
Activision Blizzard, Inc. 11.07 87.5% 13,351 (3,508) 9,843 2.30 x 2.21 x 2.46 x 13.1 x 9.9 x 6.4 x
Electronic Arts Inc. 19.28 95.3% 6,446 (1,971) 4,475 1.18 x 1.20 x 1.15 x n.m. 17.2 x 8.1 x
GameStop Corp. 19.95 77.5% 3,020 66 3,087 0.34 x 0.33 x 0.31 x 3.8 x 3.7 x 3.6 x
Take-Two Interactive Software Inc. 16.28 97.2% 1,392 (192) 1,201 1.15 x 1.08 x 0.96 x n.m. 13.2 x 8.3 x
THQ Inc. 5.64 68.0% 383 (9) 374 0.42 x 0.45 x 0.42 x 1.5 x 5.7 x 12.0 x
Asia
Capcom Co. Ltd. 18.54 81.0% 1,096 (183) 913 1.04 x 0.88 x 0.84 x 6.5 x 5.1 x 4.7 x
Konami Corp. 19.85 83.7% 2,649 (51) 2,598 0.79 x 0.81 x 0.78 x 5.6 x 6.1 x 5.6 x
Namco Bandai Holdings Inc. 11.28 95.0% 2,667 (808) 1,858 0.36 x 0.40 x 0.39 x 3.2 x 7.4 x 4.9 x
Nintendo Co. Ltd. 304.65 77.0% 38,959 (12,905) 26,054 1.41 x 1.81 x 1.81 x 5.2 x 9.1 x 10.3 x
Sega Sammy Holdings Inc. 22.42 99.8% 5,931 (1,665) 4,266 0.90 x 0.88 x 0.85 x 7.0 x 4.8 x 4.2 x
Square Enix Holdings 18.56 75.5% 2,136 (831) 1,305 0.61 x 0.73 x 0.73 x 3.2 x 4.6 x 4.5 x
Europe
Atari 4.74 68.7% 101 35 136 0.82 x n.a. n.a. 10.3 x n.a. n.a.
Game Group plc 1.09 63.9% 374 103 477 0.16 x 0.18 x 0.18 x 2.3 x 3.6 x 3.6 x
GameLoft SA 6.46 86.3% 483 (34) 449 2.58 x 2.36 x 2.10 x 19.8 x 12.1 x 9.7 x
Ubisoft Entertainment SA 11.63 75.6% 1,101 75 1,176 0.94 x 0.86 x 0.80 x n.m. 4.5 x 3.1 x
Knowledge
Relationships
50
Digi-Capital Ideas
In the advanced stages of consolidation
Selected M&A
Deal Revenue EBITDA Target
Date Target Acquirer Comments
value multiple multiple description
PC/console/handheld user Expansion of Autodesk’s existing games
17 Feb11 $36m n.a. n.a.
interface middleware provider middleware offering
19 Jan 11 n.a. n.a. n.a. Console games developer Purchase of music games developer
Video games publisher in South Wemade increased in presence in its core South
05 Jun 10 $58m 5.9x 12.4x
Korea Korean market by expanding beyond online games
(26%)
Develops online, video, and
03 May 10 n.a. n.a n.a. console games in Korea, North Expansion in the South Korean market
(65%) America, and Japan
Relationships
51
Digi-Capital Ideas
In the advanced stages of consolidation (continued)
Selected M&A
Deal Revenue EBITDA Target
Date Target Acquirer Comments
value multiple multiple description
UK based video games developer Increase development capabilities for games for
02 Mar 10 n.a. n.a. n.a.
of PlayStation Games Sony’s PlayStation platform
Publishes software for the Mac The acquisition expanded NgMoco’s portfolio
22 Feb 10 n.a. n.a. n.a.
and iPhone platforms to the Mac (as well as more iPhone games)
Japan-based video game content Game portfolio expansion in its core Japanese
09 Mar 09 $63m 0.4x 5.5x
developer market
D3 Inc
Developer of Video games The acquisition allows Square Enix to expand
12 Feb 09 $83m 0.4x neg including the Tombraider its games franchises to more focus on western
franchise markets
Relationships
52
Digi-Capital Ideas
With limited pure console investment
Selected private placements
Third party game developer with Socius Capital US-based console software
30 Sep10 n.a. clients such as Konami and EA 20 Nov 09 $5m
Group, LLC developer
Relationships
53
Digi-Capital Ideas
And clear investment, M&A and JV opportunities
Firm Type Major Independent Venture Capital Private Equity Major Technology,
Video Games Video Games Media & Telecoms
Investment, M&A Core franchise organic Organic investment Avoid pure console Avoid pure console JV with major/
and JV investment (if possible) investments due to investments due to independent video
Opportunities Limited new IP Exit to major video risk profile and sector risk profile and sector games companies for
investment until 8th games company consolidation consolidation licensed games/
generation consoles JV with major media marketing/
Avoid large, value for licensed games/ investment
destroying M&A marketing/ Strategic M&A of
Acquire economically investment independent studios
challenged AAA Restructure to focus to build internal
independents to control on self publishing, capability for
internal costs downloadable significant IP
JV with major media for content, casual/ portfolios and
licensed games/ social or mobile leveraging marketing
marketing investment markets, with parallel platforms
Explore strategic development and low Explore strategic
options for cost/ offshoring options for
underperforming assets underperforming
assets
Knowledge
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54
Digi-Capital Ideas
Online Gambling Sector
Knowledge
Relationships
55
Digi-Capital Ideas
Online gambling continues to cannibalise offline
Relationships
56 Capital Advisers
Digi-Capital Ideas
Sector dynamics and growth are leading to consolidation
Online
Content Pureplay PartyGaming / bwin merger
Online Pureplay Merger announced, creating €682M
revenue €196M EBITDA largest listed
online gambling business globally
Betfair IPO
£1.4B IPO - Betfair's
shareholders sold 15.2%
raising £211m
888 / Dragonfish
888 entered B2B platform market
with Dragonfish to leverage
inhouse technology
Relationships
57
Digi-Capital Ideas
Skill based games avoid some regulatory challenges
Knowledge
Relationships
58
Digi-Capital Ideas
Strong economics and growth support valuations
32Red Plc 0.33 97.6% 23 (2) 21 1.01 x 0.76 x 0.70 x 15.0 x 8.0 x 6.4 x
888 Holdings Public Limited Company 0.76 40.4% 262 (66) 196 0.80 x 0.77 x 0.75 x 5.6 x 7.1 x 6.5 x
GVC Holdings PLC 1.66 50.5% 52 (7) 45 0.61 x 0.57 x 0.45 x 1.9 x 3.6 x 3.3 x
Net Entertainment NE AB 10.12 75.0% 400 (7) 393 8.39 x 6.83 x 5.43 x 17.8 x 15.0 x 11.5 x
PartyGaming Plc 2.82 51.2% 1,155 (201) 955 1.57 x 1.43 x 1.32 x 5.5 x 5.3 x 4.8 x
Playtech Limited 5.91 65.9% 1,433 (82) 1,351 8.62 x 6.80 x 6.01 x 13.5 x 10.6 x 9.2 x
Knowledge
Relationships
59
Digi-Capital Ideas
And consolidating M&A is accelerating
Selected M&A
Deal Revenue EBITDA Target
Date Target Acquirer Comments
value multiple multiple description
Online casino that offers The acquisition provides SkyCity with a
10 Nov 10 (50% n.a. n.a. n.a. gambling, jackpots, and table foothold in the online casino market, to bolster
stake) games in New Zealand its offline operations
Provides integrated software and Following the deal Orbis will be rebranded
07 May 10 $23m 1.2x 11.9x hardware to the bookmaking OpenBet and Alphameric will be rebranded as
marketplace Timeweave
Relationships
60
Digi-Capital Ideas
And consolidating M&A is accelerating (continued)
Selected M&A
Deal Revenue EBITDA Target
Date Target Acquirer Comments
value multiple multiple description
Geographical expansion into the Italian online
Online gambling company based
07 Sep 09 $161m 8.2x 75.1x gambling market which it expects to be
in Italy
deregulated
Mangas Capital Online sports betting companies, Expansion of Mangas’ sports betting
27 Feb 09 $139m n.a. n.a.
Entertainment both Malta registered capabilities across Europe
Mangas Capital France-based operator of online Expand Mangas’ presence into the casino,
15 Jun 08 $62m n.a. n.a.
Entertainment casinos gambling and gaming sector in Europe
Relationships
61
Digi-Capital Ideas
With clear investment, M&A and JV opportunities
Firm Type Major Independent Venture Capital Private Equity Major Technology,
Video Games Video Games Media & Telecoms
Investment, M&A For pure online gambling VC fundraising for Invest in online Growth equity buyout For pure online
and JV online gambling gambling technology of online gambling gambling
Opportunities Avoid due to distance technology and providers technology providers
from core video games niche/geographic Invest in niche/ Growth equity buyout JV with independent
competencies online gambling geographic online of niche/geographic online gambling
Growth buyout for gambling franchises online gambling companies for
For skill based games gambling technology Avoid generic franchises licensed online
and niche/ gambling franchises LBO of large generic gambling marketing/
Mid-market strategic geographic online due to sector gambling franchises investment
M&A gambling consolidation Avoid organic
Avoid large, value LBO for large generic investment and M&A
destroying M&A gambling franchises due to different core
Focused new IP JV with major media competencies
investment in extending for licensed
skill based model to marketing/
core franchises investment
Knowledge
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62
Digi-Capital Ideas
In-game Advertising Sector
Knowledge
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63
Digi-Capital Ideas
In-game advertising is early stage
In-game advertising is small but growing US Online PC games advertising revenue by category
In-game advertising is seen by publishers as an additional revenue
stream to traditional game sales
In-game advertising delivers targeted advertising
Console: 68% male, median age 26
$2.5bn
Casual/social: 50% male, median age 36 $2.3bn
Relatively few firms Online in-game advertising: static or dynamic media advertising
that appears inside the game or during the game while its being
Corporate Independent loaded or played
Online around game advertising: static or rich media advertising
that appears outside of the videogame but shown in conjunction
with it
Online advergames: custom made games specifically created to
communicate a marketing message designed around a product or
service
Relationships
64
Digi-Capital Ideas
With limited, high profile M&A
Selected M&A
Flash game advertising network Shanda extended its online video games
11 Jan 10 $80m n.a. n.a.
and payments platform strength in China into mobile
Relationships
65
Digi-Capital Ideas
And clear investment, M&A and JV opportunities
Firm Type Major Independent Venture Capital Private Equity Major Technology,
Video Games Video Games Media & Telecoms
Investment, M&A Small strategic M&A VC fundraising Invest in in-game Develop sector Small strategic M&A
and JV Avoid large, value Exit to major video advertising relationships in to build internal
Opportunities destroying M&A games/media technology anticipation of sector capability for
Limited organic company Avoid in-game maturity significant IP
investment due to small advertising agencies portfolios and
market size due to business leveraging client
model relationships
Avoid large, value
destroying M&A
Avoid standalone
organic investment
due to different core
competencies
Knowledge
Relationships
66
Digi-Capital Ideas
About Digi-Capital
Knowledge
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67
Digi-Capital Ideas
About Digi-Capital
Digi-Capital is an investment bank focused on high growth digital companies across video games, technology, media and telecoms in
Europe, North America and Asia (particularly China, Japan and South Korea), working with major corporates, high growth
independent and VC/Private Equity firms. The firm has a particular interest in helping Chinese companies to invest and partner
internationally, as well as to find foreign partners to collaborate in China.
Digi-Capital delivers shareholder value by leveraging its knowledge, relationships and ideas to manage clients’ investment banking
(M&A, investment, fundraising), corporate development (commercial partnerships, JVs, commercial negotiation, new market entry,
publishing/licensing) and board advisory needs. Digi-Capital works as an inhouse investment bank for high growth digital companies,
as well as providing specific solutions for corporate and finance clients.
Contact
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68
Digi-Capital Ideas
Knowledge
Relationships
Digi-Capital Ideas
February 2011
Knowledge
www.digi-capital.com
Relationships © Digi-Capital Limited 2011
Digi-Capital Ideas