The Gaming Recap is the world of gaming, through the eyes of an investment banker. Each week we take a look under the hood of a key theme we’re seeing in the gaming industry, and sprinkle in some news from around the street.
Some news from a few of our friends in the world of gaming:
- Versus Systems (CSE:VS) announced at Gamescom in Germany that their patented WINFINITE technology will be powering OMEN Rewards and available for download by any Windows 10 PC via the Windows Store. OMEN Rewards will allow everyone running the OMEN Command Center app (shipped in all HP Omen PCs) to play their favourite games for real-world prizes, gift cards, trips, and experiences.
- You can view the full press release right here.
- Aquilini GameCo / EGLX (TSXV:EGLX) signed three Fortnite influencers that will add cumulative reach of ~3M followers. GameCo and Gaming Street publisher Enthusiast have combined reach of over 200M monthly viewers. They also released their 2020 season schedule for the Vancouver Titans. FYI the boys have gone 24 and 2 this season and are 1st overall in the Overwatch League.
- Millennial Esports (TSXV:GAME) took a 51% stake in Allinsports, a manufacturer of high-end racing simulator systems. Anton Stipinovich, the founder, is an engineer who spent his racing years working for Ferrari, McLaren, and Red Bull Racing as Head of R&D. Allinsports was founded in 2008, and used by leading racing teams as well as Millennial Esports’ upcoming World’s Fastest Gamer. It was a cash (US$2.M payable in tranches) and stock (US$3.65M in stock) deal with a backend 24-month option to acquire the remainder of Allinsports for either 10x 2020 EBITDA or US$20M. Closing expected Sept 30, 2019.
- You can view the full press release right here.
In case you missed it, big news in the gaming space. The biggest public gaming deal in Canada in a long time hit the wire. Gaming Street’s publisher, Enthusiast Gaming, announced their merger with Aquilini GameCo and Luminosity (“GameCo“) to create a market leader in gaming and esports. Gaming Street associates have done a lot of work helping finance and advise other clients across the value stack from monetization platforms (Versus Systems), to gaming studios (Axion Ventures), and to esports gambling (Askott Entertainment).
Members of the Gaming Street team advised Enthusiast and Canaccord advised GameCo. You can read the press release here.
A quick bit of other news before we geek out
- Great read from our friend Nick Mersch (Purpose Investments) on Yahoo Finance. Aside from the clickbait title (not Nick’s words), there’s some great content here on understanding the value stack in gaming and esports from one of the brightest in the space.
- Sony acquires Spider-Man game developer, Insomniac
- Founded 25 years ago by Ted Price, and with IP like Ratchet and Clank and Spider-Man which sold 13.2M copies. Financial terms were not disclosed.
- Our 2¢: We grew up playing Ratchet and Clank. As gaming subscription models gain further traction from the major players, we only see more and more consolidation in the IP side of the gaming business. It’s a challenging and competitive business creating quality gaming content, and highly cyclical based on game development timelines, but there is a bid for high-quality game studios with IP.
- Activision Blizzard sells two more franchise slots for the Call of Duty League
- Slots were reportedly sold for US$25M a pop, with one going to Misfits Gaming out of Florida and Kroenke Sports and Entertainment in LA.
- Our 2¢: Here’s a great read from the guy who put all of this together (OWL today) when he was still at Activision.
- Finished at 23, esports players peer nervously into retirement
- As the first generation of pro gamers enter retirement, esports is faced with an interesting question: after years spent in the virtual world, what is next.
- Our 2¢: Most players are finished by 23 because of reaction time decay. It’s largely dependent on the type of game, but 30 is typically the outside age for anyone to continue to compete in esports. It’s an interesting issue given that pro athletes become pro earlier than most typical sports, and retire far earlier.
- Loot boxes and the convergence of video games and gambling
- Loot boxes walk the fine line between gambling and game and have come under fire recently as government looks to wrap regulation around the in-game concept. Over half of the top-grossing mobile games contain loot boxes. There’s a reason why.
- How the shifting soundtrack of Red Dead Redemption 2 was built
- Scoring a video game is materially different than a movie. A movie is static, a game is dynamic. Meaning that in a movie everything is scripted, so you can nail down the score for that perfect song or for the big kiss. In a game it’s a little different, particularly in open-world games, where you have a dynamic environment that is continuously changing and not scripted. Reactive music is a very powerful concept, and something the team that built RDR2 got right.
- Our 2¢: This is more cool than anything and a thrilling read for anyone that is interested in music!!
Just the numbers
Don’t you feel it growin’ day by day?
People getting’ ready for the news
Some are happy, some are sad
– Listen to the Music, the Doobie Brothers
Summer has been interesting for the equity markets. We’ve got trade-war news, lower volume which is characteristic of summer months, and a healthy dose of fear across the markets. We thought in the face of this, we’d step back as we’re into the last week of August and just look at a few numbers about the gaming space. This week will be very little qualitative talk, and simply just a quantitative look at the gaming space.
- Between VCs and strategic investors, the gaming industry has seen ~US$10B in total investment over the last 18 months, which is equal to the previous five years of gaming investment combined.
- There are now more than 2.5B gamers across the world spending a combined US$152B on games in 2019, representing an increase of ~10% year over year. To put this in perspective, the entire global movie production distribution had estimated revenues of US$136B with 2.5% annual growth from 2013-2018.
- Today, mobile games account for 33% of app downloads, 74% of consumer spend, and 10% of all time spent in apps on peoples’ phones. Mobile games are expected to generate US$55B in revenue in 2019. 50% of mobile app users play games, making this app category as popular as music apps like Spotify and Apple Music. The average age of a mobile gamer is 36.3 (compared with 27.7 in 2014) with a gender split of 51% female and 49% male. One-third of all gamers are between the ages of 36-50.
- In the US, time spent on mobile devices has outpaced that of television. Users are reportedly spending eight more minutes per day on their mobile devices. By 2021, that number is predicted to increase to more than 30 minutes.
- Peripheral technologies around mobile revenue generation, particularly in the ad network space, have been seen. Private equity has taken notice, suggesting realization of maturity in the business vertical. In 2018, KKR bought a US$400M minority stake in AppLovin. A year later, Blackstone acquired Vungle for US$750M. Epic Games (Fortnite) completed a US$1.25B investment in late 2018 that was led by KKR.
What’s out there
Enthusiast Gaming (TSXV:EGLX) – Merging with GameCo
Gaming Street collaborators helped bring our publisher company public last year, and now they are merging with Aquilini GameCo to become a premium vertically integrated esports and gaming company.
Millennial Esports (TSXV:GAME) – Acquired Allinsports in cash and stock deal
Acquired racing sim manufacturer to deepen existing integration in the racing esports value stack with a proven world-class manufacturer of racing sims.
Versus Systems (CSE:VS) – Signed a deal with HP
Versus makes the technology to let people play games for rewards.
In December they brought on Keyvan Peymani as their Executive Chairman (the former head of startup marketing for Amazon Web Services and a former VP at Warner Bros and Disney) as they began to scale their platform to new games. They allow players to win real-life rewards while playing in-game and can be integrated into any Unity-based game.
Axion Ventures (TSXV:AXV) – Provided their corporate update and closed ~C$2.5M in debt from a shareholder loan and a 1-year 90c convert
The only Canadian publicly traded game studio with a JV with the largest gaming studio in the world (Tencent). Their marquee game Rising Fire is distributed under JV with Tencent. They also have a AAA quality mobile game made in Thailand under JV with the True Corporation.
BRAGG Gaming (TSXV:AXV) – Announced a redesigned web platform for their GiveMeSport platform
GiveMeSport now reaches more than 95M monthly unique users (up from 29M in January 2019). Bragg’s core asset is ORYX Gaming, a B2B gaming technology platform and casino content aggregator.