Money Games: Online, Mobile, China and More
Digi-Capital's Tim Merel on the fundamental shifts in games investment for 2011
Our view is that conglomerates have the best chance to adapt, as major console publisher strategies appear to have converged on fewer franchises, refreshed more often with higher marketing budgets. While adapting to meet fundamental changes in the market with online/mobile organic investment and acquisitions, pureplay console publishers must prove that their repositioning can deliver sustainable profits.
We feel that conglomerates with diversified revenue streams may find it easier to invest in the change to online/mobile games. For example, Disney invested significantly with the Playdom social games and Tapulous smartphone games acquisitions in 2010, as well as indicating an apparent intention to invest less in console games.
It is also impossible to ignore Microsoft's investment in developing and launching Kinect (8 million sold in the first two months), revitalising the sales and market share of Xbox 360 (sales up 42 per cent in 2010 over 2009) and related games software.
The Microsoft/Nokia announcement in February reinforces Microsoft's commitment to high growth markets such as smartphones and therefore mobile games, and they aren't to be underestimated.
There is Significant Opportunity to Invest in 2011
The videogames market is changing across sectors (casual/social online, middleware, smartphone/tablet, browser based MMO, online skill based gaming, pure console, retail MMO, gambling).
Video Games Market Segmentation
As online/mobile games grow and fragment the games market, supported by high growth, high profit business models, we believe there is significant opportunity for online/mobile games growth capital funds to invest in the strongest independent companies.
China's Tencent, Shanda and Giant Interactive have already invested in games funds, and we are exploring the opportunity ourselves around both Chinese games companies with international potential and international companies with Chinese potential.
We also see clear investment, M&A, JV and strategic partnership opportunities for corporate and financial investors, which are covered in depth in the Review.
From our time at GDC, we expect to see more deal activity with the companies we are met there and those already in discussions across Europe, North America and Asia. We're very excited about the prospects for this year.
Digi-Capital is a videogames investment bank focused on high growth companies 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 leverages its knowledge, relationships and ideas across investment banking (M&A, investment, fundraising), corporate development (commercial partnerships, JVs, commercial negotiation, new market entry, publishing/licensing) and board advisory work. Digi-Capital works as an inhouse