Train2Game News Games Report 2017

​Last year was a record breaker for games, with tech M&A advisor Digi-Capital’s new Games Report 2017 (www.digi-capital.com/reports/#global-games-investment-review ) recording $30.3 billion games deals in 2016. 
The $28.4 billion of games mergers and acquisitions (M&A) was 77% higher than 2014’s previous record, and $1.9 billion games investment was the second highest ever. With games revenue set to grow from $117 billion in 2017 to over $170 billion by 2021, games has turned into a two speed market driving massive consolidation around mobile games in particular.
So what’s behind the consolidation around mobile games? Mobile apps (not just games) revenue grew an unexpected 40% last year, with China a major driver. Taking over three-quarters of all mobile apps revenue globally, mobile games had an absolute flyer. Despite this outperformance, mobile games growth could slow to 14.5% annually long-term (CAGR) for over $80 billion revenue by 2021 (gross apps revenue across iOS, Google Play and all the Chinese app stores). That’s more revenue than the entire games market a few years ago.

At the other end of the spectrum is the land of the indies, where there isn’t enough money yet for the big boys. VR hardware, AR games and VR games have a lot of runway and look set to drive over $20 billion revenue combined by 2021. Together with the games tech/services and mobile games, these smaller, faster sectors are where billions of dollars from VCs and corporates were invested into games in the last 12 months. 

Train2Game News Huge VR Investment

​Another half a billion dollars was invested into virtual and augmented reality startups in the third quarter of this year, with a record $2.3 billion dollars invested in the last 12 months.
Q3 2016 saw the 9th straight quarter of investment trending upwards, as the money flowing into AR/VR is now being driven by major Sand Hill Road VCs and corporate investors. With check sizes averaging $9.3 million (or $16.4 million excluding seed deals) in the quarter, AR/VR investment is rapidly going mainstream. Details are in Digi-Capital’s new Augmented/Virtual Reality Report and Deals Database.

The mainline VC and corporate world accounted for 86% of the number of investors in AR/VR startups in the third quarter. The big name financial investors included Fidelity, Intel Capital, Softbank, Kleiner Perkins Caufield and Byers, Sequoia, DCM, Qualcomm Ventures, Raine, CITIC and more. The roster of corporate investors joining the fun added Amazon, Alibaba and News Corp. So while specialist AR/VR VCs drove the early investment market, growing confidence and check sizes has led to the number of mainstream investors accelerating.

Excluding Magic Leap’s massive rounds in 2014 and at the start of this year, the overall growth trend for AR/VR investment has now been upwards for over 2 years. In the context of more general concerns about tech market investment, that continued confidence on the part of serious investors that virtual, augmented and mixed reality are the fourth wave of consumer technology change is even more impressive.

As investment has continued to grow, the balance of where the money is going has become broader. While Magic Leap’s $793.5 million round was astonishing, it took less than $4 of every $10 invested into the market. VR/AR solutions/services was the next largest category, with video following close behind including NextVR’s $80 million round from heavyweights like CITIC, Netease and Softbank. Moving beyond AR head mounted displays (“HMDs”), VR HMDs still took in a respectable level of investment despite the presence of major corporate competitors like Facebook, Samsung, Sony and HTC/Valve. AR/VR peripherals, games, advertising/marketing, applications, tech and distribution startups also raised substantial amounts.

As the AR/VR market goes through the well-trodden path of hype cycle, facing reality, liftoff and maturity, the smart money is looking to the long term. VR will be big. AR will be bigger (and take longer). While exact market timing is impossible to predict (as evidenced by the unanticipated success of Pokémon Go), folks who know how early stage investment markets work are betting increasingly heavily on AR/VR’s potential.

To help foster growing AR/VR investment, Digi-Capital is holding its private quarterly Reality Check forum for AR/VR CEOs, corporate divisional heads and VC General Partners to do deals and solve industry issues in October.

Train2game News 2016 Q1 Games Report

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Last year was the worst games deals ice age in a decade, but the topline numbers in Digi-Capital’s new Games Report for Q1 2016 (http://www.digi-capital.com/news/2016/04/games-deals-rebound-in-q1-but-rocks-below-the-surface/ ) make it look like there has been a thaw. However, the buoyant waters of the first quarter hide rocks beneath the surface, and games deal makers should look carefully before they dive back in.

The topline figures for games investment in Q1 make it look like a recovery, with more than $500 million raised. However, that half billion dollar figure is highly concentrated with three deals taking more than half of the total. The number of games companies that successfully raised money in Q1 2016 actually dropped 40% compared to the 2015 quarterly average. Similarly, games M&A appeared to make a spectacular recovery in Q1, with over $6.2 billion dollars of exits. Again the topline figure makes this sound like a huge wave of deals, but $5.9 billion came from Activision-Blizzard completing its acquisition of King. The remaining $300 million amounted to 36% of the 2015 quarterly average. Extreme concentration and a lack of momentum characterized games deal making in Q1.

The games investment market was dominated by games tech, web games and console/PC games sectors, with the largest deals happening in Asia. It is worth noting that the previously dominant mobile games sector took under 10% of games investment in the first quarter, where it had taken around $4 of every $10 invested in games in previous years.

Games M&A in the first quarter was all about the Activision-Blizzard/King deal. Everything else was small in comparison. There could be more thawing of games exits during 2016, with larger consolidation deals and take-privates coming over the horizon to move the market forward.

Train2Game News Q2 2015 Games Industry Report

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The games industry’s structure now looks a lot like it did 10 years ago, with a handful of companies dominating the top grossing charts (although different sectors and companies to back then).

While Digi-Capital’s new Games Report Q2 2015 forecasts games software revenue growing from $88 billion in 2015 to $110 billion by 2018 , that is just 8% growth per year – low by tech standards (although AR/VR could break out next year). This dynamic has had a dramatic impact on games deals so far this year.

Last year’s record $24 billion of games M&As and IPOs was always going to be tough to match. There were 5 mega-deals that took $8.1 billion, King went IPO, as well as major deals in Asia. Games investment had already narrowed to a handful of VCs and strategic investors, down 25% on the previous high in 2011.

Games deals in the first half of 2015 fell 89% compared to 2014. Investments were down 48%, M&As down 87%, with a quiet games IPO market. Those deals that are happening centered on mobile and tech, although at much lower levels than 2014. If the second half of 2015 looks like the first half, Digi-Capital projects $800 million of investments and $2 billion of M&As for the full year. The last time games deals were at this level, folks listened to Daniel Powter and James Blunt on iPods because there were no iPhones – it was 2006.

Deal making is a game of two halves. When times are good for entrepreneurs and investors, they are hard for corporate acquirers. The go-go years of games deals between 2011 and 2014 were exceedingly kind to sellers, but now the buyers have smiles on their faces at the end of valuation negotiations. For games market leaders with strong IPs, cashflows and balance sheets, it doesn’t get much better than this.

However supply and demand don’t always meet in the middle, which explains why deal volumes are also much lower than last year. Some games companies decided to hold off on an exit when times were good, so are now sitting tight to see what happens. They might be waiting a while, as the last time the games deal market dipped (due to the global financial crisis) it took 4 years to recover. So for corporate buyers, knowing who is ready to sell and why is going to be crucial for taking advantage of market conditions.

Train2Game News: Mid-week round up – 16.01.13

Valve logoIt is that time of week for the Train2Game mid-week round up!

Valve has announced plans to to discuss a port of Team Fortress 2 to virtual reality goggles. The first talk will be programmer Joe Ludwig’s ‘What We Learned Porting Team Fortress 2 to Virtual Reality’ and it will explore the efforts of several employees over the last year to get the game to run in virtual reality goggles. In addition, Valve’s Michael Abrash will discuss the hardware challenges that lie ahead and possible solutions for virtual and augmented reality in ‘Why Virtual Reality is Hard (And Where it Might be Going).’

Square Enix have launched a new website to tease all fans of an upcoming iOS game. More information is to be released on January 17. The site has an image of what looks like a front end menu for the game which is called, Final Fantasy: All The Bravest. You can check out the website for yourself here: http://www.jp.square-enix.com/ff_atb/

Since Activision brought out Skylanders it has done very well and now Disney has seen it’s potential. They are now doing their own version with the announcement of Disney Infinity. Infinity will work in the same way as Skylanders, needing action figures and a “toy box” base to give players access to different worlds. Disney fans will recognize plenty of familiar faces, like Captain Jack Sparrow, the cast of the Incredibles, and Sully from Monsters Inc.

Surreal game creator Suda51 has revealed details of his next game, Killer is Dead. The game stars Mondo Zappa, a 35 year old American executioner that abides by a strict suit-and-tie policy and his left hand is a gun that can also transform into a drill and is used primarily to absorb an enemy’s blood for an “Adrenalin Burst” attack. The game’s antagonist is Victor, who can manipulate emotions through song. He’s appropriately styled to look like classic composer, except has a green face and glowing eyes.

Online and mobile are spearheading the game industry’s growth to a potential total valuation of $83 billion by 2016, according to new research. Conducted by Digi-Capital, the global games investment review states that online and mobile could have a revenue share of $48 billion in 2016, 55 per cent of the entire game industry. The biggest driver in mobile and tablet app revenue meanwhile will be free-to-play, which could deliver 55 per cent of revenue in the sector and account for 93 per cent of app downloads by 2016.