The Changing Investment and M&A Scene in Mobile Gaming: Opportunities for Developers

Sebastian StorfnerDirector, Corporate Development

GREE International Entertainment Inc.

Sarah E. Needleman, The Wall Street Journal, August 18th 2016

The Market has changed

Rob Fahey, Gamesindustry.biz, August 26th 2016

The Market has changed

Growth but flat Downloads

Market continues to grow while downloads have stalledSource: AppAnnie, GossamerData reflects NA, EU, RUS, TUK

In M

illio

n U

SD ~30% yoy

Shift in underlying Drivers

Production Cost ↑

UA spend ↑

LTV requirement ↑

Live Ops requirements ↑

Barriers to entry and maturity

New Titles VS Revenue Potential

How will consolidation play out?

Theme: Mobile follows ConsolesIntroduction Growth

Time

Dem

and

Maturity DeclineShake-out

Console

2003 Today

MidwayEAUbisoftTakeTwoActivision

AcclaimSierra OnlineAtariEpyxTHQ

Vast Marketplace

Ultimately, console games will not require a console

ValveSony

MicrosoftNintendo

EAUbisoft

TakeTwoActivision

Disney

Few Large PlayersBethesdaBrashSegaDICEBandai Namco+ many more...

DisneyNintendoSonyMicrosoftSquareEnixValve

Mobile Gaming

1. Late Stage: Market Consolidation

$5.9bn2.5x Rev

6.5x EBITDA

$8.6bn3.7x Rev

9.2x EBITDA

M&A to own a segment

EUR 700M2.7x Rev

33.3x EBITDA

Casual Strategy Generalist

$18.6 billion in the H1/2016 - 80% from three deals alone

2. Midmarket: Build Portfolios Strong interest in LiveOps titles (compare to consolidation in Casino)

Portfolio Management:○ Strategic additions, no land grab○ 2x Revenues, 6-7x EBITDA

7/20163/2016 2/2016 7/201610/2016 11/201610/2016

Move into or consolidate a segment

Mid Core Casual

3. Build Studio System

Hedge bets and develop long-term opportunities

Selective publishing: Search for strong teams

Hard to price with multiples, alternative deal structures

Opportunity is there

● Concentrated bets● Selected M&A and investments● LiveOps: operate for years● Support larger developer

The way opportunities are captured has changed

● Super specialization● Track record, KPIs● Competitive advantage● Realistic expectations

Where are opportunities? What do teams need to have?