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Global Video Games Investment: China, Online, Mobile Ascendent
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Global Video Games Investment: China, Online, Mobile Ascendent


February 22, 2011 Article Start Previous Page 3 of 4 Next
 

So what should online/mobile games independents be doing in this market?

We believe online/mobile independents should invest for growth or exit in 2011.

Online/mobile games are high growth, but unconsolidated (2009 $19B revenue = 32 percent of global video games revenue, 2014F $44B revenue = 50 percent of global video games revenue), with >200M casual online unique users, >700M social online monthly active users, >20M Massively Multiplayer Online (“MMO”) subscribers and >10B iPhone apps (55 percent games) downloaded.

Barriers to entry remain low (outside of Facebook social games), with strong competition but limited market dominance by major competitors. Independents are competing successfully with more established competitors, with high revenue growth (100 percent+) and operating margins (50 percent+) being delivered by the strongest independents .

Video games investment and M&A are accelerating, with fundraising 52 percent higher in 2010 than 2009, and M&A 60 percent higher in 2010 than 2009. Online/mobile games valuations for both investment and M&A have been rising, with major deals attracting significant interest.

Major corporate acquirers are increasingly looking to external investments, acquisitions, joint ventures and strategic partnerships for online/mobile games growth and diversification, and as discussed the strong Asian players (from China, Japan and South Korea) are actively seeking foreign opportunities to leverage their capabilities internationally, as well as to source international IP and knowledge for large domestic markets.

But the opportunity will not last forever, as public companies are subject to intense analyst scrutiny of high valuation investments and acquisitions. Not all current online/mobile games investments and M&A are likely to deliver as expected during 2011, with a potentially negative impact on valuations.

So the time to act is now, either raising funds to accelerate growth prior to consolidation, building joint ventures and strategic partnerships to enter major foreign markets (particularly from and to China, Japan and South Korea), or exiting to take advantage of the strong M&A market and valuations.


Consolidation Curve for Video Games

Do you think that console publishers are dinosaurs?

No, but we believe that major console publishers must evolve to survive.


Article Start Previous Page 3 of 4 Next

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