Last week, Swedish game roll-up Enad Global 7 (EG7) announced that its subsidiary Daybreak Games is acquiring U.S.-based Singularity 6. Daybreak is recognized as a long-term operator of middle-market MMORPGs, while Singularity 6 is known for its cozy life simulation Palia, which was released into open beta last year. While EG7 has kept the deal's price confidential, it did say the transaction is funded through the group’s available cash balance. At the end of Q1, EG7 had SEK466.8M ($44M) in cash and cash equivalents, hinting at a price tag in the millions or tens of millions of dollars.

Daybreak Games has built a reputation for owning and operating MMOs profitably, such as EverQuest, DC Universe Online, PlanetSide 2, and The Lord of the Rings Online. In 2020, Daybreak was acquired by EG7, and in 2021, Ji Ham, the CEO of Daybreak, became the acting CEO of EG7. After three years in this role, it might be more accurate to simply refer to Ham as the actual CEO. (We wrote an extensive analysis on EG7 back in December.)

Singularity 6, founded in 2018 by alums of Riot Games, had raised $49M in funding from backers including London Venture Partners, Andreessen Horowitz, and FunPlus. Singularity’s latest funding round in July 2021 raised $30M, suggesting a valuation of over $100M with standard venture math. Given EG7's available cash ($44M), it's unlikely that the deal went through at a price that satisfied investors.

The life simulation and massively multiplayer game Palia is Singularity 6's first and only release to date. It was released into open beta in August 2023 on PC, with a proprietary launcher, and on the Nintendo Switch in December. Before its full Steam launch in March, Palia reportedly had 3M downloads.

Palia’s Steam page currently has around 11,000 reviews. Using a download-to-review ratio of 50 times to 100 times, this suggests an additional 550K to 1.1M Steam downloads. Revenue from Palia is hard to assess due to the lack of reliable public sources, but the monetization is not at all aggressive and limited to a cosmetics-only cash shop. After several rounds of layoffs, Singularity 6 scaled down from over 150 staff to roughly 50. This downsizing likely aimed to make the company profitable, as raising more funds was no longer a viable option.

With limited visibility into Singularity 6's business, one scenario is that it had to sell due to unprofitability and dwindling cash reserves. However, even if Singularity 6 managed to turn profitable during the first half of 2024, partnering with Daybreak is a sensible move. Daybreak’s expertise in operating MMOs can provide the necessary capital and competencies to help Palia succeed, including invaluable know-how in monetization and live ops.

For Daybreak and EG7, the acquisition also makes strategic sense. Daybreak’s model is not unlike what DECA Games does with mobile: not flashy at all, but sticky and profitable. Finally, with most successful MMOs being over a decade old and newer entries often backed by big licenses, launching a new IP into the market is no small feat. When a rare opportunity arises to acquire a title that aligns with your strategy, you seize it.

For EG7, the focus seems to be shifting toward live service PC/console games rather than mobile. While My Singing Monsters on mobile has been a recent success, its rise was somewhat serendipitous. Ham appears to be steering EG7 toward PC/console live-service games, which could dominate the company’s revenue mix in the coming years.

Roll-up entities such as EG7, Embracer, and Stillfront have essentially frozen their acquisition activities. This deal does not signal that the M&A craze is back again as much as it is an opportunistic snatch for Daybreak. For startups, it does give hope: While we’ve already seen many pre-product venture-backed companies fold when no additional funding rounds are available, companies with living, sustainable titles under their belt can still find a buyer — if the price is right.

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Content Worth Consuming

Trends Shaping the Mobile Gaming Industry in 2024 (gamesindustry.biz): “To keep players engaged, it's crucial to promptly update strategies, test new hypotheses, and address current needs. In this article, we explore the trends shaping the outlook for mobile game development and strategies for retaining audiences in the context of constant changes.”

Ed Fries - Xbox (Game Changers Podcast): “In this episode of Game Changers, Josh Chapman, Managing Partner of Konvoy, sits down with Ed Fries, one of the visionaries who led the team that created the first Xbox at Microsoft. Ed began his career developing Microsoft Excel and Word before transitioning to gaming. He founded Microsoft Game Studios and expanded the team from 50 to over 1200 people, publishing over 100 games and leaving a significant mark on the industry. Today, Ed supports independent game developers through his venture fund, 1Up Ventures, and explores the intersection of art and video games.”

Why Every Video Game Company Needs a Music Strategy ft. Eric Tan (ex-Riot Games) (GXM Podcast): “From K-Pop collaborations with NewJeans and BTS to one-off activations with musicians like Tiesto and Aurora, video game studios are making a concerted effort to engage with the music industry, but why? Music and gaming consultant, Eric Tan, joins us to provide insight into some of the gaming industry’s biggest music collaborations from the perspective of his time at Riot Games and Sony Music, while highlighting the importance of every game studio having an active music strategy.”

The Future of Alternative App Stores and Payments (with Archie Stonehill) (Mobile Dev Memo Podcast): “My guest on this episode of the Mobile Dev Memo podcast is Archie Stonehill, the Head of Product at Stash, a D2C and web shop enablement tool for mobile game developers. Prior to Stash, Archie was an investor at Makers Fund, a venture capital fund investing in the gaming ecosystem.”

From Gamer to Creator with Uri Marchand (The Fourth Curtain): “Co-founder and CEO of Overwolf, Uri Marchand has been building the UGC platform for over fourteen years and Overwolf has paid more than $200 million to mod-makers going deep on games from Minecraft to Stardew Valley!”

The Content Creator Effect in Gaming with Justin Sacks of Nexus (The Here's Waldo Podcast): “Justin Sacks has worn many hats in his 15+ years in the game industry—from competitive gamer to content creator to leading business development for a global multimedia game company. Today, he serves as the CEO of Nexus, a platform specializing in building and managing creator programs for the world's top live service games.”

In Other News

💸 Funding & Acquisitions:

• Volley raises $55M for voice-enabled AI games
• Felicity Games raises $700K in pre-seed to test 10 games within a year
• Series Entertainment acquires mobile game studio Pixelberry Studios
• Hawke Media acquires gaming & entertainment agency Lemonade
• Sony Music, Aniplex, and Pocketpair form Palworld Entertainment

📊 Business & Products:

• From Honkai: Star Rail to Wuthering Waves, gacha giants made $357 million in June
• Animoca Brands bookings are up 72% in Q1 as recovery from 2023's decline continues
• Gakuen Idolmaster got 1.5x Squad Busters’ downloads during its launch month
• Slaying monsters in Vampire Survivors is like walking through a casino
• Roblox launches new range of analytical tools for developers

👾 Miscellaneous:

• Delta’s latest update lets iPad users emulate multiple games at once
• Openfort unveils cross-chain management for Web3 games
• Sony’s Shuhei Yoshida and Greg Rice dish the do’s and don'ts of indie games development
• Voodoo signs partnership with Audiomob for audio ads
• Celebrating 10 years of Cooking Fever and Nordcurrent’s sustained success 

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