Top News

#1: Netmarble’s Q4 2022 Earnings

Netmarble, the South Korean mobile game maker and parent company of Jam City and Kabam, announced Q4 2022 earnings earlier this month, including details of its full 2022 fiscal year. Although revenue was up 6.6% last year, to KRW 2,700 billion ($2 billion), the growth was deceptive. 

Much of Netmarble’s improved performance stems from its August 2021 acquisition of Cash Frenzy developer SpinX Games, as seen in the chart below. 

Despite declining revenues and downloads in the broader casino market and the decline in particular of Cash Frenzy, SpinX has maintained steady sales, thanks mainly to the performance of secondary titles. 

The same, however, cannot be said of Netmarble's core portfolio, which mainly consists of RPG titles geared toward the East Asia market. Older games are losing ground, and apart from temporary boosts in revenue from the launch of Ni no Kuni: Cross Worlds, newer titles were unable to offset the losses from older games. 

Jam City, of which Netmarble is the largest outside shareholder, also disappointed, with revenue declines across its portfolio, which includes Cookie Jam, Harry Potter: Hogwarts Mystery, and Bingo Pop. Notably, Jam City hasn’t launched a major new game since World War Doh in 2020, and its monthly active users have been in decline since hitting 50 million in 2017. 

Netmarble said EBITDA is down year over year 57.6%, from KRW 302 billion ($231 million) to KRW 128 billion ($98 billion) thanks to higher operational costs. Netmarble cites its latest acquisitions, SpinX and Jam City's new studio Ludia, as the culprits behind the the rise in operating costs, alongside the development and launch of new lineup titles. This is Netmarbles' worst EBITDA result since 2018, and EBIT was negative in 2022. 

Between a more difficult mobile environment, declines in older titles, higher operating costs, and a lackluster pipeline, Netmarble is in desperate need of a breakout hit. With the stock down more than 63% since its 2020 high, investors at large seem to agree. 

Nevertheless, there is a bit of good news in Netmarble’s 2023 product roadmap.

Some titles initially scheduled to launch globally in 2022 — The Overprime, Hype Squad, Grand Cross W, and Meta World — are now set to release in the first half of 2023, which will help boost the company’s revenue over the next few quarters.

Netmarble has also been granted approval for at least three game launches in China, a market in which it has had very little success to date. Of the approved titles, Ni no Kuni: Cross Worlds is the most promising. As an MMORPG, with Taiwan already the game’s third biggest market, Netmarble may be able to turn Cross Worlds into an even larger hit. But success is not a given, considering the game has so far underperformed in its two biggest markets, Korea and Japan. Even if Netmarble does succeed in expanding further into China, there remains considerable regulatory volatility in the region to make it a dependable long-term growth vector for the company. 

Most of Netmarble's 2023 roadmap seems focused on rebuilding its Eastern-focused RPG portfolio. Nevertheless, there is still plenty of opportunity in Netmarble's other studios. 

Jam City had a recent leadership change with new CEO Josh Yguado taking charge, and the developer has been using its newfound resources from Ludia to develop a DC Comics puzzle-RPG game, which would be its biggest launch in years and a welcome addition to the category. 

Also, Kabam is currently behind Netmarble's biggest ongoing title, Marvel Contest of Champions, but the developer has similarly not released a new game since the lackluster Disney Mirrorverse and Marvel Realm of Champions, which it shut down after just two years. However, the studio merged with Netmarble US in March 2022, and the potential synergy between studios has yet to be fully realized. 

SpinX has shown resilience in an underperforming casino market, and considering how effective the studio has been at discerning and following market trends and bringing new games to market, we can expect new slot titles to be part of the roadmap. Moreover, there is also some synergy that could be explored between SpinX and Jam City titles like Bingo Pop, given SpinX's knowledge of best-in-class casino features. 

Furthermore, it’s important to remember that a big part of Netmarble’s growth strategy relies on web3 investments, of which it has made plenty so far. The company’s largest blockchain-related investment, Grand Cross: Metaworld, is slated to enter a closed beta test in the first half of the year. While it’s unlikely metaverse and web3-related games might have an immediate financial impact for Netmarble, it could be a promising avenue for long-term growth. 

All in all, despite disappointing Q4 results, there are plenty of big titles in Netmarble’s pipeline for 2023. If the company manages to deliver, we should see improved results later this year, in addition to more realized benefits from its SpinX and Ludia acquisitions, which may help turn the situation around for Jam City and help strengthen Netmarble’s position in the non-midcore market. 

Game Launch Radar

#1: Arena Breakout

• Publisher: Tencent
• State: Closed Beta
• Territories: Australia, Canada, Mexico, New Zealand, Philippines, U.K., U.S. 
• Classification: Shooter - FPS
• Quick thoughts:
  • Arena Breakout is part of the new extraction shooter subgenre, which we analyzed in a research essay last year. The goal in these games is to shoot, loot, and escape the arena without being killed, and looted items can be sold in the game market for in-game currency. Arena Breakout features similar gameplay and you can watch a video of it here.
  • Tencent has already dabbled in extraction shooter mechanics with the PUBG game mode Metro Royale, so it’s not surprising to see the company further expanding its footprint with the genre on mobile. 
  • Overall, Arena Breakout is shaping up to be a success. The game already boasts great metrics, following a soft launch in China in July of last year, and managed to reach the No. 2 position in downloads and No. 4 position for top grossing in the shooter category during the month of January. It also has a revenue per download (RPD) of $2.52 in the region, which is already superior to the ceiling of NetEase’s battle royale Knives Out. 
  • The game is also well executed, with impressive graphics and gameplay in a still-incipient subgenre for the mobile market. It also provides more monetization vectors than your normal FPS or battle royale game. 
  • Finally, not only does Tencent already have experience with the subgenre, but the company also has the necessary expertise from its various subsidiaries, including PUBG Mobile developer LightSpeed and Call of Duty Mobile maker TiMi, to really execute in the mobile shooter category. 

#2: Tower and Titans

• Publisher: Aristocrat (Rumble)
• State: Closed Beta
• Territories: Canada 
• Classification:  RPG - Tower Defense RPG 
• Quick thoughts:
  • Tower and Titans is a new tower defense RPG (with a blockchain and NFT component) developed by Rumble Games, a California-based studio acquired by Israeli game developer Plarium in 2017. 
  • The game’s gameplay, featured here, is similar to tower defense mainstay Arknights and recently launched Path to Nowhere, in which players strategically place different heroes on the game board to fight waves of enemies. Contrary to the above-mentioned competition however,  Tower and Titans is geared toward Western audiences, while the game’s theme, art style, and gacha monetization take inspiration from Plarium’s mega-hit Raid: Shadow Legends. 
  • This early version of Tower and Titans also features PVP, a surprising addition given other tower defense titles like Path to Nowhere have not yet dabbled in competitive play. For Rumble’s new game, it works well and offers strong differentiation from the competition. 
  • The tower defense genre is still relatively small compared to other mobile genres. Still, newer success stories like Path to Nowhere may bring more interest to the segment, which has yet to truly tap into the Western mobile gaming segment outside the success of Raid. 
  • Since Raid launched in 2018, Plarium has been struggling to replicate the success of its biggest moneymaker, and declining revenues from the game have begun taking a toll on Plarium’s bottom line. The publisher is now in need of another top-grossing title in its portfolio, but it’s still too early to say whether Tower and Titans can fill the void. 

Other Game Announcements

• Dumb Ways to Die tops charts, passes 100 million lifetime downloads after TikTok trend (Link)

• Machine Zone launches Final Fantasy XV: War for Eos mobile game (Link)
• Tencent to release Chinese exclusive Honor of Kings in Brazil (Link)
• Devil May Cry: Peak of Combat gains worldwide release as Tencent opens up (Link)
• Summoners War: Sky Arena is launching an Assassin's Creed collaboration event on the 28th (Link)
• Gordon Ramsay's Chef Blast launches new challenge that rewards a fully paid trip to Washington D.C. (Link)
• Goddess of Victory: Nikke announces a crossover with legendary anime series Chainsaw Man (Link)
• Marvel Future Fight introduces Ant-Man and the Wasp: Quantumania-themed content in the latest update (Link)
• NetEase to introduce ChatGPT in their new upcoming MMORPG Justice Online Mobile(Link)

Company Announcements

• Say Games pivots to hybrid-casual (Link) 

• Embracer sales up 128% during Q3, but organic growth down (Link)
• Roblox shows its vision for UGC and generative AI (Link)
• Supercell CEO says company has 5 hit mobile games and killed 30 (Link)
• Saudi wealth fund increases stakes in EA and Take-Two Interactive (Link)
• Mobile games generated 75% of NCSoft sales revenue in 2022 (Link)
• GameHouse's Emmi Kuusikko to lead female player-focused strategy (Link)
• Huuuge announces share buyback program (Link)
• Telltale continues its rise from the dead with $8 million funding round (Link)
• FreePlay doubles downloads in past year to reach one billion installs milestone (Link)
• Roblox reports a nearly $1 billion net loss during 2022 (Link)

Ecosystem Announcements

• China games trade body calls for more restrictions on minors playing video games (Link)
• Savvy Games Groups invests $265 million in Chinese esports firm VSPO (Link)
• 2022 gaming deals totaled $51.5 billion (Link)
• Kochava acquires Machine Advertising to improve post-IDFA app marketing (Link)
• UK regulatory board issues new game-focused data protection requests (Link)
• 72% of UK adults play video games every day (Link)
• Fanta rebrand includes mobile game launch to better reach Gen Z (Link)
• VoxPop Games brings on Studio Wildcard Founder (Link)
• AdInMo appoints Scopely and Animoca Brands veterans (Link)

Content Worth Consuming

• Episode 43: How to make money if you're ditching lootboxes (Mobile GameDev Playbook): “Why have some of the biggest names in the industry pivoted away from gacha-based monetization systems? Join us as we explore the response from players to these changes in popular games like Brawl Stars, Mario Kart, Diablo Immortal, Mobile Legends: Bang Bang, Overwatch, Marvel Snap, and Arena Breakout.” (Link)

• Appsflyer performance Index vs Singular Benchmarks (Matej Lancaric): “Everybody wants to know how to spend their money effectively. Which AD network can deliver the best possible results? What is the top-performing channel for each mobile game category? What network is better to use when my revenue split in the game is 80:20 in favor of ADs? Yada yada yada!” (Link)
• Mobile games industry trends for 2023: Publishing predictions: Part one (PocketGamer): “MobileGroove's Peggy Anne Salz looks at AAA growth, multiplatform releases and a shift away from hypercasual” (Link)
• Global Gaming Deals Activity Report 2020—2022 (InvestGame): “The past three years have marked a cycle of robust investments and growing deal activity, which has far exceeded previous periods, and transformed the gaming industry landscape. While 2020 and 2021 turned out to be mostly vibrant and glorious for the games industry, 2022 has seen the correction of the market, exacerbating its cooling conditions: the current lumpish macroeconomic situation, post-pandemic user engagement changes, post-IDFA pressure, increased regulatory scrutiny, release dates shifts, supply chain issues, and other factors.” (Link)
• How the New York Times is building a games platform around Wordle (GamesBeat): “All told, the New York Times Games were played nearly 4 billion times in 2022 and it has tens of millions of players every day. Wordle superfans like Meghan Markle, Stanley Tucci, and Jimmy Fallon regularly tout the game to their massive audiences. I talked to New York Times Games lead Jonathan Knight about the business recently. Here’s an edited transcript of our interview.” (Link)
  
  
  A big thanks to Fernanda Gonzalez for writing this update! If Naavik can be of help as you build or fund games, please reach out.