Record-Breaking Deal Making

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Hi Everyone. Welcome to August! This week we have two announcements and one request:

First — Master the Meta is shifting to a twice-per-week schedule (Sunday + Wednesday)! As we continue to ramp up content production, we have more to share than can be consumed in a single edition. We’ve been testing this with a subgroup for a few weeks, and it’s worked well, so we’re excited to extend it across the full readership. We continue to work hard to bring you thoughtful games industry insights, so we hope you enjoy it.

Second — After receiving some awesome feedback, we’re tweaking our job board pricing. Standard postings are now free, and we reduced the price of featured postings (the ones that make it into the newsletter itself) to $100. Ultimately, we want the job board to add value to all of you — whether you’re hiring or looking for your next step — and we think this is a great next step to expand its utility. As always, reach out if you have any questions, and you can post your jobs here.

Finally — The games industry has been rocked by horrible stories of workplace discrimination over the past couple of weeks, especially at Activision Blizzard. We’ll cover this story next week (after the company reports), but we want to do so constructively — sharing examples, policies, recommendations, and resources from games teams who’ve created healthy and diverse company cultures. We’d like to crowdsource insights, so if you have any examples, policies, recommendations or resources — whether from your own company or others you admire — please email Aaron.

Naavik Exclusive: Roundtable #9

In this Metacast episode, Nicolas Vereecke is joined by Piers Kicks, Abhimanyu Kumar and Yonatan Raz-Fridman to discuss:

How investors can gain exposure to the booming play-to-earn space
Why Facebook wants to become a Metaverse company, and whether that's a good thing
The threat of the Chinese government over games companies

As always, you can find us on Spotify, Apple Podcasts, Google Podcasts, our website, or anywhere else you listen to podcasts. Also, remember to shoot us any questions here.

Listen to The Metacast

#1: InvestGame Gaming Deals Activity Report H1’21

Source: InvestGame — *Source:* *InvestGame*

It comes as no surprise that the gaming industry has been on a huge roll for the last several years: there are almost 3 billion gamers around the world and the global gaming market is supposed to grow to more than $200 billion in 2024. In the latest news, Xbox Series X | S are now the fastest selling consoles in Microsoft history, while Sony's sold over 10 million PS5 units, which makes it the fastest-selling PlayStation console ever.

However, on the deeper B2B-side of things there are some even more amazing numbers this year. Gaming analytics platform InvestGame has published its H1 '21 Gaming Deals Activity Report, and according to that 2021 will be all about breaking records. For the year’s first half there were 471 closed transactions with the total deal value of $44.2B (a vast 4x growth YoY), plus 18 announced transactions with the cumulative value of outstanding $50.2B for both announced and closed deals.

Over half of the closed deal value comes from 154 M&As, which accelerate the biggest growth for the gaming industry: the $22.4B (vs. $4.0B in H1 ‘20, 460% growth YoY) value already exceeds the 2020 FY result of $12.6B across 218 deals — we can only imagine what awaits us by the end of 2021 (with the EA-Playdemic $1.4B, and Tencent-Sumo Group $1.3B deals in mind). Public offerings also achieved all-time high numbers, with 54 closed deals accounting for $17.1B (vs. $4.9B in the first half of 2020), providing +248% YoY deal value growth and +74% YoY growth in transaction numbers. The $4.6B of private placements (vs. $1.4B, 226% growth YoY) across 263 closed deals set a new record, with the late-stage transactions accounting for 65% of total value, and largest funding rounds including Epic Games $1B raising, and Roblox pre-IPO round of $0.5B.

It’s not all about joie de vivre, though. While pure gaming (excluding Platform & Tech, Esports, and Other data) public offerings value in H1 showed continuing growth and reached $9.5B (compared to $3.7B in H1 ’20), many public gaming companies actually struggle with falling share prices. Among the newly listed ones, only Roblox and TinyBuild demonstrated positive share price dynamics since the initial price, whereas Playtika, Huuuge, AppLovin, and Playstudios dropped on average by 20%. This partially explains a decrease of public offering activity in both deal value and number of deals in Q2 '21, even though most of the closed deals were announced in Q1 ’21. The recent Jam City SPAC cancellation might be related to this trend as well (although this is just an assumption).

As for other noteworthy findings of the report, VC gaming funds remain very active in the first half of 2021, with the top-15 VC funds injecting approximately $1.1B into 60+ companies. BITKRAFT continues to top the chart (leading Resolution Games, Anzu, and Pocket Worlds deals, among others), followed by Makers Fund and Index Ventures; while on the strategic side of the market, Tencent continues to lead the rating with the major focus on PC & Console, closing a total of 53 deals (including acquisitions of Yager and Outsiders, and Mundfish, Dontnod, and Bohemia Interactive investments), followed by Embracer group and Sony.

We can’t, of course, overlook the fact that the industry is experiencing the rise of blockchain-powered gaming. In H1’21, crypto gaming companies closed 24 deals (vs. 12 deals closed in 2020FY) with a total value exceeding $476M — 75% of the total raised sum comes from three funding rounds: Forte ($185M), Animoca Brands ($89M), and Mythical Games ($75M).

You can find more insights and data on the gaming deals in the first half of 2021 by following this link. (Written by Anton Gorodetsky of InvestGame)

#2: Tilting Point’s $235M Raise

Source: Tilting Point — *Source:* *Tilting Point*

On July 20, Tilting Point, a free-to-play game publisher and provider of user acquisition services, announced that it had raised $235 million to further expand in the free-to-play publishing space. General Atlantic led the round with participation from strategic partners Red Ventures and Kamerra. For those who aren’t familiar, Tilting Point excels in a “progressive publishing” model — partnering with promising indie games and studios to scale their user acquisition efforts. This then has the potential to transform into a deeper partnership where they partner to co-develop or incubate a game. They aren’t the only ones who use this model, but Tilting Point has done well in the industry by identifying and creating breakout successes for smaller studios.

With this new financing, Tilting Point aims to 1) Expand by growing in strategic international markets like South Korea and China, and 2) Spend more time, energy, and capital acquiring studios. Recently, the landscape has changed in such a way where M&A and developing an ecosystem of 1st=party advertising is more commonplace. Tilting Point has had previous success with South Korean developer Storytaco’s Dangerous Fellows and JoyCity’s mobile strategy game Gunship Battle: Total Warfare. In the JoyCity example, Tilting Point invested $40M into user acquisition, helping scale JoyCity’s revenue from $2.42M a month to $3.3M a month in less than 6 months (32% growth rate).

Source: Sensor Tower (Analyzing Lifetime Unified Revenue for JoyCity Corp - Gunship Battle: Total Warfare) — *Source:* *Sensor Tower* *(Analyzing Lifetime Unified Revenue for JoyCity Corp - Gunship Battle: Total Warfare)*

In an interview with Gamesbeat, Co-Ceo Samir Agili (former VP of Production at Gameloft), said: “We see our work as de-risking free-to-play mobile game investment. We get to be very good at predicting game performance.” When executed correctly, the publisher offloads user acquisition, product management, and data analytics to Tilting Point’s in-suite team in order to free-up time for focus on creative aspects of development. The commitment is minimal at the start while both parties test each other out, and Tilting Point provides the studio with a small loan (minimum of $10,000).

With the rapid expansion of the mobile gaming industry, and the increasing cost of user acquisition for gaming apps, it’s evident that developers are leveraging companies like Tilting Point to bring their games to market and have a fighting chance at being able to release quality advertising campaigns to attract new users. Tilting Point now sits on a massive amount of data surrounding user acquisition, live ops, organic growth, platform featuring, and ad monetization which can greatly help a studio stand out from their competitors in a specific genre. It also means that they’ve honed their ability to make smarter acquisitions.

As we see companies like Unity entering into the publishing space through their Game Growth Program (and Roblox with their $500,000 Game Fund grants, among many others), companies with platforms for advertising and that generally excel at advertising are increasingly understanding the value that they have with game developers. Where the progressive publishing differs is the commitment companies are expected to enter into. Unlike conventional publishers which acquire equity from the company or aggressive upfront revenue share packages, Tilting Point starts their partnership with developers with a minimum loan to determine the viability of the partnership. Once the partnership expands, developers may negotiate fee-based or revenue sharing models with Tilting Point.

If the relationship is a successful one, Tilting Point has the opportunity to make a further investment to support game studios developing their portfolio. Their new raise indicates that acquisitions are very much in play here, too. We’ve seen examples of Disruptor Beams (Star Trek: Timelines), FTX Games, and Plamee all successfully join the Tilting Point team.

The hands-on progressive approach to publishing seems to be working for Tilting Point, with over 40 game studios part of the Tilting Point family now. This is a sign that studios value a financial partner that they can work with collaboratively to bring their game to market, while maintaining developer agency and autonomy. I personally love that indie game studios now have options for how they want to raise capital for development and post-game launch, and would love to see this trend continue into other forms of gaming outside of free-to-play. (Written by Kaelan LaBlac, Business Intelligence at Kabam)

🎮 In Other News…

💸 Funding & Acquisitions:

Animoca acquired Blowfish Studios for $26M to bring in their expertise in multiplatform development. Link
The developers of Splitgate, 1047 Games, raised a $10M round to expand server capacity after seeing 2M beta players. Link
Horizon Blockchain Games raised $4.5M, and will launch in 2021 with Skyweaver and a developer kit. Link
Eloelo, India’s fastest growing creator-led, live social gaming platform, raised $2.1M from Lumikai and Waterbridge. Link
Unity acquired SpeedTree, an interactive data visualization tool. Link
Udo Games raised a $420,000 investment round. Link

📊 Business:

Niko Partners reports that Asia’s esports market generated more than 54% of the $1B global esports revenue. Link
Aside from their accelerator program, Roblox is launching the Game Fund, which is a $500,000 grant (at minimum) for approved projects. Link
Stadia posted a job that indicates it’ll provide backend support (infrastructure and tools) to partners who “want to build their own interactive streaming platforms”. Link
With their most recent raise, bitcoin rewards site Lolli intends to partner with gaming platforms and influencers to increase awareness of their platform. Link

🕹️ Culture & Games:

Facebook brings cloud gaming to Apple devices through a web app as a workaround to Apple’s stringent policies. Link
Ember Sword has $100M pledged in their community land sale. Link
Amazon MMO New World had over 200,000 players in its beta this past week. Link
An indie game developer will give away a free bitcoin to the first player that solves their in-game puzzle. Link
Discord added a threads feature to their platform (finally!). Link