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APPNATION IVSAN FRANCISCO, CADECEMBER 11-12, 2012
Internet & Interactive Entertainment
December 2012
APPNATION IVGamer Nation: A Global Mass Market Emerges
Moderator:Brian Pitz: Senior Internet & Interactive Entertainment Analyst; Jefferies
Panelists:George Jones: Director of Programming, Games / Action; WikiaWill Kassoy: CEO; AdColonyEros Resmini: SVP, Marketing & Developer Relations; GREE
Brian [email protected]
212.336.7413
Brian [email protected]
212.284.2491
Timothy O’[email protected]
212.284.3415
Sachin Khattar, [email protected]
212.323.3381
Stan Velikov, [email protected]
212.284.2140
Jefferies & Company, Inc.
Jefferies and Company, Inc.
Companies on Panel / Biographies
George Jones: Director of Programming, Games / Action; Wikia
Wikia operates the world’s largest network of collaboratively published video game, entertainment, and lifestyle content on the web. With 1B monthly page views and 53MM unique visitors (+9MM add’l mobile uniques), Wikia now has 250K different wikis of which 50K are focused on gaming.
Will Kassoy: CEO; AdColony
AdColony operates a leading HD mobile video ad network. AdColony’s video ad network serves video ads instantly with its proprietary Instant-Play technology on the most popular apps in the world across Apple’s iOS and Google’s Android platforms.
Eros Resmini: SVP, Marketing & Developer Relations; GREE
GREE is a leading mobile social gaming company based in Japan, with a focus on creating and supporting unique free-to-play content. GREE has had a #1 grossing mobile game in 51 countries, with 2 million loyal players. The company acquired Funzio earlier in 2012.
Jefferies and Company, Inc.
Themes to be Explored by Panel
What happens to consoles during the next hardware cycle?
• Large file sizes, low latency requirements, and digital entertainment content (Netflix, etc) have isolated consoles from disruption, for now. With next-gen hardware on the horizon, what happens going forward?
• Is the $60 fixed retail price the right model going forward, or will we see new models over time?
Where does mobile gaming go over time?
• As smartphones and tablets realize vast, global audiences, what are the implications on mobile gaming? What sort of growth are you seeing, and what are the differences between iOS vs. Android and smartphone vs. tablet usage?
• Can mobile games ever make the jump to the big screen (TV)?
What do new business models look like going forward?
• Asian gaming companies are pioneering here; what are the lessons for the West? (and vice versa)
• Looking at new business models (free to play with IAP, paid downloads, subscription, ads), what is the right model going forward?
• How will data / analytics improve the economics for developers?
first, let’s review some key industry trends
Jefferies and Company, Inc.
Global Console Install Base of 239 Million is Largest Ever (and Still Growing!)
December 2005
December 2006
December 2007
December 2008
December 2009
December 2010
December 2011
December 2012
0
50
100
150
200
250
300
0%
20%
40%
60%
80%
100%
120%
140%
7th Gen Console Global Install Base (Millions, Left Axis)
vs. Y/Y Growth (Right Axis)
Wii Xbox 360 PS3
Source: NPD, VGChartz
new hardware cycle resets this install base
Jefferies and Company, Inc.
No Clear Winner or Loser This Hardware Cycle (but What About the Next Cycle?)
Wii 98 Million
41%
Xbox 360 72 Million
30%
PS370 Million
29%
Global Console Market Share
239 Million Current-Gen ConsolesSource: NPD, VGChartz
Jefferies and Company, Inc.
Retail Sales of Video Games Peak During Holidays (but Digital Sells Year Round)
Jan-0
6
Mar
-06
May
-06
Jul-0
6
Sep-0
6
Nov
-06
Jan-0
7
Mar
-07
May
-07
Jul-0
7
Sep-0
7
Nov
-07
Jan-0
8
Mar
-08
Jun-0
8
Aug-08
Oct
-08
Dec
-08
Feb-0
9
Apr-09
Jun-0
9
Aug-09
Oct
-09
Dec
-09
Feb-1
0
Apr-10
Jun-1
0
Aug-10
Oct
-10
Jan-1
1
Mar
-11
May
-11
Jul-1
1
Sep-1
1
Nov
-11
Jan-1
2
0
10
20
30
40
50
60
70
80
Monthly Unit Retail Sales of Video Game Software in the US (Millions)
Call of Duty: Black OpsJust Dance 2
Pokemon:Black / White
Call of Duty: MW3Just Dance 3Skyrim
Battlefield:BC2God of War 3
New Super Mario BrosCall of Duty: MW2
Call of Duty: WaWWii Play, Wii Fit
Guitar Hero 5
Super Smash Bros Brawl
GTA: IV
Call of Duty 4Guitar Hero 3Assassin’s Creed
Madden NFL 07Zelda: Twilight PrincessCall of Duty 3
Red DeadMadden 12Gears 3
Source: NPD
Jefferies and Company, Inc.
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
50
100
150
200
250
300
US Unit Video Game Software Sales - Retail Only (Mil-lions)
Retail Sales of Video Games Peaked in 2008
7th Gen Hardware Cycle
-4% CAGR+9% CAGR
Source: NPD
Jefferies and Company, Inc.
Comparing Digital Revenue at Leading US Video Game Publishers (3Q 2012) Total Revenue ($MM)* Digital Revenue ($MM)* % of Total Digital Revenue Y/Y Growth
Activision Blizzard 751 427 56.9% 10.6%Electronic Arts 1080 314 29.1% 45.4%Take-Two Interactive
283 57 20.0% 108.0%
Total 2114 797 37.7% 26.8%Source: Jefferies, Company
US Publishers Already Generating $3.75 of Every $10.00 Through Digital Means
What is Digital Revenue?
Downloadable Content (DLC) – Call of Duty Map Packs ($15 / per download)
Subscriptions – WoW ($15 / month), EA Sports Season Ticket ($25/ year)
Free to Play / Freemium – League of Legends, FarmVille
In-Game Advertising – Primarily on mobile games
Mobile – Angry Birds, Clash of Clans, supports many business modelsdigital revenue can be more profitable given it bypasses the retail channel
*non-GAAP revenue, note can be lumpy over time based on release schedule
Jefferies and Company, Inc.
Mobile Usage is Increasing the Global Addressable Market by a Factor of Five
Android
iOS
Other
Smartphones - 1.1 Billion42% CAGR
Wii 98 Million
41%
Xbox 360 72 Million
30%
PS370 Million
29%
Console - 239 Million19% CAGR
excludes tablets!Source: Informa, IDC, NPD
new hardware cycleresets install base
Jefferies and Company, Inc.
Mobile Explosion Creates Challenges for Traditional Handheld Gaming
Source: Nintendo forecast provided 9/30/12; Jefferies Estimates
DS 3DS iPad iPhone0
20
40
60
80
100
120
140
160
180
Apple vs. NintendoGlobal Unit Hardware Ests. (Millions; 12 Mos.
Ending Mar '13)
Jefferies and Company, Inc.
Cumulative Console vs. iOS Global Install Base (Millions)
2007 2008 2009 2010 2011 20120
100
200
300
400
500
600
700
800
iPhone iPad Wii Xbox 360 PS3
iOS
Console
Source: Apple, NPD, Jefferies
Jefferies and Company, Inc.
An Increasingly Crowded Market
Retail Facebook App Store
hundreds of games thousands of games hundreds of thousands
discoverability is a challenge
