Greg Ballard, Warner Bros

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The Increasing Importance of Brands and Global Reach -- Greg Ballard, Senior Vice President at Warner Bros. (Winter Nights: Mobile Games Conference 2014 http://www.wnconf.com/). Presentation slides

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THE INCREASING IMPORTANCE OF BRANDS AND GLOBAL REACHGreg Ballard, Warner Bros. Games07.02.14ABOUT WARNER BROS. GAMES

A $40+ billion company with premier brands

Theatrical | TelevisionHome Entertainment | Consumer Products

Warner Bros. produces and distributes premium entertainment across a variety of platforms.

TheatricalWarner Bros. PicturesWarner Bros. Pictures IntlNew Line CinemaDC EntertainmentTelevisionWarner Bros. TelevisionDomestic DistributionInternational DistributionAnimationThe CWHome EntertainmentHome VideoDigital DistributionGamesTechnical OperationsAnti-PiracyWarner PremiereOtherConsumer ProductsInternational CinemasStudio FacilitiesTheatre Ventures

Most successful film franchise.$7.7 billionworldwide box officeMost successful fantasy film franchise.$4.0 billionworldwide box officeMost successful comic character film franchise.$1.2 billionworldwide box officeMost successful R-rated comedy franchise.$1.4 billionworldwide box office

Theatrical: Continued success with portfolio

Television: Industry leadership in broadcast and cable television production20062007200820092010+LicensedLicensedFirst Self-PublishedSelf-PublishedLicensedDistributionCo-PublishedSelf-PublishedDistributionLicensedSelf-PublishedInnovating in DigitalLicensed

(EA)

(THQ)Warner Bros. Games: Background

Cross studio support provides critical strategic advantage.Turbine is the underlying digital publishing platform: e-commerce merchandising, community, and technical operations.

Warner Bros. Games: Core Franchises

Batman ArkhamInjusticeInfinite CrisisLEGO Star WarsLEGO Harry PotterLEGO Lord of the RingsLEGO MarvelShadow of MordorHelms DeepKingdoms of Middle-EarthMortal KombatMortal Kombat vs. DC Universe

WB Games: Mobile Portfolio

WBIE MobileSizzle Reel

WHY DID WARNER BROS. COME TO THIS CONFERENCE?

Russia is the 10th largest market in the world with over $330M in revenue.

At 125% YOY growth, Russia is the 4th fastest growing market behind Korea, China and Japan.

Russia bridges the gap between the Eastern and Western mobile markets.HOW DO WE SEE THE MOBILE GAMES MARKET TODAY?Competitor TypeMedia CompaniesMobile Game VeteransEarly F2P LeadersEarly Premium LeadersIllustrative CompaniesCompetitive Landscape: A wide range of competitors, but expectation is that only few will maintain consistent leadershipCompetitor TypeMobile Games LeadersAsian LeadersNew F2P ChallengersConsole PublishersIllustrative Companies

18In 2009, the market was focused on premium (paid) casual games.CasualPremiumF2PMid-CoreConsole PublishersEarly Premium LeadersMobile Game VeteransCore

CasualPremiumF2PMid-CoreConsole PublishersEarly Premium LeadersMobile Game VeteransCoreMedia Companies

In 2010, early leaders included Rovio (Angry Birds) and Halfbrick (Fruit Ninja).CasualPremiumF2PMid-CoreConsole PublishersEarly Premium LeadersMobile Game VeteransCoreMedia CompaniesEarly F2P Leaders

By 2011, a shift toward mid-core and free-to-play had begun.CasualPremiumF2PMid-CoreConsole PublishersEarly Premium LeadersMobile Game VeteransCoreMedia CompaniesEarly F2P LeadersNew F2P ChallengersAsian Leaders

And in 2012, the mid-core shift continued while new free-to-play competitors entered.CasualPremiumF2PMid-CoreConsole PublishersEarly Premium LeadersMobile Game VeteransCoreMedia CompaniesEarly F2P LeadersNew F2P ChallengersAsian LeadersMobile Games Leaders

Currently, the mid-core free-to-play space is competitive and consolidation is expected.CoreCasualPremiumF2PMid-Core

The current market is competitive with both larger and smaller companies.Initial Development (Up to Commercial Release)Live Development(After Commercial Release)Dramatic cost increase over last two yearsDriven by rising consumer expectations from improved hardware & more competitionTypical cost = $1M to $4M (9 12 months)Tablet and Android growth will drive costs higherIntroduce new content, features, systems and events after releaseTypically plan for 3 to 6 months of live support, successful titles target 12-24+ months extensionProduction costs are rising as competition and live content needs intensify.

>1,000,000 Apps>1,000,000 Apps

There are now ~1M apps on each of the Apple App Store and Google Play creating a significant discovery challengeSource; Apple announcement, Oct 2013; Google announcement, Jul 2013User acquisition costs have been steadily rising.

Brands are increasingly importantiTunes, Dec 2013.20% of top grossing games are branded.27Accelerate Western Development CapabilityDateTargetAcquirerValueOct 15, 2013$3BMay 2, 2012$210MOct 12, 2010$400MAccelerate Mobile Development CapabilityDateTargetAcquirerValueOct 1, 2012$468MMar 21, 2012$180MJan 31, 2014$527MAdd ScaleDateTargetAcquirerValueJan 15, 2013N/AAug 2, 2011N/AAug 2, 2011N/AFortify Genre (e.g. Card Battle) StrengthDateTargetAcquirerValueNov 7, 2012$460MOct 24, 2012$173M

Source: Digi-Capital: Global Games Investment Review 2013 As production and marketing cost increase, larger publishers are making acquisitions to build out capabilities, add scale, and fill out genres.

Market circumstances are right for Warner Bros. to become a bigger player.Mobile games market will become increasingly competitive.

Cost will continue to rise driving importance of brand.

Continued and meaningful consolidation is expected.WHY ITS GOOD TO ALIGN WITH MARKET LEADER.

Market will become increasingly competitiveMedia companies and leading console publishers will get more aggressive, competing against smaller, more nimble venture backed playersPush towards mid-core and f2p resulting in crowded field

Costs will continue to rise driving the importance of brandsRequirements for development talent and rising production values will push development costs higherDiscovery challenges will drive marketing expenses and the need for strong brandsLive, connected, multiplayer experiences will significantly increase publishing and operating costs

Continued and meaningful consolidation is expectedSmaller, less well-funded competitors will drop out of the marketWestern and Asian leaders will attempt to grow in each others respective markets, mostly via acquisition

29Russia is Injustices third largest market.

Red Son pack was highly successful, especially in Russia.

Our brands work well in Russia.

While Injustice has been successful, there is more Warner Bros. can do in Russia by partnering with leading local developers. To exploit additional WB brands in RussiaTo better understand the Russian marketTo bring Russian development talent to our franchises 31