SuperData released a new report on the US digital games market. Here are the interesting points:

  • There are 287 Million Mobile Active Gamers in the U.S.
  • $1.2 Billion in U.S. digital game sales for December 2014
  • 11% Year over on year growth in December 2014, compared to December 2013
  • 17% Growth in mobile digital revenues
  • 10% Increase in console digital sales
  • 10% Decrease in social game revenues
  • Average spend on PS4 was $11.09, down from $20 in November 2014
  • Average spend on Xbox One was $6.88, down from $21 in November 2014
  • Average spend on Steam was $2.35, down from $8 in November 2014

Sony recently put out more numbers on the success of the PlayStation 4 in the market so far. There are:

  • 4.2 million PlayStation 4’s were sold in 2013
  • 2 Million PlayStation Plus Accounts
  • 150 Million PlayStation Network Accounts

The high attach rate – almost 50 percent is an excellent sign of future growth for PlayStation Plus. The Instant Game Collection and ongoing free games match the offering of the Xbox Live Gold program from Microsoft. Since this generation is expensive and there are few titles available at launch, it’s going to be important for Sony to continue to offer great content on a regular basis digitally. I expect the product line-up to increase significantly in Q3-Q4 as more developers are getting development kits and middleware meets the demands of the market.

IDC_logoIDC put out a new research report “The Worldwide Video Game and Entertainment Console Hardware and Packaged Software 2012–2016 Forecast” with some interesting takeaways from analyst Lewis Ward, including:

  • PS3 has shipped an estimated 77 million bundles
  • Xbox360 has shipped approximately 76 million bundles

IDC estimates:

  • Nintendo’s Wii U will exceed 50 million bundles by year-end 2016
  • The volume of packaged game discs shipped will decline an average of roughly 3% per year through 2016
  • Eighth-generation console tie ratios will be approximately 25% lower than the tie ratios of seventh- or current-generation consoles

IESherpa Opinion – Although the number of physical games bought will decline, the number of digital games will likely increase at a faster rate, resulting in net growth for the games industry overall. Either way, we have another three years to see if this is correct and a lot can happen between now and then.

GamesIndustry.Biz has an article up regarding PlayStation Vita.

  • The current install base is 2.2 Million
  • The install base was 1.8 Million in March 2012
  • This means the handheld gaming platform is selling about 100K units per month

Sony reiterated that they believe it can hit the 10 Million mark by the end of March 2013, despite trending towards around the 3 Million mark. I would be shocked if a price cut isn’t introduced by October/November to spur additional holiday sales.

Our friends at Cerca Trova have released their September newsletter outlining recent M&A and investment activity in the games industry. Special thanks to Martin Wierzbicki who spends a lot of time pulling this info together and for allowing us to share this with you. I encourage everyone to sign up to get their updates on a more regular basis and to get to know the team there.

At first glance, this summer’s deal activity seems to be a case of “the more things change, the more they stay the same.” While the summer’s pace slowed down a bit after EA’s hefty PopCap acquisition, Zynga continued its Pacman-like “acqui-hiring” strategy as it snapped up Astro Ape, EA stuffed Bight Games into its burgeoning portfolio, Vostu continued its South American consolidation strategy and grabbed MP Game Studio, and DeNA/ngmoco acquired sports game developer Lionside. If you add in the Lolapps/6waves merger, one is left with the unmistakable impression that the big boys are getting bigger, the middle tier players are being picked off one by one, and the little guys are left standing on the sidelines hoping to be “acqui-hired” so that they can play in the big leagues too.

However, something deeper is amiss. The mad scramble for content, talent and users over the past few months is a very strong signal that companies are rapidly seeking to build scale and consolidate their strategic positions in social gaming, while preparing for the next phase in the evolution of mobile gaming, and the ultimate convergence of mobile and social platforms. With Project Spartan, HTML5 and the ascendancy of the browser on the horizon, nobody wants to be on the wrong side of any tectonic shifts, and while the current M&A climate might contain whiffs of insanity to some, and strain credulity for others, a strong argument remains that the behavior of the players playing the game is eminently rational, and indeed, prudent.

While recent M&A activity has been focused on building scale and large, volume businesses, things look a bit different on the financing side. Venture investors are increasingly putting money to work in newer (and highly profitable) niche segments ranging from “hard core” and “tween” oriented social games to tools and distribution players. Hard core social developer Kixeye raised $18 million last month and is expected to see $40 million in revenue this year from a user base of just over 1 million daily active users. Montreal-based Woozworld, a user-generated social game for tweens, raised $6 million in new funding and has tripled its user base during the last six months to 15 million monthly active users. And tools provider Unity hauled in an additional $12 million slug of cash, ostensibly for the purpose of accelerating its technology roadmap and speeding up its Asian expansion. While these venture financings as a whole do not definitively provide the road map for the future, embedded in them are hints of both the latest trends in user behavior, and the future direction of the rapidly evolving games landscape.

Games M&A Activity

On September 12, DeNA/ngmoco continued its recent acquisition streak and snapped up sports game developer Lionside, co-founded by Brandon Barber and known for NBA Legends and Lionside football on Facebook. The transaction looks like a classic “acqui-hire” in that Lionside’s games had fewer than 30,000 daily active users, leading many industry observers to conclude that the IP and user base were less important than the team and development resources. The deal comes just three months after DeNA/ngmoco’s acquisition of Dutch mobile developer Rough Cookie.

On September 7, Brazilian social gaming powerhouse Vostu purchased Buenos Aires-based social developer MP Game Studio. MP’s games are known for incorporating properties from TV networks including TNT, The Cartoon Network and Nickelodeon, as well as major brands such as Coca-Cola, Unilever and National Geographic. MP’s employees will be relocated to Vostu’s new Buenos Aires headquarters. Perhaps this new business line will steer clear of the legal troubles that have beset Vostu as of late. On August 5, a Brazilian court granted Zynga’s request for an injunction against Vostu for copyright infringment. Notwithstanding Vostu’s stated determination to appeal and fight, this is very bad news for Vostu, as the standards for obtaining an injunction are relatively high. The only good news on the legal front at this point is that the US District court in California has barred Zynga from enforcing the injunction in the US.

On August 16, it was reported that Zynga “acqui-hired” the team behind mobile games start-up Astro Ape, a small New York-based studio that specializes in real-time mobile social games. Astro Ape’s titles include Office Heroes, Dessert Heroes, and Monsterz Revenge. Its most recent game, Vegas Strip City, is the company’s first Android title and was developed exclusively for DeNA’s Mobage social gaming platform. The deal is Zynga’s 15th acquisition in the last twelve months and shows that Zynga is still very much on the hunt for mobile talent.

On August 15, San Mateo-based Digital Chocolate announced the acquisition of casual game developer Sandlot Games. The Bothell, WA-based studio was founded in 2002 and has developed a number of casual titles including Cake Mania and Super Granny. While terms of the deal were not disclosed, Digital Chocolate CEO Trip Hawkins stated that the acquisition of Sandlot would bolster their development capabilities as well as strengthen their presence in Seattle and Eastern Europe. Sandlot founder Dan Bernstein will become a VP at Digital Chocolate and be responsible for the Seattle and St. Petersburg studios.

Also on August 15, EA announced the acquisition of Bight Games, a mobile freemium game developer, further expanding its mobile and casual offering. Based in Price Edward Island, Canada, Bight Games is known for Trade Nations, a popular iPhone and iPad title that was also recently launched on Facebook. After an IP dispute with Seattle’s Z2Live earlier this year, Bight retained the rights to the Facebook version of Trade Nations while the iOS version went to Z2Live. Terms of the deal were not disclosed.

On August 2, Glu Mobile announced the acquisition of console developer Griptonite Games and mobile developer Blammo Games. Glu’s CFO explained that the competitive threat of Zynga combined with internal development capacity constraints were key considerations for the moves. Glu paid approximately $28 million in stock for Griptonite Games. Griptonite and its 200 employees were focused on development for console, Nintendo DS, and iPhone, but according to Glu, they will begin an accelerated transition to free-to-play games in the near future. The acquisition of Blammo was also a stock deal valued at up to $20 million. Under the terms of the acquisition, Blammo, which was already under contract to deliver two games to Glu by 2012, will receive 1 million shares of Glu stock up front, with the potential to earn an additional 3.3 million shares if certain targets are met. The earn-out runs for a rather long time, until March 2015, but could be worth up to $15.2 million on top of the $4.6 million up front payment. Blammo is run by Christopher Locke, the creator behind Smurf’s Village and Zombie Cafe.

On August 2, Globant, a privately held Argentianian software developer, announced that it had acquired mobile and social applications developer Nextive. Founded in 2008 in San Francisco, Nextive has a broad set of gaming clients in the US, including Crowdstar, GSN and Zynga. Nextive’s team will lead Globant’s Mobile Studio, and Nextive’s 130 employees will merge into Globant´s team, working from development centers in San Francisco, Buenos Aires and Cordoba. Following this transaction, Globant plans to further expand its US team and expects to add 200 US-based employees in the next two years. The purchase price was not disclosed.

Also on August 2, Sucker Punch Productions became a Sony-owned developer. Based in Bellevue, WA, Sucker Punch Productions is the award-winning developer of the Sly Cooper series for the PlayStation 2 and the inFamous franchise on the PlayStation 3, with combined franchise sales surpassing seven million units worldwide. Worthy of note: inFamous 2 was one of the top selling console games in the US in June. Terms of the deal were not disclosed.

On July 19, Live Gamer, a gaming e-commerce infrastructure firm, announced it had acquired Brandport and GamerDNA as part of a move into the games advertising business. The move should help Live Gamer provide more ways to help game publishers monetize their online games, from virtual goods and micro-transactions to advertising inside their games. Andrew Schneider, president of New York-based Live Gamer, explained that Brandport can offer virtual goods to gamers who agree to watch video ads in order to earn virtual currency that they can use to pay for goods inside the game. GamerDNA is the fifth-largest gamer ad network in the U.S. and Europe, according to comScore. Advertisers include Blizzard, Best Buy, KFC, Ubisoft, Sony Online and Namco. Brandport will be re-branded as Live Gamer Ad Elements. The company still operates web sites such as 360voice.com, Crispy Gamer, and GamerDNA.com. Terms of the deals were not disclosed.

On July 18, Ravenwood Fair and Ravenstone Mine developer Lolapps announced a merger with Korean games publisher 6waves. The combination of Lolapps and Hong Kong-based 6waves, known for publishing third-party Facebook games, creates a social gaming powerhouse with over 35 million monthly active users on Facebook alone. “The coming together of two of the social gaming industry’s leaders made a lot of sense given our complementary strengths and aligned vision,” said Arjun Sethi, CEO of Lolapps. “6waves is a leading international publisher of social games and Lolapps is a top social games developer.” Rex Ng, CEO of 6waves, will become CEO of the combined company with Arjun Sethi reporting to him. Terms of the deal were not disclosed.

Games Investment Activity

On September 14, location-based gaming start-up Red Robot Labs announced a new $8.5 million round of funding led by Benchmark Capital. Shasta Ventures and existing investors Rick Thompson, co-founder of Playdom, and Chamath Palihapitiya, former Facebook executive, also participated in the Series A funding round, and Benchmark’s Mitch Lasky will join the company’s board of directors. Last month at Penny Arcade Expo in Seattle, Red Robot Labs unveiled its inaugural location-based, massive multiplayer online mobile game, Life Is Crime, in which players collaborate and compete to commit virtual crimes at real locations. While the game has seen some early success, the location-based gaming space has proven to be a particularly difficult nut to crack for other players, so it will be interesting to see if the company can continue to sustain its early momentum.

On August 30, Woozworld, a user-generated social game for tweens, announced $6 million in new funding from Telesystem and iNovia Capital alongside industry angels. The company also announced that Bernard Gershon, former General Manager and SVP of Disney, has joined its board of advisors. With this new round, Montreal-based Woozworld intends to continue developing and promoting its online user-generated social platform, where tween users build entire worlds to creatively engage with their peers, build businesses, or set up restaurants, hotels and games as they choose. Woozworld’s user base has tripled during the last six months and it now receives more than 15 million monthly unique visitors from over 180 countries, with the largest group coming from the United States.

On August 24, Chinese mobile game developer CocoaChina announced that it had raised $14 million in Series B funding from Sequoia Capital China, Disney’s Steamboat Ventures and Northern Light Venture Capital. CocoaChina’s current hit iOS and Android title Fishing Joy has seen over 10 million downloads since it launched four months ago, and is one of China’s top grossing mobile titles. The company also hosts one of the most active iOS communities in China. It will use part of the new funding to further develop its community and to build new advertising and virtual currency products that will appeal to its broader iOS developer base.

On August 4, social game developer Kixeye announced a new $18 million round of financing led by Jafco Ventures with participation from previous investors Trinity Ventures and Lightspeed Venture Partners. The financing values Kixeye at nearly $200 million. Kixeye’s first game, Backyard Monsters, put the company on the map and still has more than 1 million daily active users. Kixeye followed with Battle Pirates in April, which was the first synchronous, real-time strategy game on Facebook. Battle Pirates users play an average of 60 minutes per day or 10-20x the industry average. Kixeye’s revenue this year is expected to be about $40 million, compared to about $3 million last year, and the company has been profitable for about eight months. Andrew Trader, a member of the founding team at Zynga who is no longer with the company, has joined Kixeye’s board.

Also on August 4, newly merged 6waves Lolapps, one of the leading social games publishers with 25 million monthly active users, secured a strategic investment from Korean online game developer Nexon. The investment came just days after 6waves Lolapps announced $35 million in funding from Insight Venture Partners. It’s unclear if Nexon’s investment was part of this funding or comes on top of it. The new funding will allow the group to further accelerate its international expansion, as well as to grow the Lolapps’ game development studio. “We are thrilled to be teaming up with 6waves Lolapps in such a significant way,” said Seung-woo Choi, CEO of Nexon in Seoul. “By joining forces, we are combining 6waves Lolapps’ experience in publishing and developing social games with our extensive knowledge of free-to-play games and the microtransaction business model.”

On July 20, cloud gaming company Gaikai announced that it had raised a $30 million Series C round led by New Enterprise Associates with participation from Qualcomm, Benchmark Capital, Rustic Canyon and Intel Capital. Like its larger rival OnLive, Gaikai provides a server-based, cloud gaming technology that streams video games and software experiences through the Internet to any web browser. The Los Angeles-based company recently landed a high profile distribution deal to stream games for Walmart.com and also has a streaming deal in place with EA.

Also on July 20, Unity Technologies, provider of the Unity development framework for cross-platform development of 3D games on the web, mobile devices and consoles, secured $12 million in Series B financing in a round led by WestSummit Capital of China and iGlobe Partners of Singapore. Current investor Sequoia Capital also participated in the round. San Francisco-based Unity already has more than 500,000 registered developers and plans to use the funding to accelerate technology roadmaps and expand into Asia. “Unity’s cross platform solution has been highly regarded as the best 3D game development platform among Chinese developers,” said Raymond Yang of WestSummit Capital. “We see China as the largest growing market for Unity, and we are strategically well positioned to help the company further penetrate the market and realize the full potential of doing business in China.”

Steve Ballmer released numbers on the success of Xbox 360 at CES this week according to GamesIndustry.biz. the worldwide numbers are now:

  • 50 Million Xbox 36o consoles sold
  • 30 Million gamers on Xbox Live
  • 8 Million Connects sold

Sony announced in their press conference that there are:

  • 60 Million PSN accounts

Although Sony has more accounts, I believe that there is higher engagement on Xbox Live since the players tend to be more core on Xbox and play more often according to everything I know and have heard.