Global Video Games Investment Review 2011 – June Transaction Update

Games investment bank Digi-Capital (www.digi-capital.com) has just released a quarterly transaction update of its Global Video Games Investment Review 2011 http://slidesha.re/dJwTaX. Commenting on the update, Digi-Capital boss Tim Merel said, “As anticipated, games investment and M&A dealflow has accelerated again. We’re seeing some interesting trends emerging so far this year:

1. MMO M&A is increasing in scale, with Summit Partners/TA Associates/Bigpoint ($350M), Changyou/Shenzen 7Road Technology ($100M including earn out) and Perfect World/Cryptic ($50M) continuing the trend kicked off earlier in the year by Tencent/Riot (est. $350-400M);
2. Social games investments are increasing in both volume and scale, such as Kabam ($115M in two rounds since January), Wooga ($24M), Crowdstar ($23M) and Funzio ($20M);
3. There has been a significant increase in social-mobile games M&A, such as Gree’s acquisition of OpenFeint ($104M), and investment, including Papaya Mobile ($18M) and TinyCo ($18M). In non-social mobile games, Rovio impressed the market with its $42M investment;
4. Chinese, Japanese and South Korean games companies are increasingly seen by Western firms as leading industry consolidators, so critical when companies are selling themselves;
5. The gambling/social games overlap is bringing companies from either side into each others’ markets, such as Caesars/Harrah’s/Playtika ($45M) and Zynga/DNA Games/Market Zero; and
6. Console sector consolidation has been increasingly focused on repurposing quality console developers to online/mobile games markets.

Our global dealflow leads us to expect these trends to continue through H2 2011, and we remain very bullish on online and mobile games growth and investment - now is a fantastic time. We are seeing significant appetite from Chinese, Japanese and South Korean games companies to acquire and invest in strong Western online and mobile games companies, but as our Chinese operating partner often reminds us building the right relationships remains critical. Market innovation continues across the piece (particularly in social-mobile games), with US, European and Asian companies developing great businesses built on great games. We’re also privy to a groundswell of games IPO activity poised to come to market in the next 12-18 months. As people have come to expect, we remain long term bears on the pure console market, despite recent and anticipated hardware launches.”

Tim will be discussing the social-mobile games market and investment at both GamesBeat/MobileBeat (together with Norwest Venture Partners) in San Francisco and Casual Connect (together with Playfish, TinyCo and W3i) in Seattle in July.

The Games Middleware Investment Opportunity

This article was first published on www.gamesindustry.biz on 14 April 2011. 

“Middleware?” you cry.  “Isn’t that the really boring stuff that game developers don’t want to do?”

And that’s the point.

The reason we like middleware is because it is the really boring stuff that game developers don’t want to do. And before anyone gets hot under the collar, we actually don’t think it is boring stuff either.

Let’s start by defining what we mean by middleware.

There are any number of dictionary definitions for middleware: “software that occupies a position in a hierarchy between the operating system and the applications, whose task is to ensure that software from a variety of sources will work together correctly” (Oxford), “software that mediates between an application program and a network” (Webster) etc.  In relation to games, middleware typically means a games engine, providing tools for rendering (2D or 3D), animation, physics, collision detection/reaction, artificial intelligence, sound, networking, streaming and so on.

For our purposes, what we mean by middleware is anything which makes it possible to develop, manage and commercialise games. Simple.

Actually before the rise of online and mobile games, middleware did look like a relatively simple part of the market. But today the middleware market has become more diverse and fragmented, which together with high growth in online and mobile games has created a great opportunity for the company that gets it right.

Video games fundraising talk and meetings at GDC San Francisco (1-3 Mar)

Digi-Capital's Tim Merel will be talking about video games fundraising at GDC in San Francisco http://bit.ly/hgZupz, then following up with high growth video games companies afterwards. Interested companies can contact Tim at tim.merel @ digi-capital.com

Why China could rule the new age of games

This article written by Dean Takahashi was first published by VentureBeat on February 25, 2011.

As the games business transitions from console and PC titles to social and mobile games, China is set to take away the United States’ leadership in the business.

That’s the bold prediction from Tim Merel, who has made a splash analyzing the video game market in the past couple of years as the managing director at investment bank Digi-Capital. Merel believes that in 2010, video game investment and acquisition activity changed fundamentally and accelerated in a way that it never had in the industry’s decades-long history.
 

全球电子游戏投资概况：网络/手机游戏和中国市场的崛起，和投资高成长企业时代的到来

This interview was first published in China on Techweb on 22 February 2011 , as well as in the People’s Daily and others.

Digi-Capital是一个针对高成长数字技术公司的投资银行，并刚刚发表了2011年全球电子游戏投资报告（请见http://www.digi-capital.com/）。有关这个报告的主要结论，我们采访了Digi-Capital的常务总监Tim Merel先生。

问题：从对电子游戏进行投资的角度，您看到了什么样的未来趋势？

正如我们在2010年的报告中预见的，电子游戏行业的活动在2010年快速增长，并发生了根本性的变化。2010年，游戏行业的风险投资在融到的资金方面已经达到了2007年的水平，而且这是在总投资笔数降低的情况下实现的。前10位的投资约占2010年总投资的60%，并明显地转向了网络/手机游戏公司。但是，由于普通的风险投资市场本身的弱点和对网络/手机游戏这一复杂并快速发展行业的知识匮乏和对其中关系的无法把握等原因，普通风险投资公司对这一市场的投资有很大的挑战。

Financial Times article: China's got game

This article was first published by Tim Bradshaw of the Financial Times on 22nd February 2011.

Powered by social networks and mobiles, Chinese video games are set to topple America’s lead as the world’s largest gaming market, according to research by Digi-Capital, a boutique investment bank.
Its new report predicts that revenue from online and mobile games will grow from a third to a half of the industry’s total revenues, at around $44bn, by 2014.

Global Video Games Investment: China, Online, Mobile Ascendent

This interview was first published by Gamasutra on 22nd February 2011.

Digi-Capital, an investment bank focused on high growth digital companies, has just published its 2011 Global Video Games Investment Review (available at www.digi-capital.com or http://slidesha.re/dJwTaX). We interviewed Digi-Capital’s Managing Director, Tim Merel, about their major conclusions.

Question: From a video games investment perspective, what trends do you see?

As we anticipated in our 2010 Review, video games activity accelerated and changed fundamentally during 2010. VC games investment approached 2007 levels in 2010 in terms of funds raised, although the number of investments declined. The top 10 investments accounted for ~60% of total games investment in 2010, with a fundamental shift to online/mobile games company investments. However general VC market weakness and limited knowledge and relationships across complex, fast moving online/mobile games sectors still make generalist VC games investment challenging.