Jam City finalized its plans to pick up mobile gaming company Ludia – known for its "Jurassic Park" themed games – for $165 million, as the Culver City-based company seeks to become the "go-to studio for Hollywood."
The acquisition was first announced in May as part of Jam City's plans to go public via a $1.2 billion SPAC. But the IPO fell through. Since then, Jam City has raised a $350 million round from existing investors including Netmarble, Kabam and Fortress Investment Group and it's on the hunt for more companies to pick up.
"Gaming is evolving from being what a lot of studios considered an ancillary revenue stream and from the very beginning in the creation of the franchise, [studios] are thinking about how gaming fits into the strategy of that IP," Jam City Chief Operating Officer Josh Yguado said.
In the Canadian gaming company, Jam City sees a game developer with deep ties to Hollywood. The company has long had a partnership with NBCUniversal and their properties. Ludia's developed three games based on their "Jurassic Park" franchise, including "Jurassic World Alive," along with games based on the "How to Train Your Dragon" and "Teenage Mutant Ninja Turtles" franchises. Ludia is also working on two untitled games based on DC Comics and Disney properties.
Jam City's two biggest games right now are based on well-known franchises: "Harry Potter: Hogwarts Mystery" and "Disney Emoji Blitz."
The company's goal, Yguado said, is to become "the go-to studio for Hollywood" and noted that over half of Jam City's portfolio is games based on existing franchises.
Mobile Gaming Is 'Absolutely Dominant'
In the first half of 2021 gaming deals reached a record $60 billion high, according to research from Drake Star Partners.
Gaming analysts at Newzoo estimated last year that there's roughly 2.6 billion mobile gamers worldwide, but only 38% pay for their games. Getting players to spend on in-game content is key for Jam City's revenue, since most of its games are free to play. The average person buying Jam City's in-game content spends $45-$100 per month, the company said.
Jam City wouldn't disclose its revenue but Yguado said earnings have grown by "double digits" in the last five years and added lifetime in-game spending exceeds $3 billion.
"We really think of mobile gaming, and gaming broadly as the fastest growing entertainment sector; there's faster revenue growth than film and TV and music and within gaming, mobile is absolutely dominant," Yguado said.
Expanding in the Americas
The deal adds 400 employees to Jam City's 800-strong team and adds a second Canadian office to its growing international footprint.
Yguado said it is looking abroad for more companies that it can operate for less. Jam City is targeting Canada or Latin America, where governments contribute to production costs or offer tax breaks.
"Broadly, there's a trend of companies employing talent in lower-cost regions," Yguado said, noting that Jam City has also expanded into studios in Argentina and Columbia. "It makes a real difference in terms of diminishing cost per head."
Jam City's main local competitor is Scopely. Also based in Culver City, Scopely is buying up mobile gaming firms outside the U.S. at a rapid rate too, most recently targeting game makers in Spain and Ireland.
Scopeley's biggest game is "Marvel Strike Force," a game developed with Disney that brought in $8 million from in-game purchases last month, Sensor Tower reported. Comparatively, Jam City's "Harry Potter" game generated $2 million in the same time frame. Sensor Tower does note overall Jam City recently counted more downloads than Scopely – roughly 2 million last month, compared to Scopely's 800,000.
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Mobile games featuring Harry Potter, Jurassic Park and the Teenage Mutant Ninja Turtles will soon be on the same roster when L.A.-based mobile game publisher Jam City goes public and acquires Montreal-based Ludia, creating a $1.2 billion gaming juggernaut.
Jam City announced Thursday it is going public through a merger with special purpose acquisition company (SPAC) DPCM Capital, which is led by former Uber senior VP of business Emil Michael. The merger will then allow Jam City to purchase Ludia for $175 million.
Jam City co-founder Josh Yguado said market consolidation in the mobile gaming space was the catalyst for the deal.
"If we're going to continue to be a leader and a consolidator in this space, it's going to require more dry powder," Yguado said in an interview. "Raising this money right now enables us to do this deal, and then also have additional, again, dry powder to continue to do more deals in the future," he said.
The combined company will have about $115 million in cash for other mergers and acquisitions and to develop more original games.
The deal comes during an explosive time for the gaming industry which saw a surge in users during the pandemic as people were forced to stay indoors. The value of the gaming industry topped $300 billion with 2.6 billion players globally, according to a report released in April by Accenture.
Investor interest has followed. Market analyst InvestGame reported that in the first quarter of 2021, $39 billion was invested in the gaming industry, compared to $33 billion in all of 2020. Game-maker Roblox also went public earlier this year.The gaming industry is expected to exceed $205 billion in revenue by 2023, according to Newzoo.
Related: What is a SPAC?
Since Yguado founded the company with My Space co-founder Chris DeWolfe in 2010, Jam City has based its growth strategy on acquiring games and producing original ones for a broad audience. Yguado said about half of the company's games are original. The other half are based on licensed Hollywood intellectual property, including Disney and Harry Potter.
Ludia's model is similar. The publisher will bring its Jurassic World and Teenage Mutant Ninja Turtles games, in addition to others, to Jam City platform.
Yguado said he's known Ludia President Alex Thabet for many years and they've discussed ways to work together.
"I think that the opportunity right now when their games are doing so well and they have such a great pipeline of new games and we're really at the same position, felt operationally and strategically the right thing to do at the right time," he said.
Jam City and Ludia games have been downloaded 1.3 billion times as of December 2020 and have 31 million monthly active users. The two companies also generated a combined 3 billion total hours played and 9 billion advertising impressions last year. An average of more than 1 million players spend about $45 each month playing Jam City games.
Yguado said while Jam City saw a boost in new player acquisition during the pandemic in the second and third quarters of last year, there has been "sustained performance" since then, creating a new baseline for continued growth.
More and more people are consuming entertainment on mobile devices and games are one of the most popular apps on those devices. Mobile gaming is set to grow faster than any other segment in entertainment, Yguado predicts.
"I think there will be a time when some of the words and universes and characters we're creating may live in other worlds, but that's not something that we're currently working on," he said. "There's so much opportunity in mobile games right now and in creating these mobile entertainment universes that we're really laser focused on at the moment."
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The gaming industry is poised for further growth, even after lockdowns ease, but insiders expect its future will look far different as companies add more social and interactive features and expand their worlds beyond a single platform.
That was the consensus from a panel at dot.LA's recent summit, where four heavy hitters from L.A.'s gaming industry traded thoughts on what they're preparing for. Panelists included Ophir Lupu, head of video games at talent agency UTA; Lisa Anderson, SVP of studio operations at Jam City; Rob Ricca, VP of corporate development at Scopely; and Gregory Milken, managing partner at March Capital, where he focuses on gaming investments.
Here are four key takeaways:
Gaming Less About Winning, More About Partnering
Already, games like Fortnite and Animal Crossing are providing users with virtual experiences that one would be hard-pressed to call a "game." Fortnite has hosted virtual concerts attended by millions, while Animal Crossing has provided a virtual venue for weddings, graduations and funerals.
"What's come to the fore in the pandemic is really that gaming is social," said Milken.
More than that, Anderson noted that COVID has underscored players desire to find meaningful connections through their consoles and apps. As a result, Jam City is exploring ways for players to find their friends more easily and join social groups, whether with IRL friends or ones they meet online.
Similarly, Ricca noted that many players of Scopely's "Star Trek Fleet Command" have turned the game's "Alliances" feature into "their core experience in the game," opting to partner up with others to game on an ongoing basis rather than linking up with an ad hoc group or going it alone.
As to how this trend will shape Milken's investment strategy, he said he'll be looking to place bets on cooperative gameplay experiences in the future.
Gaming Will Be Everywhere
As Anderson put it, "the ultimate goal is that players can experience their favorite game on the device of their preference. Looking to other mediums (like streaming services), consumers can already do this (PC, TV, Mobile, tablet, etc.) and it feels like gaming is a natural extension of that conceit."
This sort of "cross-play" already exists to an extent, but the industry is evolving further away from the closed ecosystems that rely on a single console. That reality won't fly with younger generations, who've grown up with a more open ecosystem that has shaped their expectations.
"They will expect all game environments to be open for all of their friends and other players to join and experience rich social interaction with each other, regardless of where they are physically located and the number of other players they want to interact with," Ricca said.
Lupu surmised that as more game-streaming services come on the market to rival incumbents like Playstation Now or Google Stadia – which give console and PC gamers near-instant access to titles without requiring downloads – the industry may see large platforms build better access for players to move across different platforms and interact.
As a hypothetical example, Lupu said: "You could imagine how Amazon's new streaming game service Luna could connect with Twitch and allow viewers to 'jump in' or somehow interact with their favorite streamers playing games. (Same with Stadia and YouTube, etc.)."
Esports Will See More Cooperation and, Possibly, Consolidation
For all the hype that esports generates, it's a rather small business, generating just north of $1 billion per year – a fraction of the $150 billion-plus gaming market. Its function often appears to be more of a marketing tool than anything, whether for the game titles themselves or for teams that leverage their roster's followings to sell other items like merchandise.
Unlike a traditional sport, games have an owner – Riot Games owns League of Legends, for instance, but nobody owns soccer. This potentially weighs the scales of influence in favor of game developers and publishers, and away from esports teams. But as the teams grow more famous and build more brand equity of their own, their leverage will continue to grow.
This leads Milken to conclude: "I think we'll see further development between teams that operate and game developers and publishers and thinking about how they jointly work together to create value."
Fans Mix with Celebrities in the Metaverse
Although it's still anyone's guess what will be the ultimate version of the metaverse – a parallel virtual world, kind of like a more immersive version of the internet – what appears unambiguous is that the metaverse offers a unique opportunity for IRL stars to engage with their fans.
"It creates incredible touch points for non-gaming clients – certainly mostly in the music space," said Lupu. "It provides a really unique and interesting opportunity for talent of all types to interact with their fans." Expect these to continue, in other words.
But such interactions won't be exclusively between fans and stars. Milken said he sees the metaverse introducing a new level to in-game interactivity that is an increasingly important component of what gaming offers consumers.
"The metaverse as a hangout place, where you're experiencing things together, is really interesting to me," he said.
When asked to place their bets on what consumers are most likely to see in the industry, the panelists unanimously chose the concert of the metaverse, agreeing that in their various lines of business it is a future that has to be taken seriously. That nobody has much idea of what exactly it will entail suggests that the metaverse will emerge over a prolonged period, with a series of incremental changes that eventually transform gaming. See you there.
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