I was speaking at the European Cloud Gaming Summit yesterday and amidst warning people about the upcoming under-12 revolution I made the suggestion that some of the well-heeled publishers in the room should buy GAME Group (the troubled UK retailer).
Cue most people’s jaws dropping. Buy a retailer? Are you nuts?
GAME Group has about 3.5m store visitors every week. That’s about 182m people who are interested in games every year predictably walking into a property that you own. Think about that for a second. This is a network of 182m people, specifically interested in games, who are coming to you.
They also convert approximately 19 per cent of them into customers so their premium user group is about 36.5m. The company also has a reasonably sophisticated loyalty system (15M users) plus their new pre-paid currency just being rolled out.
As of today, their market cap is £12.1m. Interested? Yeah, me too.
Let’s just try and value the retailer in online game industry terms:
- Openfeint had 75m users within its network when it was acquired by GREE last year for $104m. On this valuation basis, GAME is worth about $252m.
- Zynga has about 223.5m MAU within its network and it’s market cap yesterday was $6.5bn. GAME’s MAU count is a bit murky but let’s go with 14m. That puts GAME’s price tag at about $407m.
- From a social gaming perspective, a $2 CPA isn’t unreasonable, giving you a $364m price tag.
The calculations above are approximate at best. And it doesn’t take into account GAME’s debt and net cash (so you’re looking at a minimum of £103m-thanks to Paul Heydon for the maths) plus potential lease obligations. But here’s the thing, if I was a games publisher (specifically non-console) the opportunity to acquire a network of gamers who I can then distribute my content to (and perhaps selected content from my partners) which also gives me a near monopoly on a strategically important market, is a very rare commodity indeed.
As someone who’s seen both sides of gaming (my last company was acquired by a retailer), I’ve probably seen more data on this than most. GAME’s future should be as a games publisher with a retail network. There is serious value here.
(btw, I don’t own any stock in GAME Group)
Story originally published on Dylan Collins’ blog Founderware.
Dylan Collins is the founder/CEO of several internet and online gaming companies such as Jolt Online Gaming, DemonWare and Phorest. He is currently chairman of Fight My Monster.