eResearch | Last week, existing investor Supercell offered Helsinki developer Metacore Games (private; metacoregames.com) a €150 million ($180 million) credit line to scale its mobile puzzle game Merge Mansion, currently booking revenue at an annualized rate of over $50 million. Gaming industry investment and M&A hit record levels in 2020 and continues to be strong in 2021.
Helsinki-based Supercell develops mobile games for tablets and smartphones and operates as a subsidiary of China-based Tencent Holdings Limited (SEHK:700 | OTC:TCTZF | LSE:0LEA).
In 2018, Supercell invested €5 million ($5.7 million) in an equity round of financing into Metacore and then invested another €15 million ($17.7 million) and also extended a €10 million ($11.8 million) line of credit in 2020 to “fuel” Merge Mansion’s global release.
Merge Mansion – Story-based Game – Launched in 2019 – now with 800,000 Daily Users
Merge Mansion is a mobile, story-based, puzzle game, centred on cleaning up Grandma’s mansion. Released in alpha-mode in 2019, the game was commercially launched in September 2020 and now has over 800,000 daily active players.
Merge Mansion combines the popular Match-style mobile app game with a story-driven puzzle game.
Mika Tammenkoski, Co-Founder and Chief Technology Officer of Metacore commented,
“The best mobile games have a lifetime of 10+ years and Merge Mansion has the potential to become one. This will require a lot from our in-game content, both in terms of its creative quality and shipping pace. As our first hit game, Merge Mansion will be the cornerstone of our company – a stable basis to build our future success stories on.”
Metacore aims to lift Merge Mansion to the top of the App Store and Play Store charts. It’s planning a “massive marketing spend” and will go beyond its current Facebook and Google advertising to include traditional media advertising and influencer marketing.
FIGURE 1: Metacore’s Merge Mansion Screenshots
Deal Bodes Well for Kuuhubb Valuation
Kuuhubb (TSXV:KUU | OTC:BCDMF), also based in Helsinki, focuses on digital entertainment and casual eSports mobile games, targeting the female demographic.
Kuuhubb expects some positive price momentum this year as its Match-3 app with a story-based format, Tiles & Tales, is set for commercial launch in the second half of this year.
Tiles & Tales is Kuuhubb’s first game developed entirely in its Helsinki Game Studio using an in-house developed Match-3 engine. Kuuhubb intends to use its Match-3 engine to develop other Match-3 games.
Currently in soft launch, Tiles & Tales is available for both iOS and Android devices in Australia, Canada, Croatia, Finland, the Netherlands, the Philippines, and the United States.
FIGURE 2: Kuuhubb’s Tiles & Tales Screenshots
Mobile App Gaming Market Booming During the Pandemic
During the current global pandemic with stay-at-home orders, the gaming market has thrived.
According to data compiled by Statista, in 2020, the worldwide PC gaming revenue was an estimated $37 billion, while mobile gaming revenue was an estimated $77 billion. The total gaming market is expected to reach almost $290 billion by 2026, growing at almost 10% per year.
Online gaming, one of the fastest-growing subsets of the gaming market, includes social and mobile games that are either free-to-play or pay-to-play, and can encompass Massively Multiplayer Online (MMO) games, such as World of Warcraft.
An important fact revealed in Statista’s research was that the first generation of gamers are now adults and are now a major demographic, equally split between genders.
However, competition to attract and keep gamers is fierce and capital-intensive. To make it to the top of the charts, game producers require massive marketing budgets and exceptional marketing creativity.
M&A Continues to Drive the Market
According to a recent report from DDM, 2020 was a record year for M&A in the gaming space and the first quarter of 2021 has reported more than twice the total number of transactions from the same quarter last year. Recent deals in the gaming space include:
- Electronic Arts (NASDAQ: EA) acquired Glu Mobile for $2.1 billion.
- Microsoft’s (NASDAQ: MSFT) $7.5 billion all-cash acquisition of ZeniMax Media.
- Zynga (NASDAQ:ZNGA) acquiring Turkey’s Peak Games for $1.8 billion.
- Swedish’s Embracer (OM:EMBRAC B) $2.5 billion buying spree of Aspyr Media, Easybrain, and Gearbox.
- Leaf Mobile (TSX:LEAF) acquiring East Side Games for $125 million.
Other related eResearch articles:
- Big Waiver Wire Moves Ahead? DraftKings Issues $1.27B Convertible Notes
- theScore Places Million-Dollar Wager on Sports Betting to Win
- 2021 PGC Conference – Trends in the Gaming Industry
- Electronic Arts Acquires Glu Mobile to Boost Online Gaming Portfolio
- After Latest $520M VC Raise, Roblox Sets Site on Public Listing in February
- Video Games and Esports Update
- Fandom to Mint Non-Fungible Tokens for Esports Fan Rewards
Notes: All numbers in USD unless otherwise stated. The author of this report, and employees, consultants, and family of eResearch may own stock positions in companies mentioned in this article and may have been paid by a company mentioned in the article or research report. eResearch offers no representations or warranties that any of the information contained in this article is accurate or complete. Articles on eresearch.com are provided for general informational purposes only and do not constitute financial, investment, tax, legal, or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this information should consult with a financial advisor. The article may contain “forward-looking statements” within the meaning of applicable securities legislation. Forward-looking statements are based on the opinions and assumptions of the Company’s management as of the date made. They are inherently susceptible to uncertainty and other factors that could cause actual events/results to differ materially from these forward-looking statements. Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, may also adversely affect the Company’s business or any investment therein. Any projections given are principally intended for use as objectives and are not intended, and should not be taken, as assurances that the projected results will be obtained by the Company. The assumptions used may not prove to be accurate and a potential decline in the Company’s financial condition or results of operations may negatively impact the value of its securities. Please read eResearch’s full disclaimer.
