As smartphones have become cheaper and more powerful over time mobile gaming has risen to become the primary platform for many casual players.
In fact, games currently make up 72% of all app store spending and mobile as a whole made up 49% of the global gaming market in 2020.
With global smartphone users forecast to continue to grow, reaching 4.1 billion in 2031, the pool of new players and payers is set to expand dramatically for many years to come.
One company that is uniquely positioned to benefit from this trend is East Side Games Group (TSX:EAGR, OTCQB:EAGRF) Inc - formerly LEAF Mobile Inc - a leading free-to-play (F2P) mobile game group, creating engaging games that produce enduring player loyalty.
The company is Canada’s largest F2P mobile game group through a focus on building high-growth recurring revenue technology platform, organic game development and publishing and disciplined acquisitions strategy.
The mobile game platform technology company has three studios creating legendary games: East Side Games; LDRLY (pronounced Leaderly) Games; and Truly Social Games.
East Side Games partners with and develops game studios to support them in achieving their vision. Its studios operate in a decentralised structure to promote the entrepreneurial culture and success of each local team.
The company's entrepreneurial culture is anchored in creativity, execution, and growth through licensing of its proprietary Game Kit software platform that enables professional game developers to greatly increase the efficiency and effectiveness of game creation.
In addition it fosters organic growth through a diverse portfolio of original and licensed IP mobile games that include: Archer: Danger Phone, The Goldbergs: Back to the 80s, It's Always Sunny: The Gang Goes Mobile and Trailer Park Boys Grea$y Money, RuPaul's Drag Race Superstar and the recently released, The Office: Somehow We Manage.
The company is a diverse group of entrepreneurs that share a common set of beliefs on creating a positive impact in the mobile games industry.
Proactive caught up with Darcy Taylor, the CEO of East Side Games to find out more about the company.
Proactive: East Side Games is a developer of free-to-play (F2P) mobile games. What led the company to focus on that area of the gaming world?
Darcy Taylor: Free to Play has been driving the penetration of games to a wider audience, I would say, for around eight to 10 years now. And when I say wider, I mean wider than the traditional console, or PC gaming platforms. So it has introduced people who I would say weren’t gamers in general - or didn't think of themselves as traditional gamers - to games of all types and genres, and is now the fastest growing and largest segment of all games out there.
There is a very low barrier to entry - people can download it for free and then choose if they would like to pay for additional collectable items or progression boosts. We've been pioneers, or on the forefront of free-to-play since we decided to make it the focus of our business around 10 years ago. We are now at the point where we're a top developer globally that has won awards from top publications in the space like Pocket Gamer, who named us a Top 50 developer/publisher in 2020.
The company focuses on games based on large IPs lead with loyal fandoms like The Office, Doctor Who, and RuPaul’s Drag Race. Can you expand on why that strategy?
Well, I think first we would say we make the games that we would like to play. We love certain IP, and there's certain IP out there that we've been trying to, or are working with, that we feel translate well into games and, as a player, we would love to play. So I think that sort of anchors our first view of it. But we feel that crafting narrative-led games based on established properties leads to greater, faster success as we take a game to market.
It allows us to meaningfully improve our user-acquisition costs because we're tapping into large fandoms that have an immediate affinity and connection to the game. This also drives monetization because fans feel a connection to the source material, and it increases the long-term value of each user because fans want to engage outside of watching the TV series, whether it’s Doctor Who, RuPaul, Archer, or The Office. For the IP owners making these series it helps keep their audiences engaged while they make the next season or iteration of the show.
Our users play longer, engage with the source material in an active way, and re-experience their favourite episodes within our games which drives better engagement and monetization in our games. So, that combination of dedicated fandoms and in-game content that speaks to the essence of what makes IP like The Office or RuPaul’s Drag Race special gives us the ability to improve the economics of our games and is where we see the sweet spot of our business.
East Side Games is currently comprised of three studios. What do you think knits the group together as a whole?
If you look at the East Side Games Group, we have three studios. They have similarities in the way that they have expert developers and tremendous storytellers and publishers across them. But we do start to see some specialization in certain areas.
For example, East Side Games Group Studio focuses on our super marquee IPs such as Doctor Who, The Office: Somehow We Manage, and RuPaul Drag Race Superstar, as well as being our Center of Excellence for UA growth and live services. And then you have the other studios that focus on a specific genre and thematic, like LDRLY and Truly Social as well. So they do have similar threads as far as talent and skill sets, but we do see some defined centers of expertise within our studios.
Would you look to expand the studio numbers through acquisition?
One of the company’s pillars of growth is via acquisitions. Most recently, we acquired Truly Social Games last June and we are actively looking to grow further. Our focus is on being a disciplined buyer, and any acquisition needs to be value-add from a financial perspective and help develop our game portfolio, teams, tech, or talent. Our goal in evaluating every M&A candidate is to bring studios into the fold that have strong creative that we can slot into our existing processes and systems to create a 1 + 1 = 3 scenario.
The company’s main markets by revenue are the US, Canada, and the European regions. Would you look to expand that reach?
So right now, our regions are primarily dictated by the IP that we work with. The fans of The Office are tremendously strong in North America; obviously the BBC and Doctor Who will allow us to make a splash in the UK. So we usually allow our IP to lead wider penetration into new geographies.
That being said, all of our games are available in 160 countries worldwide, so anyone can play them. They're translated into multiple languages to attract a diverse, global audience. If we saw the right fit in terms of IP for say, an Asia-Pacific market we would absolutely look at that opportunity.
What should East Side Games’ investors expect in the short to medium term?
I think if you're an investor you should be tremendously excited because we have just launched two of our largest games to date, with RuPaul's Drag Race Superstar, which you will only see the first two months of in the fourth quarter, and then The Office: Somehow We Manage, which just launched at the end of January. Investors should look forward to seeing revenue from these two marquee, high-growth titles through FY2022 and beyond.
We also plan to launch a mobile game based on Doctor Who in 2022, as well as one other super marquee IP that I can’t talk about right now but am super excited to be working on. So, as far as our game portfolio organic growth driven by our new launches, 2022 is going to be a firecracker of a year as these games ramp-up. Internally we think all of these new launches will translate to one of our best years to-date in terms of growth.
We also have more games in development now than we've ever had before, utilizing our Game Kit and other distributed partners. As an investor if you were impressed by our progress through 2021, you’re going to love 2022. We will be reporting our full-year financials by the end of March so keep your eyes peeled for the specific date.
2021 was a year where we set the foundation for growth through 2022 and beyond. In the coming quarters you're going to see a massive ramping of our portfolio and even bigger and better games. Investors should look forward to seeing the continued scaling of our Game Kit partners, something that acts as a force multiplier on our ability to take new games to market and diversify our revenues.
With respect to M&A from the acquirer standpoint we're always watching what is going on in the mobile games landscape with a view towards acting opportunistically. We are also very aware that as a number of our peers like Glu and Zynga get snapped up by companies like EA and Take-Two that are looking to increase their presence in mobile our value proposition and scarcity as a pure-play mobile business rises.
Our team is extremely excited about 2022 and we think investors should be as well. More games, bigger IPs, and a really strong team are what we hope will allow is to compound our growth through 2022 and beyond.
Contact the author at jon.hopkins@proactiveinvestors.com