Under the Spotlight AUS: Playside (PLY)
Gaming has gone truly mainstream, rivalling Hollywood’s revenues by taking over the screens of younger generations. Australia’s largest listed video game developer holds the controller across four platforms, with over 50 titles available, ready to advance to the next level.
The global gaming industry is a diverse and highly competitive market, with emerging start-ups competing against established entertainment companies. Playside (ASX: PLY) is the brainchild of CEO George Sakkas, a young Melburnian inspired by Steve Jobs’ focus on product quality and call for people to define their own path. When working at EA Games (NASDAQ:EA), he spotted a gap in the mobile gaming market. He founded Playside in 2011 and quickly managed to secure the first publishing deal with EA/Chillingo in 2012.
Playside has since expanded its offerings from mobile to VR, AR and computer platforms. The company has self-published games based on their own intellectual property (IP) and worked on projects in collaboration with major studios such as Disney (NYSE:DIS), Pixar, Nickelodeon and Warner Bros (NASDAQ:WBD). This impressive and diverse portfolio helped them list on the ASX in December 2020, after eight years of being self-funded.
Playside is organised into four key divisions, keeping its 200+ game creators ahead of the curve from its Melbourne headquarters. In early 2022 they expanded interstate to a branch on the Gold Coast, called Playside North.
The Brands and Licensing division manages regular and large fixed price contracts. The Original Intellectual Property side develops, publishes and maintains their own brand titles. The Partnerships division develops IP with leading game publishers, eventually getting a share of revenue in these games. Having identified the potential of esports, Playside also invested in local industry consultants BIG Esports.
Original works aside, games are often based on popular films, TV shows or books for which gaining licences is key. Playside is in discussion with several Hollywood movie studios about potential new licences to launch games for mobile, consoles and computers.
Field of view
Playside has set its sights on global audiences – no small ambition when the video games industry is estimated to reach US$321b in value by 2026. By already generating over 50% of revenuesin their core market of North America, the company has a strong international audience and great track record to achieve top 10 in games in the U.S., UK and Asia.
In FY22, Playside grew revenues by 153% to $29m, with IP being responsible for $19m and work-for-hire activities with other companies worth $10 million. By FY23 the company already had a backlog of $15m in contracted work, while sitting comfortably on $34.7m cash in the bank by the end of September 2022.
Video game companies tend to make money through either product purchases or advertising in games, as the freemium model still dominates mobile games. With the exclusive licences Playside holds to develop games for the Legally Blonde and The Godfather movies, the majority of income will be gained through in-game purchases. Meanwhile, their popular Animal Warfare title is an advertising-based game.
Major titles released by the company include Age of Darkness, Animal Warfare, Bits and Ropes franchise, AR Dragon and Battle Simulator Warfare. After acquiring the Dumb Ways to Die franchise, Playside launched its first Web3 project BEANS in early 2022 and is actively considering the metaverse in its future strategy.
Playside has cemented strong links with top budget ‘AAA’ video game publishers through agreements with Activision Blizzard and 2K Games (NASDAQ:TTWO). Their in-house team covers end-to-end projects, with design, development, marketing and user acquisition capabilities. The company has also expanded and extended a work-for-hire agreement with Meta to the end of 2023 focusing on the VR space.
They’ve also had success at the grassroots level, teaming up with influencers LazarBeam and Fresh for the free first-person shooter game World Boss. High-profile players hold significant sway over this market, with viewers watching 5.71 billion hours of content on gaming-focused live streaming platform Twitch just between July and September 2022. A collaboration with Silicon Valley actor Thomas Middleditch is also in the pipeline for Playside.
Skin in the game
Although the accelerated demand for gaming from Covid-19 shutdowns is not expected to be sustained, the future looks bright for the industry: a global Compound Annual Growth Grate (CAGR) of 8.4% is expected until 2026. Specific trends also provide unique opportunities. Playside’s success with NFTs in early 2022 was well-timed to capture prices around the top of the market.
However, George Sakkas knows keeping all the easter eggs in one basket is risky and keeps a close watch over the business – his shareholding is just under 20%. The company remains nimble enough to quickly pivot their efforts behind a successful product, but Playside’s core strategy is to launch multiple games every year to increase the odds of landing a winner. Which then represents winning for all its shareholders.
This does not constitute financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.