GameON Finance 2.0: Public vs Private Funds In The Gaming Industry

This panel featured a discussion on where / how to get financing for your gaming start-up.

Panelists:

• Pierre LeLann, Co-CEO, Tribal Nova
• Jenna Seguin, Loan Officer, Aver Media
• Robert Shoniker, Principal, Courage Capital
• Marc Jackson, Managing Partner, Video Game Finance Inc.

Key points:

• Robert mentioned that there used to be a government organization called “Innovation Ontario” which invested a seed amount of $500k in tech companies in the province. That is how RIM got funded in its initial days. He said there is a need for a government fund which would seek to invest $20 – $30 million in the digital media industry, which should be matched by private funds.
• Pierre suggested it might be a good idea to get the publisher involved early, as potential new contracts for more games can help in the growth of your gaming start-up.
• Jenna talked about the digital media tax credits available to companies operating in that space. She mentioned that there is a high level of predictability in the tax credit system since it has been around long enough. She also advised companies pitching to financiers like herself to come prepared (have their cash flow, financing documents, etc in order).

Overall, the advice for gaming start-ups seemed to be to seek initial funding from friends/family, seek out government funding options like the tax credits and IRAP and seek strategic partners/publishers to get off the ground.

GameON Finance 2.0 conference wrapped up in Toronto yesterday. It brought together 100+ people from the gaming industry: entrepreneurs, investors, professional service providers and industry leaders. It was held at the swanky Grand Ballroom of 1 King West in downtown Toronto.

The full day of panel discussions and presentations explored topics such as gaming companies business models, financing options for gaming start-ups, angel investment in Canada and economic motivations behind games based on different forms of intellectual property. Networking options for the delegates included 1-on-1 10 minute sessions with other delegates, including some of the speakers. Check out the follow-up posts from some of the sessions I attended.

Overall a fun, informative and useful event, especially for those in the gaming industry. Kudos to Interactive Ontario for putting it together. Their next event would be in March ’09 – Interactive Content Exchange (ICE) at the Carlu in Toronto.

Presentation: Key Gaming Industry Trends and Market Overview

Presenter: Wanda Meloni, President & Senior Technology Analyst, DFC Intelligence

Key points:

• Gaming is a $47 billion global market.
  
  • Console gaming alone is estimated to be $27 billion in size.
  • PC online games is a $6.5 billion industry. Projected to be $13 billion by 2012.
  • Online MMOGs is a $3.5 billion industry.
  • Casual gaming is a $1.5 billion industry.
• Nintendo doing better than expected while PS3 not expected to break-even. Sony can’t hold on to its 67% marketshare (with PS2) and will eventually come down to about 50% marketshare.
• World of Warcraft is an incredibly popular and successful MMORPG. Earned $600 million in revenue in ’08, with 11 million users. Sells for $50 retail + $15/month.
• BigFish, a casual gaming company, earned $100 million in ’08 revenue. Business model orginally was to offer free, ad-supported games but moving on to digital distribution / ‘try-before-you-buy’ and subscription.
• Casual games
  
  • team size: 25
  • cost: $75k – $300k
  • time: 6 months
• AAA games
  
  • team size: about 100
  • cost: $15 – $30 million
  • time: 2-3 yrs
• MMOGs
  
  • team size: starts at 100 – 450
  • cost: $15 – $25 million + $500k annual cost for servicing users
  • time: 3-5 yrs
• Regional perspective
  • North America – strong diversity; sports, action, first person games more popular
  • Europe – more cost conscious, similar to North American gaming market otherwise
  • Japan – console based
  • Korea/China – MMOGs are more popular.
• Canada’s gaming development industry
  • Montreal – 80+ game companies including EA and Ubisoft affiliate studios
  • Vancouver – 100+ game companies, strong affiliate studios.

This panel featured a discussion on angel funding for gaming start-ups in Canada.

Moderator: Nathon Gunn, CEO, Bitcasters

Panelists:

• Julian Spillane, CEO, Frozen North Productions
• Scott Simpson, Founder, Bitheads
• Daniel Mothersill, President, National Angel Organization

Key points:

• ‘Angels’ are high net-worth individuals who seek to invest their own after-tax dollars in start-up companies which interest them and provide mentorship as well.
• Angelinvestor.ca has listings of various angel groups in Canada. But the best way to find and connect with angels is through referrals – normally by lawyers, accountants, other professional service folks who are connected to them. Angels operate collaboratively in most cases.
• $3.5 billion invested by angels in Canada in ’08 (compared to about $20 billion of angel funding in the US).
• Angel investing in Canada is fairly new – not much existed until several years ago.
• Angels invest in people / teams. Rarely interested in project-based financing.
• Key steps before contacting angels: build your team, form your company and gather a team of advisers.
• Validating your business as much as you can (eg by building a prototype) only improves your chances of getting funded.

GameON: Finance 2.0 conference is being held in downtown Toronto on October 28th and 29th. It will bring together game developers, innovators, investors and industry leaders in the interactive games industry. The two-day event opens with the Ontario Games Summit (OGS) on October 28th, where environment and mechanisms for funding both games and game companies in Ontario will be discussed. On the 29th, various case-studies and panel sessions are planned throughout the day to provide insight on the diverse prospects for growth within the economic, creative and technological landscape of games.

Discussion and presentation topics include:

• How video games are transforming the business world
• Can new revenue models extend the value of your game?
• Comparing financing strategies that may be worlds apart
• Playing the spread: original vs. licensed IP
• Examining the risks and potential rewards of game development on mobile devices
• Achieving critical mass in the Ontario game cluster
• The Bottom Line: Increasing liquidity and leveraging investment in Ontario video game companies

Some of the speakers who will appear at the conference are:

• Marc Jackson, Managing Partner, Video Game Finance
• David Edery, Worldwide Games Portfolio Planner, XBLA, Microsoft
• Rick Segal, JLA Ventures
• Jason Della Rocca, Executive Director of the International Game Developers Association (IGDA)
• Jenna Seguin, Loan Officer, Aver Media
• Steve Bocska, President, Pug Pharm Productions
• Bob Shoniker, President, Courage Capital

Game:ON Finance is being organized by Interactive Ontario, the same folks who put together the brilliantly organized ICE ’08 earlier this year. There are a limited number of start-up passes available as well. I’ll be attending the conference and will blog about some of the sessions here on Techvibes. Stay tuned!