One year has passed since your first appearance on our blog. How has the company and the games developed since then?
– We are in the best place we have ever been if you look at the fundamentals of the business and its future development. We have the money and the capacity to develop new games and continue to evolve our portfolio. G5 has a strong portfolio and loyal fan base to generate revenue and profits for many years to come. And we have very interesting games in the development pipeline for 2019 and 2020.
– Let’s start with the most exciting things, and that’s a game we have just launched, called Jewels of Rome. It has been only a few days and we have not started any paid marketing for the game, but we see the interest and positive reviews and it’s doing quite well. So far so good.
– On the corporate level, through the end of 2018 we continued strengthening our development teams and so the company is more prepared to deal with the evolution of the games in our portfolio, all the new games we have in the pipeline, and new games we are only starting to work on, than before.
– Speaking of evolving our existing games, there were a lot of improvements in our portfolio. Homicide Squad has grown over the last year, and it has more than doubled its monthly revenue since we last met. The Secret Society was finally integrated with our G5 Friends platform which resolved a number of critical issues we “inherited” when we acquired the game, and the game’s monthly revenue has been gradually going up since January this year.
– We have focused more resources on fewer games, both internally and externally. Just recently we removed tens of premium games that we still had in the application stores and in our “landing pages”. At this point these games were not making any money to speak of but they greatly increased the amount of noise. It’s an end of an era for us and frankly it was a little sad for a day or two, but I already like how our streamlined offering looks in the application stores: there are only 20 games or so, and you can see all of our catalogue without too much scrolling through the application store or the landing page.
– We have also stopped our efforts to revive or achieve growth on several games, and the teams of these games were reassigned to games that have more potential. This is not a change that will produce immediate results, but it’s an important change that focuses the company’s efforts on where we are likely to achieve growth over the next few quarters.
What should we expect from the top selling game, Hidden City, from this point forward? How do you work with engagement and updates since the growth pace has slowed down a bit?
– Hidden City is an amazing game, and an amazing success, and it will continue generating revenue and profits for many years to come. In fact, most of its profits are ahead of us. There will be a significant ”long tail” and, given our progress with reviving The Secret Society somewhat, this may happen to Hidden City as well. We will make sure that both G5 and the developer are earning good profit from the game. At times, we may also decide to do a marketing push to test if the game’s continued evolution has helped and if we can find growth momentum again with this game.
You recently announced Jewels of Rome. The game looks bigger than previous releases from start and is combining elements from HOPA/match-3. Could you give us some flavor on your expectations on the game?
– It is an interesting take on the Match-3 genre because it combines some strategic aspects of building a settlement with a meta-game framework that is proven and very engaging for the players, and then you have some freedom of choice when it comes to which match-3 level you want to play. We are using the match-3 engine we have originally developed for Pirates & Pearls in this game, but the team took it further and made many improvements. I think our players are going to appreciate this game. It turned out well, and we are seeing interest, good downloads, and nice reviews, even though we haven’t spent a dime yet on promoting the game. It is too early to say anything else at this point.
The staff has gotten a lot bigger during the past year. What is the main reason behind the expansion? How hard is it to find talent in the region?
– Great talent is always hard to find, and there’s a lot of competition for talent in the region given how many successful games are coming out of the region. You can also see some consolidation going on and arguably G5 could have been a good consolidation point for the developers of the region, but it would have been easier if the market awarded us anything other than the worst valuation among our peers in our sector. But that’s another topic.
– Nonetheless, we did a great job attracting great talent. It costs money of course to hire the best talent possible but it is money well spent, or rather, invested. It is natural for us to expand our development capacity given the opportunity. Never before in the history of the company could we afford to have so many fully-staffed, top development teams working on our best ideas. It takes some shots on goal to score and previously we relied on licensing deals to take the shots. Now we can finally afford to do it internally, and we have put a lot of effort into building the capable teams to do it. At last we can try ideas and develop the volume of concepts internally, while also having enough resources to continue to evolve our existing games. Of course, it is more expensive as you need more employees to do it, but the upside is that whatever success originates from this model We own it, and the upside is all ours.
– Thanks to the success of Hidden City, The Secret Society and Mahjong Journey, we can afford to have hundreds of developers working on many unpublished games simultaneously, and at the same time we can have full teams on our published games working to evolve them for continued growth. There are some interesting updates in development and some exciting new games (other than Jewels of Rome) coming to the market this year and next year. We believe we can soon improve the dynamic substantially.
Is the current level of employees enough to maintain the current portfolio and upcoming games? Should we expect the total numbers of games being “live” in the portfolio to increase during the upcoming years?
– Yes, we have the right number of employees for now. What we are going to do next in terms of development capacity will depend on our top line dynamic. If we are going to be flat or so, we would not look to expand capacity and instead we would choose to re-focus existing teams from non-performers or flat-performers to new ideas. But if we are to find growth points, we may decide the best course of action would be to make some more hires. We will see. We are committed to keeping G5 a sustainable business that generates enough profit and cash flow to go on, and that is developing organically.
– And yes, you should expect the number of “live” games in the portfolio to increase as we publish games that we are currently working on and that have not been released yet. We have several exciting games being developed.
Your title Homicide Squad was the rising star during the past year, with good growth quarter to quarter. Why do you think this game suddenly got the attention from gamers?
– I don’t think it was sudden. The game started “working” gradually as we were making changes to alter the game play towards a new vision, and with the help of an entirely new team. We have a very strong team on the game right now and they made the right decisions and paid attention to detail, allowing them to find their audience and niche. The game is now the largest criminal investigation hidden object game on mobile, and the team believes they can expand this market. It’s quite interesting that Asia is a big market for this game and it certainly helps.
Since you bought the rights for Secret Society, the progress been slow and the game seems to struggle a bit. Can you go give us some insight in this development?
– The Secret Society continues to be our #3 game by monthly revenue and in fact its monthly revenue has been gradually going up since January this year. It is very profitable for us every month as it has a mature, stable, and loyal audience of players. We are spending practically nothing on the game’s marketing. The game acquisition deal is going to be very profitable for the company, especially in the long run. When we acquired the game, there was a lot of “deferred maintenance”, some of which was technically quite challenging. First, we had to focus on “hygiene” and fixing critical stability issues in the game so players didn’t lose their progress. Then we could turn to focus on content. We also had to build a team, and that takes time. Now that we have a great team, we are starting to make higher level improvements and we can see that the audience is responding positively. There are some further major improvements coming to the game very soon. This takes us to our current thinking about how we could grow the game’s revenue faster. Then the next step for us is developing this valuable brand that we own going forward. The team has some exciting ideas on what could be the next step, but you’ll have to wait to hear more about that.
Recently, you revealed that the pipeline of new games (coming out 2019) will be in the genres of match-3 and HOPA. G5 Entertainment has a dominating position in HOPA, but that is generally with licensed games. What are your plans to be able to make “a new Hidden City” in house?
– We love the independent studios we have collaborated with on making some of the best games in the genre, and we wouldn’t be where we are today without them. We want to continue working with them, sharing our knowledge with them and making a lot of money together. That said, both Homicide Squad and The Secret Society are being successfully developed internally, and we are certainly accumulating knowledge in the genre and growing our revenue share. We will work closely with our independent developers, but we also have our own ideas and willingness to go into certain genre niches and try things. I think it’s good and can create a healthy creative competition between our teams, both internally and with independent developers. It can drive innovation and help us figure out how to grow this genre further.
Speaking of match-3, Pirates and Pearls came out with a bang and grew fast during the initial lifecycle of the game. First off, what can we expect from Pirate and Pearls moving forward? Second, what can we expect from other smaller games in the portfolio?
– We have a plan of how much time we want to spend on each game to make sure we have tried everything that made sense to try. P&P has some very interesting updates that are coming, and I think these can have a positive effect. But with any game after a certain time if we don’t see the potential for significant improvement we would move on to other ideas. A game can be profitable and make important contribution to our entrance to a new genre even if at some point we realize its limitations. We learn, make money, and we move on to new ideas. It applies to other smaller games in the portfolio as well.
How do you see the mobile games industry moving forward during the next couple of years? For example: platform fees seems to get slashed in PC-gaming, do you think we could see the same thing in mobile?
– This is an interesting question, of course. If the fees were to go down, I think the benefits could go to end users, the advertising ecosystem, and the developers, too. I can see this topic gaining steam, and I can also see why dominant platforms are going to fight it as much as they can. Government action and legal outcomes are hard to predict. For mobile, I think we will see more consolidation as it finally does feel like a consolidation time in the market, and it’s always an easy thing to say :). I also think we will see some interesting development around the store fees and how companies are going to try to get around that, either with streaming or other approaches. It creates opportunity but also creates some uncertainty. For me personally, it feels like something interesting may happen, but I wouldn’t speculate. We are of course looking at how things are developing and playing with scenarios and action plans for G5 in this regard.
Vid publicering äger skribenterna på Gamingaktier inga aktier eller andra värdepapper i G5 Entertainment. Länkar till Avanza Bank är så kallade affiliate-länkar.