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Even a company as big as Nintendo can see their market valuation skyrocket by more than $20 Billion in a week with success from one game, just as it did recently with its mobile game Pokémon GO. Simply, it just goes to show the insatiable hunger worldwide for applications, digital and mobile games. To add a little color as to the size of the market, analysts at research firm Newzoo estimate in their Global Games Market Report that the global digital games market will generate $99.6 billion in revenues this year, representing growth of 8.5 percent from 2015. In 2019, revenues are forecast to climb to $118.6 billion.
SPYR: A True Cross-Platform, Real-Time Play
Notice in the graphic above that the majority of the market share falls into the PC/MMO (Massively Multiplayer Online) and mobile (Smartphone, Tablet & Handheld) categories. Most companies try to penetrate one segment or the other, but a company like SPYR, Inc. (OTCQB: SPYR), a developer and publisher of mobile games, is a ground-floor investment opportunity clearly differentiated from peers with its portfolio of games, its latest game being Pocket Starships. Pocket Starships is free-to-play, MMO space combat game that is a true real-time cross-platform game.
These attributes make the game unique in the digital games space because Pocket Starships can be downloaded as an app on most mobile devices (Apple App Store, the Google Play Store and Amazon App Store), and it can also be played online at www.pocketstarships.com in any web browser with all of the players across all platforms playing together in real-time. Other companies may claim to be cross- or multi-platform, but what they are saying is that their games are available on different platforms (i.e. mobile and PC), not that players on those different platforms can play simultaneously against each other in real time. For example, many games that can be played on Microsoft’s (NASDAQ: MSFT) Xbox console are also available on PC or mobile, but players can only play against others that are playing on the same platform.
SPYR has a competitive edge in Pocket Starships being a true real-time, cross-platform game, as they cater to a wider audience, promote increased social interaction and create strong brand awareness. A survey by researchers at Mauj Cellular’s GamesBond determined that “multi-platform gamers” spend far more money and time on mobile games as compared to “mobile-only gamers.”
Pocket Starships is Already Outperforming the Industry’s Average Revenue Per Daily Active User (ARPDAU) During the First 6 Months of 2016
It only makes sense that more time spent playing equates to greater user spending and it is already showing for SPYR’s Pocket Starships. In line with industry practices, SPYR gives the game away to users for free and then generates revenue through “in-game purchases.” So far in 2016, Pocket Starships has handily exceeded industry averages in ARPDAUs. According to gameanalytics.com, the ARPDAUs of mobile games in the “Games in the Action, Strategy and Role Playing” genres, all of which Pocket Starships could be classified under, in early 2016 have ranged in ARPDAUs of $0.075, $0.047, and $0.087, respectively. Pocket Starships ARPDAUs for 2016 so far have been the following:
- January $0.15
- February $0.18
- March $0.16
- April $0.33 (although the data shows this surge was an anomaly)
- May $0.21
- June $0.22 (through the first two weeks)
Even at the top end of the industry range (Role Playing games) at $0.087, Pocket Starships is more than doubling ARPDAUs. The math is simple from there forward. At $0.15 ARPDAU, 1 user is 15 cents per day; 10 is $1.50; 100 is $15.00; 1,000 is $150.00; 10,000 is $1,500; 100,000 is $15,000 and 1 million is $150,000. On an annual basis, the top end of those examples is $54.75 million. Considering that researchers at eMarketer forecast 4.5 billion connected mobile devices worldwide by 2018, it’s not difficult to understand how a popular game can easily exceed one million daily users.
By Improving on Existing Digital Game Strategies, SPYR and Pocket Starships Can Penetrate Multiple Markets
Because Pocket Starships is available on multiple platforms, SPYR can penetrate essentially every bit of the broad digital games market, including having a competitive edge in the $20 billion MMO market. Just take a look at what some of the top games generated in revenue last year in the Digital PC and Mobile segments and the potential becomes clearer.
- “League of Legends” $1.6 billion
- “Crossfire” $1.1 billion
- “Dungeon Fighter Online $1.1 billion
- “World of Warcraft” $814 million
- “World of Tanks” $446 million (note that SPYR Advisory Board member Lars Koschin was an advisor at Wargaming, the producer of World of Tanks)
- “Clash of Clans” $1.4 billion
- “Game of War: Fire Age” $799 million
- “Puzzles & Dragons” $729 million
- “Candy Crush Saga” $682 million
- “MonsterStrike” $674 million
After becoming popularized in Asia, competitive video gaming (electronic sports, eSports) is becoming a worldwide phenomenon and represents a significant emerging global market. Majors broadcast networks like ESPN, Fox Sports and Turner Broadcasting (owner of CNN, TNT and TBS) are now covering eSports and Bud Light is engaged in becoming the first major beer brand to sponsor events to get ahead of advertisers jockeying for a position in the burgeoning business. If you don’t know what eSports is, picture Madison Square Garden full of fans watching large screen televisions of teams of competitors down on the floor (called the Multiplayer Online Battle Arena) playing video games against each other. It’s seriously competitive with sponsors backing professional gamers vying for ever-increasing cash and prizes by emerging victorious in popular games like World of Warcraft and League of Legends.
As it is built in the same multi-player combative style as these games, Pocket Starships, where players aim for interstellar dominance, is a natural fit for eSports venues should it continue to grow its userbase. Further, eSports is currently dominated by PC-based games, with mobile games still relatively nascent in the space. Given the sheer number of mobile devices and growth curve, it is logical that mobile games will soon gain more attention in eSports. Pocket Starships and the multi-platform strategy of SPYR again appear to be a prescient move to maximize the chance of success. While the main thrust of this report is on the market opportunity available to Pocket Starships, it is well worth noting that SPYR APPS, LLC, SPYR’s wholly owned subsidiary (d/b/a SPYR Games), in just over one year since inception, has developed, published, or co-published with third party developers several other mobile games, including Plucky, Plucky Rush, Rune Guardian and Retro Shot.
SPYR’s Impressive Leadership
The array of games quickly brought to market and tremendous difference in the cross-platform strategy of Pocket Starships speaks to the forward thinking nature and expertise of SPYR leadership. Management is also employing a risk-off approach to developing games by working in collaboration with third-party developers already proven successful across the gamut of the digital gaming market. Leveraging this strategy means that SPYR keeps development costs minimal and doesn’t waste resources in game development. Instead, they make payments based upon the milestone progressions and recoup their money as the games are published and revenue is realized.
It’s often said that a company is only as good as the people behind it. With SPYR, this saying is particularly true as evidenced by getting a little familiar with the seasoned C-suite executives and advisors.
James Thompson: CEO, President and General Counsel
Across nearly three decades, Mr. Thompson, who holds a Juris Doctor degree from Rutgers University and a BSBA from the University of Denver, has provided legal advice and his business acumen to help large and small companies thrive. When presented the opportunity from a long-term client to transform Eat at Joe’s, Ltd into the digital media holding company, Jim immediately assumed the position and embarked on a mission in the digital games space, rapidly bringing SPYR to where it is today.
- Paul Thind: Managing Director of Games and Applications
With 20 years experience, Thind is regarded as a digital authority in online and mobile games and virtual worlds. Amongst Thind’s lengthy list of accomplishments, he formulated the marketing and launch strategy for 20th Century Fox’s “Family Guy” game, was the General Manager for Disney’s Virtual Magic Kingdom and COO of Outspark, an entertainment services company that published engaging online multiplayer games. He also served as the Head of Business Development, North America, for InMobi and Spil Games and was U.S. CEO and General Manager for Habbo North America, a global teen virtual world community with offices and communities in 32 countries, where he grew the North American user base from 5 million users to 25 million users.
- Barry Loveless: Chief Financial Officer
Loveless, a certified public accountant, brings 23+ years of accounting, auditing, tax and merger and acquisition experience to the SPYR management team. Since 1993, he has worked for clients in a variety of industries such as restaurant/hospitality, pharmaceutical, wholesale, and precious metals/minerals. Mr. Loveless has been intimately involved with SPYR since inception, working as its outside auditor and accountant before becoming CFO. He received his Bachelors in Accounting and a Masters of Professional Accountancy from the University of Utah. He is a member of both the American Institute of Certified Public Accountants and the Utah Association of Certified Public Accountants.
- Jennifer Duettra: Executive Vice President, Secretary & Asst. General Counsel
Jennifer has a long and successful working history with Thompson and also shared Jim’s vision when presented the opportunity to be a part of SPYR. Ms. Duettra has her Bachelor of Arts in Political Science and Speech Communication from Colorado State University and Juris Doctor from Harvard University. Utilizing her degrees and knowledge in mobile gaming and pop culture, she has an expanded role at SPYR, with responsibilities ranging from drafting and reviewing contracts and press releases to evaluating business opportunities and brainstorming new ideas for the games and apps.
SPYR’s Advisory Board reads like a veritable Who’s Who in the digital gaming industry.
- Reinout te Brake
A serial successful entrepreneur, he is widely recognized as a thought leader in the international gaming industry, currently investing and lending his knowledge in several early-stage gaming companies. As he works to develop and monetize a network of companies in his native land of Holland, te Brake has been involved with such companies as Mobilizer, GetSocial, CloudGames and Creel.
- Lars Koschin
Koschin has successfully launched about 25 MMO games, began his career in the interactive entertainment industry as co-founder and Chief Technical Officer of Gamigo, one of the biggest online game magazines and MMO publishers in Germany. Koschin also was the CTO of the popular MMO game portal Curse, Inc. and had of the U.S. Office for Gameforge. Moreover, he founded Frogster America Inc. to launch Runes of Magic, one of the most successful free-to-play MMOs on the market. As mentioned above, Koschin was at advisor at Wargaming, the producer of “World of Tanks,” one of the most successful MMO games of all time.
- Juhana Kotilainen
Kotilainen has over 10 years of experience in mobile and social games, having worked with global brands like Sulake’s “Habbo Hotel” and as early marketing executive on Rovio’s wildly popular “Angry Birds” franchise. During his tenure at Rovio, the company grew from 20 employees to over 700, experienced over 1 billion downloads and generated nearly $200 million in annual revenue. He is currently the Founder (along with other Rovio and Habbo veterans) and CEO of Silvermile, a new mobile games company based in Helsinki, Finland, San Francisco and Bogota, Colombia.
- Edward Laws
Laws has held leadership positions in online and mobile, initially as a finance director and subsequently a commercial Senior Vice President. Edward has specialist industry expertise in mobile advertising and mobile monetization across verticals such as Gaming, Music, Entertainment, Media and Social.
Skin in the Game
In what shareholders should consider an extreme vote of confidence in the future of the company, insiders control about 65% of SPYR’s approximately 153 million shares outstanding. Owning stock is one thing, but these shares are restricted, meaning that they cannot be sold in the near term and not without documentation to remove the restricted legends from the stock certificates. This only leaves about 54 million shares in the public float, a number that is conducive to active trading, yet thin enough to allow for sharp movement in the stock upon increased demand.