On June 29th 2016, Gameloft was finally consolidated within French media giant Vivendi.
The culmination of a hostile takeover spanning eight months, Vivendi argued the deal would transform the loss-making mobile games developer.
Offered a 160% premium to the stock’s 52-week low, Gameloft’s shareholders readily agreed.
Vivendi also moved quickly to inspire its new staff.
CEO Arnaud de Puyfontaine wrote to them, saying: “You will take part in a great collective adventure as Vivendi pursues its ambitious redeployment in content and media.
“This plan will rely above all on your talents and creative freedom.”
Of course, this wasn’t the only view on the situation.
At the time, I suggested Vivendi had just bought “an over-staffed, under-skilled company” that was “failing to compete in a rapidly maturing market”.
You will take part in a great collective adventure.Arnaud de Puyfontaine
Now, with a stream of games just released or in soft launch, this is a good opportunity to consider if the new Gameloft is making good on de Puyfontaine’s promise.
Speculate to accumulate
The simplest way of gauging the company’s recent performance is to look at its financials.
Broken out within Vivendi’s quarterly figures, at first view Gameloft’s FY16 revenues of €257 million don’t look much different to FY15’s total of €256 million.
Q4 sales of €69 million were a record quarter, however, up 10% quarter-on-quarter and 6% year-on-year.
The profitability of a Vivendi-owned Gameloft is a more tricky metric to compare to a standalone Gameloft.
But given Gameloft made a loss of €3 million in terms of income from operations in the last six months of FY15, its profitability (€10 million) over the same period in FY16 suggests Vivendi has been stamping down on costs, while optimising monetisation and marketing spend.
Gameloft had been undergoing significant restructuring to its development footprint and operations.
Indeed, a subtle but notable public change has been the appearance of Gameloft titles - especially Dungeon Hunter 5 - within the rewarded video channels of other developers’ mobile games.
Green shoots of recovery
While such efficiencies point to slackness from the previous management team, it’s worth pointing out Gameloft had been undergoing significant restructuring to its development footprint and operations long before Vivendi appeared on the scene.
Similarly, when we consider Gameloft’s just released and upcoming titles, most (if not all) would have been started under the previous administration. On that basis, ex-CEO Michel Guillemot and co must feel a certain level of righteous jealousness.
Yet, as witnessed by the market reaction to the technically impressive Gangstar New Orleans, the future is not plain sailing for Gameloft.
Released at the end of March 2017, the open world GTA-style F2P mobile game ranked #1 in many key territories such as the US in terms of downloads, but has failed to make any impact in terms of top grossing performance.
In terms of the US iPhone App Store, it hasn’t even breached the top 150 top grossing chart, and currently sits outside the top 400.
Indeed, the title follows Gameloft’s historic pattern of generating industry-leading download numbers - it was ranked the #2 global mobile developer by downloads in Q1 2016 - but failing to convert them into comparative revenue.
The context of monetisation
This situation partly stems from Gameloft’s success during the paid app era.
When an app store download was triggered by direct revenue, Gameloft’s model of a large number of development staff (at one point its headcount was 6,000) churning out high quality games which bought console-style gameplay to mobile was profitable.
Back then process was everything and mobile gamers starved of content didn’t seem to mind if N.O.V.A. was Gameloft’s version of Halo, Modern Combat its Call of Duty, or Dungeon Hunter its Diablo.
In the F2P era, however, production quality and gameplay is irrelevant compared to short 24/7 sessions, a strong emphasis on in-game community for retention, and smart psychological hooks.
Brutally put, it’s still not clear how fully Gameloft gets metagame.
And that’s demonstrated in Gangstar New Orleans, which struggles to balance the endless possibilities of open-world freedom with more tightly controlled missions and events.
The gameplay is fun but metagame progression is slow, painful and gated more by gameplay prowess than resources or time.
Yet there are some positives.
Launched in 2016, Disney Magic Kingdoms has been a modest grossing hit in the US - peaking at #29 on the US iPhone chart as recently as March 2017 - but more surprisingly in Japan, where it’s published by Puzzle & Dragons outfit GungHo Online.
Soft launched hack-and-slash game Iron Blade: Medieval Legends is shaping up well too.
Graphically it’s certainly impressive, boasting fluid controls and short sessions.
But what’s more interesting is what appears to be a deep metagame in terms of levelling up your character, his weapons and items, and also your fortress, which enables PVP play.
None of this is innovative in terms of industry standards for retention and monetisation, but it does demonstrate Gameloft is getting up to speed.
And there’s more
Other games in soft launch include Asphalt Street Storm Racing and Blitz Brigade: Rival Tactics.
Most significant is Modern Combat Versus, which sees Gameloft looking to ride the eSports shooter wave.
Obviously, there’s still more than a whiff of old school Gameloft about these titles.
Asphalt Street Storm Racing is Gameloft’s version of CSR Racing, while Blitz Brigade: Rival Tactics brings Clash Royale’s MOBA-lite into 3D, and we can speculate how much Modern Combat Versus will have been influenced by Overwatch. Certainly the art style is a bit Borderlands.
Still, at this stage of the mobile game cycle, unless you’re Supercell, it’s not clear the market rewards innovation.
Vivendi shouldn’t be relying on any of these games to be a breakout hit.
Instead, buoyed by those FY16 Q4 financials, it will be hoping its focus on live operations within Gameloft's new titles will be enough to ratchet up sales and profitability to the next level, and start to justify that €700 million acquisition pricetag.