Another year, another substantial investment for US mobile games publisher Scopely.
In July 2017, it closed a Series C round of $60 million, bringing its funding total to almost $160 million.
The announcement of a further $100 million in an extended C round from the likes of Greenspring Associates and Horizon Ventures sees the company - which prefers to label itself a “next generation mobile entertainment network” - valued at $700 million.
Planning for an IPO or other exit is no doubt already on the cards.
Stop to start
More significantly, both investments were described as being for acquisitions in terms of IP and development teams, but to-date no such activity has been announced.
The only event of note both pre and post-investments has been Scopely winding down development on two of its high profile soft-launched games.
After 19 months of testing Breaking Bad: Empire Business was canned in mid 2017. And while another licensed game, match-three hybrid Temple Run: Treasure Hunters remains listed on the App Store and Google Play stores in certain countries, it hasn’t been updated since October 2017.
Indeed, the latter’s developer Redemption Games, into which Scopely itself had made a strategic investment, has since raised further investment from Supercell and appears to have moved onto other projects.
That leaves Scopely in an interesting position.
The majority of its games are casual multiplayer titles such as Wheel of Fortune Free Play and New Yahtzee! With Buddies. But two of its most successful games are midcore-themed titles WWE: Champions and The Walking Dead: Road to Survival.
Scopely’s most successful titles are based on external IP and US-centric in terms of audience appeal.
Notably all four of these - its most successful titles - are based on external IP, something which reduces the company’s profitability due to royalty payments, and are US-centric in terms of audience appeal.
Whether that’s a sufficient foundation for describing the company as CEO Walter Driver does as the “Netflix of software-based entertainment” remains open to discussion.
Of course, $100 million buys a bunch of opportunity, but at this stage of the mobile games market maybe less than expected.
For example, Zynga spent $43 million buying the number one free App Store Solitaire card game and then $100 million on Peak Games’ collection of card and board games. It rounded off its M&A activity by dropping $250 million buying Gram Games.
Unless Scopely can pull off another Crowdstar, which cost $46 million and has generated almost $200 million for Glu within 18 months, $100 million will likely buy a mobile games company with up to $50 million of annual revenues.
Scopely’s success is built as much on its data platform as its games.
For a company of Scopely’s size and trajectory that’s not a massive uplift and it’s difficult to get small early-stage investments to work. Prior to its investment in Redemption Games, Scopely also invested in Irish outfit Digit Game Studio and US developer Kung Fu Factory.
These deals weren’t failures in the sense that Scopely released Digit’s Kings of the Realm back in 2015 and Kung Fu Factory developed WWE Champions.
But it’s not clear how strong an ongoing relationship either company has with Scopely, which given it has over 800 staff, isn’t lacking in terms of manpower or game expertise.
And more generally, as the mobile games market has matured and development and marketing costs have soared, competitive advantage has become more about operational smarts than pure creativity.
In that sense, Scopely’s success is built as much on the data platform that underpins all its games and drives its marketing and retailing activity, as the games themselves.
So the issue for publishers or “next-generation mobile entertainment networks” isn’t now about filtering a wide number of original games from indies to find a hit. It’s about analysing the market and finding lucrative audiences that are underserved with mobile games, and/or accessing brands that have strong appeal.
Yet as demonstrated in the examples of Breaking Bad and Temple Run, successfully combining the right licence, game and audience remains as much an art as a science.
But that’s the next challenge for Scopely to maintain its trajectory towards the unicorn status so beloved by the VCs who invest hundreds of millions of dollars.