Frank Gibeau on how IP licensing will help Zynga to the next level

Jetfuel for the mobile generation

Frank Gibeau on how IP licensing will help Zynga to the next level

After months and years of talking in intricate detail about the financial performance of Zynga Poker, CSR Racing 2 and Words With Friends, CEO Frank Gibeau couldn’t be more excited to finally be talking about Zynga’s new games.

And given the company’s 2019/2020 slate includes games based around some of the biggest entertainment licences ever - Harry Potter, Game of Thrones, Star Wars - such enthusiasm seems reasonable.

“We’re very excited about our product pipeline,” Gibeau explains.

“We’re combining some big licences with existing franchises that will grow the company.”

For, as well as these new IP, Zynga also announced the reboot of two of its most historically popular franchises - FarmVille and CityVille.

“They will be familiar but with new ways to play,” says Gibeau. “They’re mobile from-the-ground-up and will mix proven, better and new features.”

As a corporate ‘pulling back of the curtain’, it’s hard to imagine how Zynga’s reveal could have gone better.

A careful strategy

Yet in the highly competitive world of mobile games, the temptation to bet your future on expensive external sources has caught out plenty of CEOs, witness Glu’s series of celebrity flops, Kabam’s Star Wars: Uprising and, more generally, Telltale Games’ entire business model.

Licences are really efficient at enabling you to build a global audience quickly.
Frank Gibeau

Given the latter’s recent demise, Gibeau is keen to contextualise Zynga’s decision making.

“Licences are really efficient at enabling you to build a global audience quickly and they also have great staying power,” he points out.

“Yes, there might be some pushback on gross margins [because of royalties] but they also lower your risk.”

It’s also interesting to see how Zynga is carefully positioning its new toys.

The Harry Potter game will be a casual match-three experience, which will use the licenced IP to deepen engagement, while the first of the two Game of Thrones titles will be a slots gambling game; a genre in which Zynga is already very strong with its Wizard of Oz and Willy Wonka slots games.

More generally, Gibeau says even with these new games he believes Zynga will have the “right mix” of licensed and internal IP.

For, aside from the headline focus on what’s next, Zynga’s FY18 Q3 financials demonstrated a company with solid foundations.

Bookings were at their highest since 2012 at $249 million, trailing 12 months bookings up to $926 million, while net income was $10 million; Zynga’s fifth profitable quarter of the past six. Operating cash flow was $41 million and despite recent acquisitions such as $250 million for Gram Games, it still has $420 million in cash and equivalents.

Most significantly for Gibeau was the company exceeding its short-term margin goal of 20 per cent.

Zynga’s FY18 Q3 financials demonstrated a company with solid foundations.

“When I became CEO, it was two per cent. Now it’s 21.6 per cent. We hit our goal one quarter early. That demonstrates our good momentum.”

All systems go

And it’s the company’s now almost boring ability to hit its numbers quarter-on-quarter with existing games that should provide the real excitement for what happens next.

Released in June 2016, CSR Racing 2 has grown into a $100 million-plus a year product and is still growing, while the launch of the more competitive Words With Friends 2 was Q3’s big performer. With the previous games limited to advertising revenue, Words With Friends 2’s IAP focus was clearly reflected in a 53 per cent year-on-year rise in revenue for the franchise.

“We’re adding a lot of innovation into these games through our live operations,” says Gibeau.

“We’ve got plenty more to come for Words With Friends, and CSR 2 will get a new Legends mode, which will add the muscle cars arc from CSR Classics.”

Zynga Poker has just kicked off its long-term licensing deal with World Poker Tour and Gibeau is also keen to talk about Gram Games’ potential, notably its Merge Dragons! game and several new Merge! titles that are also likely to be released in 2019.

In other words, it’s all systems go. “We’re moving on from the turnaround language,” Gibeau agrees.

If nothing else, he’ll certainly have plenty more to say in future financial briefings.

Contributing Editor

A Pocket Gamer co-founder, Jon is Contributing Editor at which means he acts like a slightly confused uncle who's forgotten where he's left his glasses. As well as letters and cameras, he likes imaginary numbers and legumes.