IPO Watch: PlaySide Studios flags scale-up plans ahead of ASX debut
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Melbourne-based PlaySide Studios (ASX:PLY) is set to become the first Australia-based games development company to list publicly when it joins the ASX boards on December 18.
The company has raised $15m from investors in a funding round led by Cannacord Genuity, giving it an indicative valuation of around $70m. PlaySide Studios shares will debut with a listing price of 20c.
Ahead of the listing, Stockhead caught up with co-founders Gerry Sakkas (CEO) and Mark Goulopoulos (director) to discuss the company’s outlook.
Sakkas highlighted that with an established business model already in place, the capital injection comes at the right time for PlaySide to scale up.
The company makes income via its suite of mobile games, with revenue generated through advertising and in-app purchases.
PlaySide Studios booked revenues of $7m for the 2020 financial year, with total game downloads of 4.6m.
“We’ve spent the last few years learning about user acquisition and the monetisation of our products. And there’s some IP there that’s allowed us to grow,” Sakkas said.
PlaySide produces games for Hollywood studios such as Nickelodeon and Disney, in connection with franchises such Cars and Spongebob Squarepants.
“With some of those brands we collaborate on a work-to-hire basis. So with this capital we’ll look to acquire those licences and build those products in-house,” Sakkas said.
“We’ve worked with a lot of Hollywood brands over the years and those games have sold well, so this gives us an opportunity develop our own IP.”
“That’s where we’re looking to scale — developing our own IP and allocating capital to acquiring users.”
‘User acquisition’ is a popular phrase in tech circles. However, Sakkas said that in practice it’s easier said than done.
As an example of the practical challenge, he pointed to key policy changes on the Apple app store that changed how the industry works.
“At one point the app store had apps and games — everything on one page,” Sakkas says.
“So if you were searching for a popular app, you’d also find games. If anyone got featured on the app store, you’d typically get a huge surge in downloads. It’d essentially be like free marketing.”
But in early 2018, Apple changed its interface – a move which forced companies to find “new ways of attracting users”.
“It took two or three years working with a lot of large partners and building that repetition with our own products, to the point that today we’re very successful with it,” Sakkas said.
“Google have actually sent some of our staff around the country to teach people about user acquisition, so our team is really advanced there.”
“Data analytics and product monetisation are both things we’ve taken seriously over last few years, and it’s allowed us to get to this point.”
Sakkas said that IP provided a tailwind for PlaySide’s most recent title Animal Warfare, which launched in October and generated around 2 million downloads in its first month.
An alum of EA Games, Sakkas launched PlaySide Studios in 2012 along with co-founders Aaron Pasias and Mark Goulopoulos. The company released its first game that year.
“After we launched that initial title, the first call we got was from Nickelodeon. They really like the graphics and wanted to work with us for their SpongeBob (SquarePants) game,” Sakkas said.
“So through the catalogue of brands we work with, it’s made it a lost easier to pitch for these jobs and get work-for-hire deals.”
“Quality is important but it’s very competitive space – a lot of people can make quality games these days,” Goulopoulos added.
“But what a lot of companies fail to do is complete it when they say they’re going to. If you’re trying to make a game that aligns with a movie release, you can’t afford not to meet the release date.”
“What we’ve found over the years is a lot of studios have failed in that endeavour, and that’s helped us stand out.”
Having closed out its pre-IPO funding round, Goulopoulos said Playside Studios received some “really good feedback” from institutional investors who were keen to learn more about the sector.
“It’s a bit of a unique proposition in that we are the only Australia-based games developer that will be listed on the ASX,” he said.
“In that sense I think institutional investors in Australia are more familiar with the SaaS (software-as-a-service) model in tech.”
“But we’ve had quite a lot of interest since IPO closed as well. So we think it’s reflective of an unmet desire to invest in this space.”
He said the business has been “carefully managed since inception”, running a profit most years with compound growth rates of over 30 per cent.
“We’re in sector that’s growing fast, and we have what we think is a formula that succeeds — particularly in the mobile space where we’ve already proven our ability to grow games very successfully,” Goulopoulos said.
“So we think our capacity to scale is very strong. And the extra balance sheet strength from this raise is going to give us the ability to do that at a quicker rate than what we were doing.”