Pinned straw:
Good news this morning: Playside has announced that Rocket Flair Studios’ (RFS) Dynasty of the Sands is the first title to be signed to its publishing division.
The game is an Ancient Egypt-inspired survival city builder, teaser trailer here.
Playside will provide RFS with development advances relevant to agreed milestones, consistent with industry benchmark requirements for bringing the game to launch. Playside will be responsible for publishing and marketing, and will pay RFS a share of net revenue from the sale of the game as part of the agreement.
Playside has indicated it cannot predict likely revenues at this stage. This slide from H1 FY23 provides some clues around potential performance for indie games:
It is difficult to make forecasts at this stage, but it is obviously good news for the division to have signed its first deal. Should Playside gain traction with its publishing division, there is real potential of this one day being the largest revenue contributor for the company.
Strawman
Looks like an interesting game. I don't mind a good city builder.
Creative products like games and movies have such vast upsides. A single blockbuster can generate rivers of cash flows for many years.
At the same time, these tend to be industries which very much follow the Pareto Principle, in that 80% of the value is captured by the top 20%. In fact, I suspect with games it's more like 90% of the value is captured by the top 10%. And there's a long tail of poor ROI projects.
That's reflected in Playsides slide -- you spend up to US$4 million to generate anywhere between US$2-20million over two years. Projects also get abandoned and written down occasionally. 1/4 of their mobile titles generate 55% of the revenue etc
Picking the next big thing in advance is nigh on impossible. Still, this continues to be a fast growing industry (the overall pie is getting bigger), the company has a good diversity of projects and some good reliability of revenues in work for hire agreements (and with increasingly big players).
It's just so hard to value the shares.. Doubling the recent half's results, PLY is on >4x sales. Then again, their work for hire revenue double this year, and a bit of success with some original IP could really bring that ratio down. And I do think Gerry and Co know what they are doing.
But I do get a bit stuck on the very wide range of outcomes that are possible here.
Rocket6
@Strawman my views are the same. The ROI will be very difficult to gauge. I think a large element of this investment is backing in management -- not only for capital allocation but strategy -- while also maintaining culture. I think their pivot six months ago was admirable. They saw a lot of their talent and resource being wasted and didn't hesitate to step away from that. I would much rather that than they continue with something that is a waste of time. This is where strategy is really important for me and establishing where to invest in what (production wise).
You have touched on my thesis though. I think their WFH provides the foundation and consistent cash flows required to sustain the IP creation/development (and now publishing) side of the business. There is a bit of luck required, but like you have alluded to, one big hit has the potential to be a company maker. This now extends to not only their own IP but publishing -- perhaps they publish a title that goes big. Provided the publishing side continues to gain traction, they have expanded their chances of success in my view while keeping the risk/reward sensible.
The below slide touches on just how attractive the publishing side of things is -- low initial investment required, so low risk -- but significant upside if they find a winner. Anyway, in short, I remain cautiously optimistic about their future.
Bradbury
I agree @Rocket6 that the publishing division adds another stream to help de-risk the revenues from the Original IP team. Depending on how frequently they continue to make these investments, I think revenue is going to become lumpier going forward, particularly around release dates. For example DotS is scheduled for a 2024 early access release and 2025 full release, which puts this at least 18 months from its full sales potential.
Further to that, so far Rocket Flair Studios have had some issues executing on this title in the past. Steam has developer posts going back to early 2020 and then the title being put on hold in 2022. Hopefully with the funds that Playside will be providing it sees the project through, I would have thought they may have gone for a title that was closer to release for their first publishing efforts. There are still many titles working their way through the funnel as shown on the publishing slide in the investment deck, so potentially some other announcements are not too far off given the $30m+ in cash that Playside is holding.
