Kabam bumps up 2013 revenue forecast as games outperform

SAN FRANCISCO Wed Oct 23, 2013 6:07pm EDT

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SAN FRANCISCO (Reuters) - Mobile gaming company Kabam is raising its 2013 revenue forecast by about 8 percent to $325 million as recent hits like "Dragons of Atlantis" beat expectations and its publishing business for other developers' games is taking off, Chief Executive Kevin Chou said.

Kabam, which is considering going public, expects to be profitable this year, with revenue up 80 percent from 2012, the former Silicon Valley venture capitalist and investment bank analyst said in an interview late on Tuesday.

Kabam, whose hits also include "Kingdoms of Camelot," is among a crop of mobile gaming startups garnering investor attention as smartphone and tablet sales boom and players spend more time on mobile devices at the expense of traditional platforms like personal computers and consoles.

King, the developer of hit mobile game "Candy Crush Saga," filed confidentially for an initial public offering this year. China's Forgame Holdings Ltd and other game publishers have held successful debuts.

"Kingdoms of Camelot," which is 4 years old, is "still at a near all-time high from a revenue standpoint," said Chou, who co-founded Kabam in 2006 with a group of entrepreneurs.

The San Francisco-based company, whose games are free to play, does not disclose the number of "Kingdoms of Camelot" users or its yearly revenue, but has said that the strategy game hit $100 million in revenue in less than 3 years since its launch in 2009.

Kabam derives over 70 percent of its revenue from iOS and Android phones and tablets, by selling in-game goods.

Other revenue comes from a business unit Kabam set up in March to publish games created by third-pary developers. It has also set up a $50 million fund to help Asian developers distribute games to the West.

Last week, SoftBank Corp said it was paying $1.53 billion for a 51 percent stake in Finnish mobile game maker Supercell, valuing the company at $3 billion.

Such recent developments have buoyed the mobile gaming market, Chou said. He declined to talk about the timeline for an IPO, but said Kabam would not go public before King, and is keeping a close watch on market conditions.

"We're tracking how well that IPO does," Chou said.

MULTI-YEAR FRANCHISES

Kabam, which competes with Zynga Inc and Supercell, announced an employee stock sale of $38.5 million in July, valuing the company at $700 million. Chou has said the company expects to go public in 2014 or later.

While media reports this month were rife with news of King's IPO filing, the British company has declined to comment on its plans.

Zynga, which debuted in 2011, has been struggling due to its over-dependence on Facebook Inc and inability to shift toward a mobile gaming market that has exploded in recent years.

Globally, mobile game revenues generated through Apple's iOS and Google's Android platforms are expected to exceed $10 billion this year, analysts said.

For years, publishers like Activision Blizzard Inc have dominated the game industry by churning out console games like "Call Of Duty" that have grown into billion-dollar franchises. With the onslaught of free or lower-priced mobile games, users have been moving away from console games, analysts said.

Mobile games are booming, especially in Asia, with the rapid ascent of companies like Japan's GungHo Online Entertainment.

Chou said Forgame's IPO three weeks ago, which raised $206 million, was a sign that the market was responding well to game companies. The Chinese company's stock shot up 36.5 percent on its first day of trading.

The faddish nature of mobile games continues to challenge the industry. Many titles leap to the top of app charts after launch but quickly lose steam as new entrants emerge.

Just as Billboard's music charts spell success for pop music, Apple Inc and Google Inc's charts for the top paid, free and top-grossing apps have become a touchstone for the gaming industry, with a top ranking giving sales an extra boost.

"The beginning of the mobile gaming era was defined by games that would come to market. They would explode in terms of their popularity, be at the top of the charts for a few months and then they would fall off," Chou said.

To help keep their games on the charts, companies like Kabam, Supercell and King are focusing more on building mobile game franchises and are constantly feeding users with new content to engage them, Chou said.

"This is what is going to take mobile gaming into the next era where there'll be several public companies."

(Reporting by Malathi Nayak; Editing by Richard Chang)

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