PlaySide Studios (ASX: PLY) has graced us with their Half Year report. Apparently, they’ve been busy repositioning themselves and refocusing its development team to create new titles for new platforms. The report also reveals that they’re planning to ride the wave of emerging technology, and although they did generate significant revenue during this period, it’s still up in the air if they can still call themselves ‘the largest VR/AR development studio in the country’.
The Half Year ending on 31 December 2022 saw PlaySide with a revenue of $16.6m, which is a whopping 76% increase over the same the previous year’s corresponding period ($9.4m). However, net losses ballooned 1,136% to $5.5m, compared to the $400k loss a year prior (pcp). Overall, underlying EBITDA blew out to $2.7m in losses, well down from last year’s corresponding $147k earnings loss.
As part of its plan to keep up consecutive growth, the Studio is set on a hard and fast growth trajectory. The momentum boost comes as the Company secures an extension to their existing multi-year work-for-hire (WFH) contract it won with Meta Platforms (NASDAQ: FB) in April 2021 to progress ’emerging tech’.
Slowly Meta has been warming the relationship between the two where part of the recent update highlights another extension to add to the four extensions from previous updates, is that both parties have finally agreed to a revenue share – hinting at promising progression in creating a mixed reality game for Meta’s latest gamble, Horizon Worlds.
Moving higher up the value chain, PlaySide is currently working on the popular franchise title, Warcraft III: Reforged, which will be remastered for a PC launch.
Other contracts signed in the last 12 months include some notable big global players, 2k Games – the group that brings NBA to console, Shiba – a developer creating games based on the popular Shiba Inu cryptocurrency, and Activision Blizzard.
Apart from their most significant venture, the Studio already has a bank of over 60 original titles (games) that have seen a launch via PC, Mobile or VR/AR/MR (virtual, augmented and mixed, respectively). The reality space continues to grow alongside Big Tech, as evident in the recent initiative.
The Company’s global reputation and recognition derive from previously completed projects that saw PlaySide having worked with big entertainment names, Disney and Warner Studios. Remaining as the Original IP, the partnerships produced highly successful games; The Godfather and Legally Blonde.
In fact, the successful launch was claimed by The Legally Blonde original IP title, which amassed over 500k downloads since its inception. With such promising metrics, PlaySide’s top three games; Legally Blonde, The Godfather, and The Dumb Ways to Die Franchise, collectively contributed $5.5m, or just over 55% of total revenue.
With the studio diversifying its offerings as it churns out game development, the Company expects increased engagement to ultimately stand-out in the already crowded gaming industry, where to ensure future survival, consistent double-digit growth is a must.
Unfortunately, while its attempt to appeal to consumers has reaped benefits for the Studio, the board recently finalised their decision to embark on a strategic re-evaluation to shift its workforce focus towards more promising ventures in VR/AR game development – but comes at a cost to many of their existing original IP titles that were either cut completely or development was reduced to the bare minimum – which will eventuate itself as a temporary revenue decline in the financial report.
Announced in the half-yearly report, the partnership with Meta Platforms pulled in nearly $11m in work-for-hire revenue, up from $7.54m in the pcp. Original IP revenue totalled $5.6m, while overall sales grew $7.1m, or 76% on the pcp.
It was expected that Original IP would contribute the most in overall revenue in FY23; however, this is no longer the case due to reasons such as; fewer titles launched in the previous six months, continued monetization efforts, longer life-cycles and the new development partnerships that were signed during the December quarter.
PLY shares have been hammered lower in the past 12 months, languishing at $0.32 after peaking at $1.27 in January 2022.
Trading Desk Assistant at Emerald Financial
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