Good Gaming CC transcipts:
(this is a partial transcript)
Here’s why I am so bullish on this deal:
Good Gaming is the most exciting investment opportunity to come across my desk in my career.
Not that I was lucky enough to see Facebook, Pinterest, Twitter, or Instagram, or other wellknown
dot.com names. But when I analyzed this company’s model it hit me. Good Gaming
combines some of the best features of all of these businesses, but its model is even better. I
have spoken to some of my deepest industry contracts, and they agree the model is ideal.
Good Gaming has a differentiated, carrier-class platform capable of supporting 100,000, and as
high as 500,000, competitors in pay-to-play online tournaments. It has a substantial
addressable market of 205MM online gamers – according to Activision Blizzard - that is growing
at a rate of 20%-30% per year. This audience includes gamers that are amateurs and have
nowhere to compete with other gamers for cash nor do they have a means of turning pro.
Good Gaming has no direct competition for massive scale competitions. Yes, there are myriad
local tournaments, often sponsored by major brands, but no real scale platform exists today
and competes with us. We have the world’s premiere games publisher as a partner already,
and that publisher is so bullish on our model that they put us up on their launcher page for days
at no cost, to promote our tournaments. So there is no confusion, we announced three titles
last week, all published by A*B*. So there is no confusion, our initial alliance partner is in fact
A*B*. Again, I state, our partner is A*B*, which recently bought a global mobile games
company and now boasts 500MM gamers as customers worldwide. A*B* is our initial alliance
partner though we are not exclusive to them.
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In 2014, Good Gaming’s 1.0 platform had already run the world’s largest online amateur
eSports tournament of its kind. We have a patent pending system that may give us long-term
sustainable competitive advantage and a barrier to potential new entrants if we perfect it.
Good Gaming has a model that can go viral, generate sticky recurring revenues, generate
substantial transactional revenues, and attract advertising and sponsorships. And last, Good
Gaming’s model, when functioning properly, is basically a prepaid model, whereby recurring
subscription fees, transaction revenues, and sponsorships pay the expenses before they are
even incurred. Oh one other thing, our model is scalable, generates high incremental margins,
and has a trendline that should show accelerating top line, improving margins, and increasing
revenue per subscriber over time. All of these metrics were exhibited by the most successful
tech companies I covered as an analyst and banker back in the peak of the telecom and
dot.com markets.
eSports Market Commentary
The eSports market has been very active, especially over the past few months. Late last year,
our ally – again so you are not confused by our PR on Wednesday – is A*B* - launched its own
eSports division and hired the former CEO of ESPN as its chief. ESPN itself has launched eSports
coverage, as has Yahoo! Activision Blizzard made a statement with its acquisition of Major
League Gaming last month, giving them coveted access to the pro eSports circuit. One by one,
we are seeing colleges starting to offer eSports scholarships, while pro athletes and acclaimed
investors are buying eSports teams to position themselves for the future. So the market is
simply on fire. So there is no doubt, Good Gaming is in the right place and at the right time,
and lightning is striking – not once, not twice, but many times in our favor.
Investor Update
Two days ago, Good Gaming announced that it had secured slots for 9 tournaments this SpringSummer.
Titles to be featured include Hearthstone, Heroes of the Storm, and Call of Duty.
These three titles represent active gamers of over 150MM, meaning we already will address ¾
of the 205MM amateur gamers in the world with our rollout. While we have not pinpointed
the exact dollar amounts of these competitions, it’s safe to assume a range of $5,000 - $25,000
per tournament, with larger prize pools near the end of the summer in a couple of series
finales. We also intend to run some mini tournaments next month, almost a prelaunch test if
you will, to make sure the platform is well oiled and any kinks are worked out prior to going
into full production.
On other news, we intend to bring the HDSI vehicle current shortly, meaning within the next 6
weeks. We also intend to file for a name change and ticker change in the near-term. A number
of you have asked about our authorized shares and plans for a reverse split. At present, we
have no plans to execute on either, but they may be revisited later this year only if we think it
makes sense for our shareholders and not as a means of generating dilutive financing. I can
assure you, not only have we not issued one share of common stock to any investor, but also
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we have removed toxic debt from the balance sheet and raised capital in fixed price securities
with institutional and high net worth technology investors that we believe will be holders of
Good Gaming securities through this new chapter in GG’s public life. We have good working
relationships with these new investors, who have pledged to allow us to place any of their
securities, if they ever seek liquidity, into friendly hands, which could include the treasury of
Good Gaming itself. I have known some of these investors for many years, in some cases over a
decade. Like me, they are here for the long-term.
Model Discussion
Now let’s get down to some math. While these are not projections, I want to illustrate to you
how powerful the Good Gaming model is. I want to run 3-4 scenarios by you, so grab your pens
or prepare to type.
First, our model has multiple revenues streams. 1)-subscriptions, which you can assume for
now at roughly $6-$9/month depending on where we end up pricing the product with
incentives, promotions, and other; 2)-tournament entries, which we estimate subscribers will
pay anywhere from $6-$9/tournament although frankly I think this can range a lot higher as the
business matures; 3)-purchases of Good Gaming credits to use in our Mercenary System, which
we believe will range between $5-$10/month, though we have no data to backup this
prediction; and 4) advertising, which is hard to pin down since our members may spend days
and days on our site versus social networking sites which get 5-10 minutes a day per user, but
let’s call that for now another $2/month with potential upside. That adds up to roughly $20-
$25/month per subscriber. For many reasons I believe these numbers could be conservative
and over time I predict the results will bear out a higher yield as our site gets populated. But
for our math next, I will use $20/month per month per subscriber.
Scenario 1: We have about 100K followers of our Twitter feed. $100K x $20/month = $2MM in
monthly revenues or a $24MM run rate company. Let’s round up to $25MM because
sometimes people will just play a tournament and not subscribe, for whatever reason.
Dot.Com’s of that revenue scale typically get lower multiples of 2x-4x, so that’s a $50-100MM
market cap. company. This is something within reach of our business today, based on the 9
tournament slots and our existing followers on Twitter. It may prove conservative.
Scenario 2: In 2014, the 1.0 platform held a tournament for Hearthstone that was up on the
burner page for 7-8 days, generating 300K hits. We were promised 14 days but were cut short
due to a scheduling issue. Let’s run with 300K hits, which we believe we could have converted
to subscribers if our parent had not run into difficulties and we had been able to run multiple
additional tournaments as we are positioned now over a year later. 300K x $20/month =
$6MM per month or $72MM per year, rounding up to $75MM for players that do not subscribe
for whatever reason. Dot.Com’s of that scale get a revenue multiple of 4x-6x, which would
make Good Gaming a $300-400MM market cap company.
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Scenario 3: Using a conservative ½% share of the 205MM amateur gamer market worldwide as
a base case, that suggests roughly 1.0 million subscribers. 1.0MM x $20/month = $20 million
per month or $240 million per year. Again this excludes gamers who do not subscribe to our
site and just show up to play tournaments without subscribing. Let’s call that $10MM a year of
annual revenue which may be conservative. At ½% share of the worldwide market, this
suggests Good Gaming will generate $250MM in annual revenues, and at that scale we project
significant double digit cash flow margins. Multiples applied to Internet companies of that scale
range from 5x-10x, suggesting a valuation of $1.25-$2.5BN.
I wanted to give you a fourth and fifth scenario, targeting 1% of today’s market, ranging up to
10% of a 300MM gamer market in 2-3 years with higher monthly revenues per subscriber of
$50. I was told by Mr. Laken I couldn’t go that far, **BUT** I have given you the metrics off
which you can make your own model at least as far as revenues go. I want to point out that I
believe this is a rising ARPU situation, where the $20/month/subscriber will rise to $50 or more.
When we are running 10-20-30+ tournaments a week for multiple titles, multiple publishers,
the numbers are going to get staggering. And I want to make one other point, my scenarios DO
NOT include any B2B deals for licensing or white label, whereby we can take our model to a
colleges and universities or a broad range of institutions, and offer them the chance to run their
own competitions. That’s where the math gets even more nutty. But you have to imagine
what that could be worth – Good Gaming could become the backend for eSports tournaments
for major channel partners. The upside is staggering and if I say any more you’re going to think
it is just silly.
