Enthusiast Gaming Holdings (EGLX.V) has completed its deferred payment obligation ahead of time for its planned acquisition of The Sims Resource (TSR).
Growing up, there was a persistent myth that girls don’t play video games. Maybe it might have even been true at one time, but it certainly isn’t now. Women have reached close to parity with men in terms of participation, courtesy of intelligent game designers who recognized that they could double their revenues by making games that women may be interested in.
And that’s how games like The Sims came about:
Watch live video from HarrieSilver on www.twitch.tv If you’re not familiar with The Sims, it’s a game where you take control of a quirky, pixelated family and guide them through their daily life, seeking out love and work among a pre-generated community of computer operated Sims. Sound boring? It isn’t.
For the past few weeks my place has been Sims central. My wife’s recently finished her latest post-secondary marathon and is taking a few well-deserved weeks off to do absolutely nothing, and that means The Sims. She’s even downloaded some custom content from TSR, and made eerily accurate facsimiles of us both, and then used the content from that DLC to make us into a witch and werewolf respectively. So basically I write during the day and run in a pack and bite people at night. No real change there.
She’s not alone in her fascination with The Sims either.
TSR fans generated over 2.5 billion page views last year, while the property earned $7 million revenue – split between advertising and recurring monthly paid subscribers – and $5.25 million in Adjusted EBITDA. Since Enthusiast Gaming closed the transaction with TSR in April 2019, the number of monthly subscribers has grown nearly 30%.
Enthusiast paid the deferred payment obligation ahead of schedule using the capital proceeds from their recent merger with Aquilini GameCo and Luminosity Gaming. Paying it off ahead of schedule gives them full ownership, and the ability to increase the number of video game and content sites, do their own advertising and manage their own content strategy.
“Paying down the deferred payment ahead of schedule to TSR was an extremely important first step for the new Enthusiast Gaming. Having 100% economic and strategic control of TSR provides significant upside potential to increase our revenue/user and value/user – two key metrics for Enthusiast Gaming moving forward,” Menashe Kestenbaum, President of Enthusiast Gaming, said.
Most video game studios draw in their revenue from a mix of DLC and paid subscription models, and Enthusiast is no different. They anticipate unlocking an extra 70% of the EDITDA that had previously been returned to the vendors.
“Two of our primary growth opportunities include driving revenue through direct sales and adopting monthly, paid subscriber models across our network of video game media sites. Since we announced the acquisition of TSR, we have already seen steady growth of its subscriber base and it will be a key factor in achieving success across both key metrics,” said Kestenbaum.
Enthusiast ramps up
A quick search on the Twitch streaming site shows that over 2,000 viewers are watching people play The Sims 4 right now. That’s nowhere near the highest earners on the site, but in terms of a game with little action, it’s still decent metrics. It’s unlikely that we’re going to see The Sims played competitive anytime soon (I’m not even sure what that would look like.) But The Sims is only one avenue of Enthusiast’s overall revenue stream.
Enthusiast Gaming owns a number of websites and runs an annual convention in Toronto.
Their holdings include:
- Nintendo Enthusiast
- PlayStation Enthusiast
- Xbox Enthusiast
- Only Single Player
- Daily Esports
- PC Invasion
- The Escapist
- Operation Sports
- DiabloII Net
- Diablo Wiki
- The Sims Resource
Their subsidiary, Luminosity Gaming, is where the esports scene comes in. They’ve signed three popular streamers to their label and collected themselves an Overwatch league team, which they’re hoping to leverage into solid revenues for next season. Whether or not this is going to actually work is still unknown, but there’s some serious potential here.
Last year, according to PwC, esports revenues were $805 million with the largest portions being added by sponsorships (at $277 million) followed by media rights and streaming advertisements.
This year, with esports scheduled to be a billion dollar industry, ad revenue alone will grow 25% to $178 million and to more than $214 million in 2020.
If the present state of my living room is any indication, then we’re going to be seeing a lot more of Enthusiast Games.
—Joseph MortonDisclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.