Gaming Mergers & Acquisitions Update

1. Gaming Mergers & AcquisitionsUpdate Jim Perkins Director, Corum Group May 2013

2. Introduction Jim Perkins Digital Media Specialist Corum Group, Ltd. Entertainment software entrepreneur Jim Perkins is directly responsible for publishing some of the industry’s biggest franchises, including Unreal, Duke Nukem, Wolfenstein, Doom, Hunting Unlimited, and Driver. A well-known senior executive with a 22-year track record of publishing such bestselling hits, he founded and grew two highly successful software publishing companies (FormGen and ARUSH) from start-ups to multi-million dollar enterprises. Jim also launched Radar Group, the first Transmedia Incubation Company to monetize entertainment franchises across all media, including film and television. His success and extensive experience in software production, marketing and public relations, packaging, online and retail distribution and software M&A, uniquely qualify him as an expert in building value and realizing wealth. Jim joined Corum Group, the world’s leading software M&A firm, with a specific focus on educating and helping prospective sellers maximize the value of their digital media companies.

3. Agenda • Background: Digital Game Trends • Spotlight: China, Japan, South Korea • Review of Recent M&A • Case Study: Asian Notables • Conclusions • Looking Ahead

4. Game Trends

5. Digital Game Sales Growth • Digital Game & Downloadable Content +33% year-over-year in the US and EU • Digital content 40% of total game spend in US • Asia projected to dominate online and mobile games by 2016 • Chinese gamers are younger, 37% under 18 • Mobile game spending in China will exceed $1 billion in 2013 • Mobile game spending in US @ $2.1 billion in 2012 Source: NPD, iResearch & Digi-Capital

6. Global Video Game Revenue

7. Shift to Tablets • Tablet-based In-App gaming purchases to jump from $301 million in 2012 to $3 billion in 2016 • Far East/China will generate 3x the In-App revenue on tablets than North America by 2016 • Asia is overtaking North America as a key revenue producing market • An ongoing shift to mid-core gaming is increasing the importance of tablets • “Dual Launch” on Google Play and App Store will become the standard instead of launching App Store followed by Android Source: Juniper Research

8. All About Apps Source: App Annie

9. China, Japan, South Korea

10. Chinese Mobile Gaming • 425 million new smartphone installs this year • Mobile gaming revenue growth 50%+ through 2015 • Carrier billing increases will allow monetization • Fragmentation • Ecosystem: Android 70%+ (counterfeit Android) • App Store: > 500 App Stores • Content: Action, Puzzle, MMO – no leader • Launch Strategies • Focus on Android • Develop relationships with App Store Operators • Launch with a Local Partner to • Help localize titles • Cut through Chinese bureaucracy Source: ufert.se

11. Japanese Gaming • Japanese gamer profiles similar to European & North American players. • Older players = higher monetization rate • $4.16 billion social gaming market in 2012 • ARPPU = @ $50/month • Ecosystem = 55% Android, 36% iOS, 9% Other • Culture Counts • No foreign mobile/social gaming company is really successful in Japan • Do not try to sell in Japan unprepared Source: ufert.se

12. South Korean Mobile Gaming • 2011: South Korea deregulates review of App Store games • 2012: Mobile gaming surges • 2012: Kakao Games, mobile gaming network launch, $51.6 million revenue within 3 months • 2013: 41% mobile gaming growth forecast • 2013: Gamevil revenue forecast at $100 million; its revenue increased 64% in 2012 • 2017: Market stabilizes at 12-18% year-over-year growth Source: ufert.se

13. Game M&A

14. Top Strategic Acquirers: 2012

15. Game M&A - 2012 • Game acquisitions set a new record in 2012 - $3.2B disclosed, estimated $4 billion total transaction value • 15% increase from 2011 • Number of deals declined by 12% • Average transaction size rose 60% to approx. $50 million • 7 of top 10 deal buyers were from South Korea, China or Japan Source: 451 Research, Digi-Capital

16. Game M&A Transaction Value - 2012 Source: Digi-Capital

17. Game M&A Transaction Volume - 2012

18. Game M&A History

19. Game Investment - 2012 • Game investment transactions were up 9% • Average game investment transaction value was down 57% • Average size of investment - $5 million • More mobile game studios were funded, but the money needed to fund the studios was smaller • Kickstarter accounted for 6% of all investments Source: Digi-Capital

20. Game Investment Transaction Value - 2012 Source: Digi-Capital

21. Game Investment Transaction Volume - 2012 Source: Digi-Capital

22. Asian Game M&ATransactions Past 12 Months • Aeria Games & Entertainment (Japan) • Gamepot - Online & social network games • Aspect Gaming (China) • Longshot Interactive - Baccarat game for Facebook users in Asia • ChangYou.com (China) • 7Road - MMORPG game, DDTank • Chengdu B-Ray Media Co. (China) • Gamegoo Information Tech - Online video games in China

23. Asia Game M&ATransactions Past 12 Months • Giant Interactive (China) • Backward Heroes - Online marketing and video services • Gree (Japan) • Pokelabo, Inc. – Japanese mobile video games • AppAnt Studios – Android video game, Dino Life • Paprika Lab – Facebook games + iOS quiz game • GungHo Online Entertainment (Japan) • Grasshopper Manufacture – Console and mobile video games • Kog Corporation (South Korea) • Kill3rCombo – MMORPG games for consumers globally

24. Asian Game M&ATransactions Past 12 Months • Mobcast, Inc. (Japan) • Entercrews Co. – Web and mobile role-playing games • Nexon (Japan) • gloops, Inc. – Mobile and social networking games • inBLue, Inc. – Mobile and social networking games • Sega Corp. (Japan) • Relic Entertainment – Canadian PC and console-based games • Sony Computer Entertainment (California) • Gaikai – Videogame delivery network operator • Webzen (South Korea) • Gala Networks – Online MMO game, gPotato

25. Case Study – Asian Notables

26. Asian Notables

27. Asian Notables Source: Financial Times

28. Asian Notables 9 Source: Capital IQ & 451 Research

29. Asian Notables“M & A Outlook” • All companies are trying to increase their mobile presence via: • M&A • Partnerships • Internal Development • Nexon’s strong earnings and its 2012 purchases suggest it will continue buying in 2013 • Giant announced M&A will be one of its avenues to develop its mobile offerings

30. Conclusions and Looking Forward

31. General Game Sector Tech M&A Outlook • 2013 off to a slower start than 2011 & 2012: • US tax law changes accelerated some M&A into 2012 • Seasonality - larger deals usually land in H2 • Less sophisticated buyers tempted by mass denial of how hard to build • Frothy social games market got ahead of itself

32. Potential Drivers of a Double Top • Platform rotation: tablets, console cycle • Software/design innovation: tools, wild cards • Legal changes such as equity crowdfunding: • - Kickstarter already nearly $50M without equity • - Pressurizes market, brings new buyers • US Android games market growth • - Google Play games services announced • - Speaking of which …

33. Arrival in Force of Top-Tier, Sophisticated Buyers • Yahoo, Google, etc. • Tech-sophisticated, deep expertise at hand • Realistic about need to buy • Disciplined, established M&A processes • Able to factor in costs of hiring and training • Deep pockets and long-term outlook • Strategically aware and driven

34. Conclusion • An incredible industry with Asia uniquely positioned • An incredible year of M&A, with more to come • Tech, talent and growth drive demand • Strategic players arriving • Opportunities abound

35. Thank youJim Perkinsjimp@corumgroup.com