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#G5 Entertainment: CEO interview

newlogoSwedish site published an interview with G5 Entertainment’s CEO Vlad Suglobov today:

Question: Can you describe the quarterly result, why we see a negative growth and how the possibilities to make money on unlockable games have changed recently?

VS: The context is that G5 is going through transition from large portfolio of unlockable games to smaller portfolio of free-to-play games, where each free-to-play game is making substantially more money than a number of unlockable games combined. As we go through this transition, we cannibalize our unlockable business to some extent, switching players to free-to-play games. As a result, the % of our revenue from free-to-play games is growing, while the % of our revenue from unlockable games is not growing, at best. We do not disclose the exact breakdown between unlockable and free-to-play games revenue, but the growth in free-to-play part of the portfolio is substantial, higher than the overall company growth, and very high y-o-y. This is quite evident from the chart positions of The Secret Society that has been as high as #15 Top Grossing Game on iPad in Q3 2013. As we go through this transition, which is happening rather quickly, the situation is somewhat similar to 2010. A part of the business (unlockable) is suffering, while another (free-to-play) has strong growth and a lot of potential for scaling. With unlockable games, we could never achieve the scale of Supercell or With free-to-play games, we have that possibility and the potential. Again, the precedent is there – The Secret Society (TSS) has been #15 Top Grossing Games in USA on iPad, spend most of the year in Top 50 Grossing Games in USA. We want to have more games like that, and we want to get TSS higher. That is why we are preparing more free-to-play games for release. The management aims to restore the growth levels by scaling free-to-play part of the business further. We focus on the long-term picture, not on third quarter results.

 Talking more specifically about Q3 y-o-y comparison, Q3 2012 had a boost due to Apple’s strong promotion of Virtual City Playground. We did not have such support this year, but it’s good news as it’s good to be able not to rely on Apple. Note that Q3 2012 was the best of the whole 2012; it was the high point which we could not sustain. This year, Q3 is more of a low point of the year, as Q1 was better, and Q4 is usually better seasonally. Note that Q3 was also negatively affected by stronger krona.

Q: Can you describe the progress with Secret Society on iPhone and how you plan to go forward with the game in terms of platform and marketing efforts?

VS: The Secret Society is a hidden object game and as such, it is enjoyed best on the large screens. Our iPad users are most profitable and they stay involved with the game for very long time. Therefore our focus with this game is on tablets, both iPads and Android tablets, including Kindle Fire. There are other genres that are more suitable for smartphones, but we see tablets as equally if not more important market, as large part of our audience prefers to play on tablets.

Q: Brave Tribe, the new Free 2 Play game, has not yet been a world success, can you describe your view on the game and how it fits into your game portfolio?

 VS: In our internal classification of F2P games, Brave Tribe is Tier3, and that is after Tier 1 (The Secret Society) and Tier 2 (Virtual City Playground). Tiers are based on monetization parameters and maximum revenue per month we expect to see from the game. Brave Tribe for us is the same class as Doomsday Preppers. And it performs in accordance with the expectations, even thought it was released in English only and only for iPad. We work with the developer to improve the game further, and there is no doubt it is going to be good business for the company. But we never planned on making another The Secret Society or a better-performing game out of Brave Tribe.

Q: You have plans for 6 new games with the Free 2 Play model during the next year. Can you describe what sort of games you are focusing on and what we can expect in terms of innovation and diversification of the new games?

VS: We do have a number of games approaching the market, and it is a very interesting portfolio. It combines “sure bets” based off of The Secret Society and Virtual City Playground successes, but also certain more innovative games that provide bigger opportunity but with higher degree of risk. As we communicated previously, we plan on releasing several games before the end of the year, and since we said that, there was only one coming out, so more will follow soon. Follow our news.

Q: We are entering an interesting period app revenue wise and last year at this time you had a shortfall in game releases, how do you plan to mitigate that risk in this important season in game revenue?

VS: The momentum is positive coming out of Q3, and we have been quite successful with recent releases and especially with the new updates for The Secret Society and Virtual City Playground. We don’t stop working on these games. What is very different in F2P compared to unlockable business, is that we do not necessarily need more games on the market, but we need to focus more on our successful games. This is what we intend to do, while also bringing new games to the market, of course.

Q: Can you describe your current market focus, we see a steep growth in Google Play revenues for example and also what geographical areas are most important going forward compared to now?

VS: We are focused on realizing the potential of our F2P successes in USA and Western Europe, focusing primarily on The Secret Society. It is great learning experience, and we haven’t yet figured out if there is an upper limit for this type of game, or it can continue to gain chart positions. We learn a lot every day and we apply this knowledge to new F2P games we are about to release. The 2nd most important focus is therefore repeating the success of Virtual City Playground and The Secret Society in our select new F2P game releases.


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