Good morning, everybody, and welcome to our 2023 full year results presentation. It's fantastic to see so many of you here face-to-face. From talking to Mark, this is the first time we've done a face-to-face presentation for a number of years. So thanks ever so much for everybody that's joined in the room itself and also on the webcast itself. I know there's a number of people who are dialing in to listen to the, to the presentation that we've got. Although I've met a number of you in the room already and a number of people who have dialed in, there's a number of people that I won't have actually met, so I just wanna do a very brief introduction to myself in terms of what I've done historically, and also why Team17 Group was such an exciting opportunity for me as an individual.
So my name is Steve Bell. I took over officially from Debbie Bestwick, who I know a number of you will know very, very well over the years. So I took over from Debbie on the first of January this year, so 3.5 months into being the Group CEO of the business. Prior to joining Team17, I actually worked within the world of brand communication, advertising, CRM, digital media. So I founded and grew a group of companies in the advertising networks, and we actually sold our business to Samsung about 4 years ago. So I've got a very good understanding of the world of brand advertising, communication, and the power of brands.
But a number of people actually asked me the question when I joined Team17: "Why have you gone from the world of marketing communications to computer games?" And it was a pretty easy decision for me, if I'm being honest with you. As soon as I met Debbie and the rest of the board, and I started to understand the power of the brands and the IP that Team17 Group had, the ambition that the business had, and also the talent it had, then it was a no-brainer. I wanted to be part of this business, and I'm so excited to be leading the charge in terms of the business moving forward, at a time when I think there are huge opportunities within the gaming world. So I'm just gonna give a very brief intro to my sort of perspectives of Team17 and the gaming world.
I'm gonna talk about the indie marketplace, and more importantly, I'm gonna talk about our strategy moving forward and the importance of a simple, simple strategy to make sure we generate the growth that I think we, we can deliver. So what's my perspective 3.5 months into the, the role officially? Well, you don't need me to tell you how competitive, fast-paced, and dynamic the computer games world is. 2023 was a brutal year for gaming. More games launches than ever before. And I think the thing that really jumped out for me is that indie is a fantastic space to play. The indie marketplace is such an exciting place, and I'll go on to talk about indie in a bit more detail later on because we can't just presume that everybody understands indie.
So I'll go on to unpack that in a bit more detail later on. The other thing that I noticed is we've got some fantastic businesses within Team17 Group. The acquisitions of StoryToys and Astragon are hugely beneficial to the group. They add real value and specialism that is very, very clear to see. I also think we've got some underappreciated IP, and again, I'll go on to talk about that in a bit more detail later on. We've got an exceptionally talented team. So again, from the first time I met all of the leaders of the individual businesses and the senior leadership team beneath them, I was blown away with the passion, the understanding, and the experience they have in the world of computer games.
You'll hear me talk about lifecycle management a lot, and obviously, from a brand background, I understand the importance of long-term brand value, and we've got some incredible IP within the Team17 Group. So it's a case of what do we do with that IP? How do we make sure we're realizing value over a period of time? And again, we'll talk about that in more detail. But there are absolutely opportunities for us to improve moving forward. We need to get better as a group at collaborating, sharing skills, sharing opportunities. We're definitely making big steps forward, but I wanna make sure that the whole is greater than the sum of the parts. I wanna make sure that our group feels streamlined and synergized and efficient, and is sharing all of the skills and opportunities that we have, and I think there's a big opportunity there.
I think the next point is around discoverability. It is so important to be seen in the marketplace now. 14,000 games were launched on Steam in 2023. That's nearly 40 games every single day were launched. Discoverability in a crowded marketplace is key, and that's where my background of brand advertising, communication, and digital media is going to be so important. You don't need to outspend the competitors, you need to outthink them, and you need to make sure that your target audiences understand what the game is, why they should play it, and more importantly, why they should buy it. Parts of our business underachieved in 2023, and when I say parts of our business, I'm talking specifically about Team17 Games Label.
It was a disappointing year, but the most important thing is we have learned from the mistakes that we made in 2023, and we will never make those mistakes again. And that is such an important thing that we will again unpack throughout this presentation. But we're back in form in 2024. We've had a strong start to the year. Our Q1 has been very pleasing for us, and we've got a very clear plan around delivering growth moving forward. But let's just take a step back before we go into the financial details of 2023, which I know most of you will be very interested in within this room. But let's just look at the indie marketplace, because the indie marketplace offers great opportunities for the Team17 Group.
If we look at the wider gaming market, although 2023 was tough, 2023 started to show growth again within gaming as a whole. That's a really positive signal, I think, for everybody to understand. Sales are dominated by back catalog, so 90% of Steam games played in 2023 were titles of 12 months or older. So again, that just plays into the importance of back catalog, the importance of life cycle management skills, that's really, really important. The indie segment is huge. By our calculations, the indie segment is north of $8 billion in 2023, and I think that's relatively conservative. And if you develop incredibly innovative games in the world of indie, then you will do fantastically well.
But as I said earlier on, I don't think we can just presume that everybody understands what indie is, and one of the first things that I did when I joined Team17 Group was I went round and I spoke to pretty much anybody that would talk to me, whether they were console partners or developers or consultants in the world of gaming. And I just posed the question: What is indie? What does indie mean to you? Because it's really important. We all talk about it a lot, and everybody just talks about it on a day-to-day basis, but what exactly does it mean? And it was quite interesting, the responses that I got. Some people were super philosophical.
Oh, it's an attitude." I was like: "Well, what exactly does that mean, it's an attitude?" But basically, when I drilled down from all of the conversations that I had, where I got to was indie titles require less investment, less commercial investment within an indie title. You're not spending GBP 10 million, GBP 50 million, GBP 100 million, GBP 150 million to develop an indie game. And the other part of this is indie games tend to be far more innovative. They're far more willing to take a risk when it comes to gameplay or the look or the feel. So it's almost the two parts of that in terms of lower development spend and higher levels of innovation. And Dredge is a brilliant example, which is the visual on the left-hand side of the slide. Dredge was a standout title for Team17 Group within 2023.
Totally unique, totally different, never been seen before. Not a huge amount of investment had to go into that game. Indie also offers a very differentiated and more affordable proposition to AAA titles. I'm not standing here today saying you either play AAAs or you play indies, because gamers play both. If you look at the success of Baldur's Gate 3 in 2023, I can pretty much guarantee that people that may have viewed themselves as indie gamers will have played that AAA game. It's not that we're necessarily fighting against AAA, what we can produce and what we can deliver is what we call snackable content, because indie games are far smaller games than AAA games. Most AAA games are never, ever finished because they take hundreds and hundreds of hours to actually complete. Whereas an indie game is snackable content.
It's a game that might take five, 10, 15, 20 hours, and you play that in between the AAA titles. So it's quite an interesting point that I think we all need to understand in terms of the role that indie will play. Indie titles are growing on Steam, so there's been a 20% increase over the last five years in titles on Steam that are classified as indie. Indie definitely delivers or carries far lower risk from a return on investment because you're not spending tens of millions of GBP, you're spending hundreds of thousands of GBP when it comes to the development of that. But why is Team17 well-positioned to become the indie powerhouse? That's something we spend a lot of time internally talking about. We want to be the indie powerhouse.
What I'm going to do now is just talk about the foundations of our business that give us the ability to be that, that indie powerhouse. The first is the global reach of our, of our games, the fact we're platform-agnostic, the fact our sales span six continents. 90% of our sales in 2023 were outside of the U.K., and that just gives you a flavor of how global we are as a publisher. Our IP, really strong IP. 35% of our sales are from first-party IP, and I go on to talk about that in a bit more detail later on. We have over, over 100 titles that generate sales for Team17. Then when you look at the scale of some of our IP, we have 15 franchises where the lifetime sale is over GBP 10 million.
We have four franchises where the lifetime sale is over GBP 45 million, and one of our franchises, the overall sale is over GBP 100 million. So suddenly, as an indie publisher, you can see the scale and stature of the games that we're actually publishing. We've got an exceptional back catalog. Again, you'll hear me talk about back catalog time and time again. 71% of our sales in 2023 were back catalog. That was growing 10% from the previous year, and it's consistently being fed by new releases in one year, where suddenly the following year will actually go into back catalog. So we're constantly feeding the back catalog, which is critical. We've got a really diversified portfolio, so we hit hardcore gamers, casual gamers, enthusiasts.
We talk a lot within the Team17 Group about our vision being, it's around a lifetime of play, and that's something that we're very, very proud of. The fact that we have 2-year-olds playing the apps that StoryToys will produce, and we've got 60-, 70-, 80-year-olds playing, whether they're the sim games or the indie games that Games Label will produce. No game within our portfolio is north of 15% of our revenue. So again, it shows that we're not overly dependent on one particular title. We have a truly compelling proposition for developers. So the fact that we talk to all of the platforms, we have depth of relationship with Xbox and Sony and Nintendo and Steam and, and everybody that you would want to sell your game through. We've got access to data, and that data is worth its weight in gold.
because data is the thing that allows us to work out what we should be doing from a promotional perspective, from a launch perspective, from an early access perspective. We've also got the financial resources to be able to back those titles when we feel as though we need to. And linked to that, we've got a very strong balance sheet, and that strong balance sheet can enhance IP. It can also grow and scale through M&A, and again, we'll go on to talk about that in more detail. But if that's the world of gaming, that's the indie world, and that's Team17, why we feel as though we're well-positioned to be the powerhouse, the indie powerhouse moving forward. What's our action plan? What are we doing to deliver the growth that I'm talking about? Well, the first point is around how do we accelerate that growth?
Well, we need to double down on our indie focus. We need to make sure that we don't try and pretend that we're something that we're not. We've always been an incredible indie publisher. We need to make sure that we continue on that journey, that we're not over-investing and suddenly drifting into a world of AA titles that carry far more risk and sit in this middle ground, which I think is a really dangerous place to be. We have to prioritize evergreen franchises. We've got to make sure that we're backing titles that we feel as though have longevity, rather than they go up like a firework and then just come down, and then suddenly there's no revenue returns over a short period of time.
We've got to make sure that our marketing is totally progressive, and I talk about participation marketing because that is exactly what we need to be and we need to do. We need to make sure that people are participating, engaging, leaning in to any form of marketing that we develop, and making sure that we're doing it in a very, very different way. From my experience, having launched so many brands over the last 20 years within the world of advertising, I know what it takes to do things in a different way. And to be totally honest with you, I think most games launches, it's almost like a playbook. It's a very standard way of launching a game, and we're gonna be really pushing hard and have already started doing this, and we've got some great successes around that, where we're doing things in a different way.
We're launching games in a different way, using different channels and different tactics to be able to do that. We also need to make sure that we're innovating around the publishing models that we're actually delivering. We need to listen to what developers want. We can't just be saying, "This is our model. This is what you have to work with us in this certain way." We have to flex. We need to show that there is understanding from our perspective, because we want to be on the side of developers. We want to make sure their games are flying, and we also want to make sure that we're doing the right sort of M&A, and that right sort is being very selective. We've always been super selective with the M&A that we followed through on.
There are opportunities pretty much every day of the week that get put across our desk, but we need to make sure that we're selective. We've got to make sure that it's delivering against our strategic pillars that we've set out. But how do we improve profitability and return on investment? The first point is around increasing the sales mix of first-party IP, and the two graphs that we've got here show how we've started to do that. So if you look at the increase in revenues from first-party IP, in 2019, it was at 17% of our total revenues. In 2023, it was 35%, and obviously, there are some years where that figure is going to be higher and lower, depending on third-party releases and first-party releases. But you can see the direction of travel, and that is really, really important.
It's really, really important because of the slide under or the chart underneath, where you start to look at the margins that we can generate from the different types of business that we operate within. So if you look at the bottom left of this, third-party physical distribution, it delivers far lower margin rates for us because we're distributing physically somebody else's game. You work up to what's on the right, the top right-hand corner, where you've got first-party IP with co-developers, which is very much the Astragon model, and internal first-party IP, which delivers far higher margins for us. So you can see very clearly why we would want to be operating in this area here, because it delivers higher margins, we have greater control, greater understanding and autonomy, and a greater long-term view of what those games can deliver.
If I was to look at 2023, the operational highlights, I'm just going to touch on these very quickly, but revenue growth of 12%, we're really proud of that. Obviously, the year was challenging, but the fact that our revenue growth was at 12%, and all of that is organic, is really impressive. Our Adjusted EBITDA pre-impairments was GBP 41 million. Mark will go into the impairments in far more detail within the financial section. I'm sure there will be a number of questions relating to that later on, but Adjusted EBITDA pre-impairments of GBP 41 million. 17 games were launched, 45 DLCs, 327 app updates. You can see the quantity and the quality of content that we're putting out in the market in 2023, and we're going to continue in that vein.
14 awards were won, and in some industries, awards are just a vanity statement. In gaming, that is not true at all, because gamers look for games that have won awards. There's usually a huge spike in sales when a game has won a particular award, and the fact that we've won 14 awards across our portfolio, and most of those are global awards, is testament to the quality of games that we're actually producing. The Games Label, the strategic review, and Games Label, I've already touched on this. It was a challenging year for Games Label in 2023, but we have looked at that business, we've realigned that business, we've got absolute clarity as to what that business actually is, and we've got improved operational controls that will ensure that the mistakes that were made will not be made moving forward.
We've also strengthened the leadership team, and the board. We've got a fantastically senior and experienced board, and the leaders of the individual businesses that we've got are exceptional. One piece of news just to update everybody on, and it may have been a question that would've been asked, we've had an interim leader of our Games Label for the last 6 months. I'm really pleased to announce that, we have firmed up and we have offered the role to Ann Hurley, who has been the interim within Games Label. So she is the next General Manager with immediate effect of Games Label, and Anne has over 30 years experience. She is world-class when it comes to operational understanding and control, which is a really important thing for that business moving forward.
I just wanna spend a minute or two before I hand over to Mark, just talking about Games Label, Astragon, and StoryToys, just so we've got a better understanding of what's going on within those individual businesses. Games Label was around strategic alignment. It was around making sure we had absolute clarity and focus of what we are. We are an indie publisher. We're not a double-A publisher. We don't wanna be spending more and more on games. We wanna get back to the basics that we always have done within that business. Revenue growth was at 12%, which is a really impressive revenue growth when you look at the market as a whole at 2.8%. 11 new titles were launched in that period, so we almost launched a title every month.
Our five best-selling new releases in 2023 had an average positive Steam user score of 91%, so that's a bit of a mouthful, but that 91% is almost unheard of, the fact that our users of the top five games are telling us what a fantastic set of games we have. User scores can make a game die or fly literally. If you have a user score of 40%, 50%, 60%, or even 70%, no one's gonna pick up on it, and when you've got 14,000 games on Steam alone, those user scores are critical, so 91% shows the quality of games that we are publishing. Popular sequels were launched to successful IPs, Blasphemous 2 and Moving Out. Very strong year for awards. Dredge was a standout title for us, as most of you will know.
A fantastic title that is purely straight in the indie sweet spot. Wasn't a huge amount of investment that went into that, but it was purely innovative in terms of what it did. Refocus on the proven historical indie games investment model, so we know we're not gonna invest above a certain amount, and that is really, really important, and normalize marketing levels. So we're making sure that we're spending the minimum amount that we need to spend on marketing to make sure we've got traction and cut through in the marketplace. And again, that's something that I'm helping the marketing team on a day-to-day basis with.
If we look at Astragon, a year of franchise growth, so overall organic growth was at 5%, and that's even more impressive when you look at the comparative in 2022, where they launched 4 of their own IP, so a really tough comparative in 2022. Total digital sales, if you exclude the boxed or the physical sales, actually grew at 10%, which shows even more of a positive signal around how they were selling. They launched 2 new third-party titles, 16 paid DLCs, and again, the paid DLCs are critical because what it's doing, it's providing updates to games that are phenomenally successful. But you can't just rest on your laurels, you need to be constantly updating those games. Police Simulator was established as a key franchise. We marketed and we physically distributed 45 separate third-party titles, and again, it just shows how good we are at that.
Even though it's lower margin, it's a, it's an important part of that business. We also completed the acquisition of Independent Arts Software, which is 45 heads, and basically, that allows us to really invest and develop some of our first-party titles. Finally, StoryToys. 26% organic revenue growth in a declining mobile market, and I think that just shows the importance that we play on StoryToys and the growth potential within, within that business. They've got incredible relationships with some of the most powerful children's brands, preschool brands in the world, and the most important thing is we have long-term relationships with those, those partners. To be working with Mattel and Marvel and Sesame Workshop and LEGO and The Walt Disney Company, I don't think there are any other preschool gaming edutainment brands that are doing that.
Over 300 app updates throughout the year, so pretty much every day of the year we were updating apps, we were giving new updates to... I mean, you need to. The subscription model requires you to make sure there's constantly new content that's being delivered. So a fantastic year for, for StoryToys as well. So they're the three individual businesses, but I think sometimes we forget the industry that we're in, and I think we spend a lot of time, rightly so, talking about the numbers and the importance of numbers and the growth strategy and everything that we're doing. But I just wanted to pull together a very quick show reel that just brings to life some of the games that we launched in 2023.
So I'm gonna play that, and then Mark will cover the financials that I know a lot of you will be very interested in.
Fantastic. Good morning, everyone. 4 years since we saw everyone, so it's nice to be face to face again after all that COVID lockdown. So I'm gonna take you through some of the numbers. It's great that you've been able to see some of those titles. I know some of you play our games already, so you'll have already seen them, but a testament to, I think, the portfolio. I'm gonna talk a bit about that in terms of the financials. So the group has always seen consistent growth and we're really proud of that record, and 2023 was no exception, as Steve's talked about. Really pleased to see 12% growth, all from our existing businesses, so no benefit from new acquisitions. And that's against a games market that saw a growth of just under 3%, so. And that's Newzoo data.
What we have done this year, and just to sort of go through it, is that we have had to recognize digital mobile sales, and those are sales through Apple and Google. We've got to recognize those gross. We didn't previously, so that means the 30% platform fee gets added onto the sales at gross and then deducted at our cost of sales. So that does have an uplift. We've restated all the prior numbers, so the growth on growth is still not taking-- you know, it's taking that into account. That impacts predominantly all of the StoryToys business, because 92% of their sales go through Apple and Google. So, you know, that GBP 6 million uplift was all around StoryToys.
I think from my perspective as well, that growth rate is spread across the whole of the business, so through all divisions, and that, for me, shows the strength and balance of our broadening portfolio, which is really important to us. StoryToys led the way, as Steve said, with a 26% growth, and Games Label closely behind at 12% growth year-over-year, all through organic growth. As Steve mentioned, Astragon's growth is really pleasing at 5% above market rate, considering that they launched on all of their own IP titles in 2022. Really good, strong position at the top line. A bit more detail onto that.
Although we had no major own IP launches in 2023, our own IP held firm, and four of our top 10 selling titles are our own IP titles, and that's split equally between Games Label and Astragon. And the top-selling titles on own IP would be Hell Let Loose and Police Sim. So really pleased with Police Sim. It came out of early access in 2022, so you know, that's actually doing really well for the Astragon team on simulation titles. The real story, I guess, is behind the third-party titles, which grew at 20%, and Steve's already talked about Dredge with the accolades and awards that that title has been recognized by. Those new releases were really strong at 17% growth, and they benefited really from the Games Label launch profile, with new games.
Talked about Dredge, but also titles like Blasphemous 2, a sequel to the successful title of Blasphemous, and then Trepang2. I always thought oddly titled name, since it's the first one of the title, it's not the second one in Trepang, but not quite sure how that worked out. So key for us, though, I guess in the background is that balanced back catalog and that portfolio effect, and 10% growth in that back catalog demonstrates that for us. That's now representing over 70% of our total spend. So that, I think, is an enviable asset to any business in the gaming sector, that we've got that back catalog.
As Steve mentioned, we top it up with new releases each year, and it, and it really is all about the strength and depth of our sales teams now across the board, you know, managing the lifecycle management to extend the lifecycle of those titles. So moving on, I guess despite that top-line growth, you know, we have seen gross profits fall, and they fell to GBP 58 million in the year. Significant impact came from one-off non-cash impairments of titles, and we identified this in Q4 last year and talked about that number. We actually delivered, you know, the impairment charges of 11, just over 11 million. And that followed, as you'd expect, a very detailed review of all of our titles, and in both in development and launched. And that's looking at future cash generation and comparing that to the carrying value. So it's very detailed.
Majority effect, it was impacting titles that were released in 2022 and 2023, a small number in 2024 titles. We're confident, given that review of those titles, both existing launch plus in development, that we've this it's an adjustment that won't be repeated on that basis going forward. We'll always have impairment reviews, but, you know, it's something that we've now got control of through the development process, and we're confident that we've got that under control. The other element that drove some pressure on gross margins was the mix, and again, we talked about this at the end of last year. Third-party sales and their growth, as talked about earlier, were higher than expected, and also the mix within third-party sales had more titles with slightly higher royalties, royalty payments to the development partners.
Equally on own IP, there's a slightly higher percentage of Astragon sales make up that mix compared with Games Label titles, and as Steve did mention earlier, they work, Astragon, with dedicated third-party development partners, and they pay royalty payments to those partners. So that means that overall, from the bottom chart, you can see royalty payments were 30% of sales, up from 26% in the prior year. To give you some idea of the increase and the impact on cost of sales. External development costs were higher, and that supported both the 45 DLCs that we put through in the year, plus over 300 app updates, predominantly with StoryToys, but also supporting live titles and more ports such as Hell Let Loose.
We did talk about in the first half some pressure on Hell Let Loose. We got those review scores back up, as Steve said, really important that you get higher review scores well above 80% up into the 90s, and that happened and was successful in Hell Let Loose. You know, expense development costs also included the biggest impact of the restructuring that went through Games Label at the back end of last year. So the majority of those were around reorganizing the studio teams, thinking about outsourcing and utilizing more efficient, outsource supply base for QA, porting, localization costs. So in expense development costs are GBP 1 million of that GBP 1.2 million restructuring costs, that we took in the year.
So and actually, overall, if you look, expense development costs are up 10% of sales compared with 7% in the prior year. In terms of capitalized development amortization cost, we're still seeing the flow-through of the increased investment in development titles that has happened over the last couple of years. You know, Steve has mentioned that we went through the whole restructuring process, and we've refocused the business in the Games label back onto that indie model. You know, looking at between GBP 1 million and GBP 1.5 million. We will spend more on a title that meets all of the right internal hurdles, and actually, we're typically spending less than GBP 1 million as well on the most recent title signed.
But that means that we will start to see those amortization costs of capitalized costs reduce over time, that we're still seeing the flow-through at the moment on those costs in the business. And then the final other part relates to physical costs, so physical cost of goods. So also mentioned, Astragon has a fair proportion of physical boxed products. They will fluctuate. It's important to know they fluctuate, linked to the retail partners and when they're launching titles, but they reduced in year for 2023. So overall, given that the above impairments mentioned, their performance our performance measure of adjusted EBITDA did fall to GBP 30 million. If you add back those impairments on titles of GBP 11 million, you get to GBP 41 million. Still a reduction versus the prior year.
The biggest impact below the gross margin was the impairment charge that we took on The Label, and just want to talk about that. It's clearly very disappointing. I think in reflection, it probably came at the time when we were focusing very hard on Astragon and StoryToys, and Debbie and I, and I think, you know, clearly those two are tremendous successes in terms of acquisition. They're growing, the revenues are growing, and they're accretive to earnings. I think our focus was perhaps too much on there, not enough on here. I think under Team17 Games Label, where it was managed, the management perhaps wasn't the team, and the senior team wasn't looking at the right pace and with the right strategic execution for that business, and so it suffered from that. But equally, there were some very important external factors.
Over the last two years, the mobile market has declined. It's been under real pressure. We've seen reductions in 2022 in the marketplace around 7%, and last year, about 1.5%. That there's been increased competition for performance bonuses, which are paid post-launch, so we've not been able to generate the revenues through Team17 USA the way we had expected. Equally, competition with Apple, the main development partner for development funding, has been reduced, and therefore the opportunity to bring the titles into the mobile subscription market through Apple has been reduced. And therefore, fewer titles are there in development. So overall, that's had an impact on reducing the performance in that business versus our expectation. From an outlook point of view, we still are positive about a channel of mobile subscription for the business.
There's strong relationships with Apple and with Google and developing with Netflix, and so we've already seen one of the Games Label's back catalog titles going into development for mobile subscription at the back end of 2023. So we've got opportunities to bring more of that back catalog in the future, but unfortunately, it meant we've taken a GBP 21 million impairment charge. It's non-cash, it's one-off, so obviously, that will be flushed through and it, it won't impact us going forward. There are some other pressures that we've seen within the admin costs, and Steve has already talked about marketing. What we saw in the first half of the year was a increase in marketing spend. I think the picture's been painted quite clearly.
Within the indie market, it's not about how much you spend on marketing, it's about how smart you are and what you're doing with that marketing spend, and we were able to reduce the spend in the second half. We managed the increase to around, you know, just under GBP 1 million uplift on the prior year. Importantly, though, the marketing models and the processes are back to the indie approach that we've always had in the business, so it's back down to lower levels of investment in marketing. Our staff costs were actually lower, and that's not a reflection of the reorganization that happened right at the end of the year, so we'll see some staff costs. You know, typically, most of them were in the studio.
The savings that we saw on the commercial side, the admin costs, cost us around GBP 200 thousand in terms of the real cost for in 2023. The flow-through of that benefit of the reductions will be about GBP 700 thousand coming into 2023. That represents about 10% of the staff costs within the Games Label. So that will flow through into this year. The impact of lower costs in 2023 was more around we didn't hit our numbers, so we didn't pay any bonuses, so bonuses were down year-on-year, and not just within Games Label, also at group level. Some of the other areas of spend, we managed to put the cost controls in place as fast as possible, and we reduced our sort of premises costs, our T&E costs, and professional costs.
So overall, we've got our cost controls back in place. But it did mean, you know, on a reported level, GBP 57.5 million in terms of admin costs. They do include around GBP 9 million of acquisition-related and amortization costs as well. So with all of that impact across both the gross margins and through the admin costs, we've obviously seen an impact on our statutory profit. But if you take out the GBP 32 million worth of collective one-off non-cash impairment charges, that obviously reverses that bit going forwards and takes it out of our picture. Just a point on the tax charges that you'll see on the face of the P&L. Because of the acquisition-related charge, the impairment charges, they have no relief benefit from a tax point of view.
The effective tax rate will be more like 16% versus 18% the prior year. Bottom line, that means at statutory level, we hit our, our EPS, but at an adjusted level, EPS is around, 17.5%, and we look to see that increase going forwards as we've got the in control of the business. Key for me, I think, in this area is that we've learned our lessons, tough lessons at the, the middle and the back end of last year. We've put in place all those tighter controls across the business, and it's not—although the focus is on Games Label, we've pushed that across the whole of the group. And we've got a lot more rigor involved.
So I think we've got real control over the cost base, not just on administrative side, but also through the development process, you know, whether we're signing the right games with those lower levels, but also managing through the process of development all the way through to launch. So in terms of the balance sheet, it is a strong balance sheet with great cash position. The key movements on the balance sheet in the year are the reduced goodwill and intangible assets, as a result of those impairments. Capitalized development costs, which are always important and key, we have seen that continue to rise as a flow-through of investment in those titles. It's up to GBP 32 million in the year, but that increase year-on-year is slowing down.
Games Label will reduce further going forward in the future as they readjust their investment profile on titles and put those caps in place. Where we are seeing Astragon and StoryToys, and we're supporting their ongoing investment in those titles, as you've seen them broaden their app license deals with StoryToys. Indeed, in Astragon, we're broadening their own IP portfolio, so there's several titles, own IP simulation titles, in the development cycle. We'll see them slightly increase in development spend in 2024. But directionally, over time, we expect to see capitalized on it costs as a percent of sales reducing as we get that more in control, and we start flowing through our approach. We remain highly cash generative as a business.
This year, now, we'll see the final payout and on an earn-out for all the acquisitions that we completed in 2021 and 2022. So subject, depending on any other M&A activity, the cash that we generate through operations will start to increase our cash reserves, and that puts us really into that position with a very strong and very clean balance sheet, with cash funds available to support M&A activity, whether that's on IP or, or other businesses going forward. And that's, that's it from a financial point of view. So I'm going to hand back to Steve to, finish up, and then we'll head to questions.
Thanks, Mark. 2 more slides. So, and then we can open up for questions, because I'm sure there will be a number of questions. So the first slide is just around why we feel Team17 Group is an attractive investment case. Spent a lot of time over the last 35 minutes talking about this. IP, absolutely critical. You need world-class IP to be a world-class publisher, and I genuinely feel as though we have that. We also have the talent in place. We've got an incredible set of leaders that are running the business. We've got a really strong group team centrally now, and also a board that has more gaming experience than probably any other board in the world.
We've got proven franchise creation, so we're very, very good at finding titles and making sure we deliver value over years and years and years, and that's so important. That's linked to this back catalog. 71% of our sales are back catalog. A track record of market-beating growth, a strong balance sheet and cash generation, and M&A optionality, which is a really important thing for us moving forward. But what's the outlook? What's the outlook for 2024, and what's the outlook in the midterm? Well, in 2024, we've already spent a lot of time talking about the actions and the strategy that we have in place to generate growth around revenue and profit. We expect to launch at least 10 titles in 2024, and the continued cost discipline isn't a nice-to-have.
It's now part of the business's DNA, and I think that's really important that everybody understands that. We've had a good start to the year. We're on target in terms of what we said we were going to do internally, and our underlying trading performance is in line with market expectations. So that's 2024, but probably more interestingly, what about the midterm? Well, a higher weighting of first-party IP. The slide I presented earlier on in terms of the margins that we can get from first-party IP, it doesn't take a genius to work out why we would be investing more in terms of our first-party IP moving forward. More flexible publishing models. The biggest competition we have is not other publishers, it's developers self-publishing.
So we need to make sure that we need and we should be innovating and developing models that are market-leading when it comes to the way we publish. Marketing innovation, doing things in a different way.
... really, really challenging ourself and making sure that we're creating these participative experiences for gamers to actually find our games, and more importantly, buy our games. Greater realization of group synergies. Making sure that the whole is greater than the sum of the parts. Making sure that we are sharing insights, skills, synergies, efficiencies across our entire group, rather than having siloed businesses. Rising cash generation, a really, really important thing, and especially something that's linked to M&A. So that hopefully gives you a flavor in terms of the 2024 plan, but just as, if not more importantly, the midterm plan. And I'm just gonna finish with one more reel that's just gonna show you the games that we'll be launching in 2024 and beyond, and then we'll open for questions.
We had a run-through of the presentation yesterday, and one of the things that I was told to do that I forgot, was to warn anybody about the Autopsy Sim, because it is quite a gruesome game. So I should have pre-warned that if you have a weak stomach at 8:30 A.M., then not to watch that, but I do apologize for not telling you before.
Okay, well, thanks, everyone. We're gonna take some questions from the room now, first, and then we'll go to the ones on the webcast. So, William, why don't we kick off with you?
Yeah, just a couple from me, William Larwood from Berenberg. William Larwood from Berenberg, thanks. Just firstly, you spoke about the split of own IP versus third party going from 17 to 35. What sort of level do you think that can get to in the future? Do you have a specific target? And then you mentioned sort of innovative marketing techniques going forward that you employed, and you talked to some recent successes. Can you provide any sort of examples on that? And then finally, just in terms of sort of royalties going forward, given it impacted the mix this year, are you setting any sort of maximum in terms of the royalty payouts that you'll be paying in the future?
Yeah. Let me take royalties. I'll do a bit on our own IP and then leave you with the marketing, Steve.
So yeah, firstly on royalties. Look, I think it's driven by the mix on our titles. We're seeing... Steve talked about trying to be flexible and sign up the right titles. Look, I'll sign 10 Dredge titles on lower royalties if I can get them. It's difficult to predict what that's gonna be like, but I think what we have got is a very focused and, you know, agile, commercial approach to the greenlight process. We've refocused that. It's not to say we're getting any different kind of quality coming through there, it's more around being faster and nimble and more agile, getting back to how we used to be, and it kind of grew over the last two years. So I think we'll continue to sign great titles.
If that means we're signing titles on lower, some higher royalties, and we think they've got the capability to be a success, then we'll still sign those. In terms of next year, we're probably looking at royalties being flat to where we are this year, as an indication. In terms of own IP, look, I think Steve's right. We know that we've got investment that we're putting in place to Astragon's own IP, to broaden their portfolio, but also to do things like Construction Sim, that launched its next sequel, you know, back in 2022. It's been a huge success. It's a leading title in own IP. It's one of the top four IP for us. They're broadening their own IP, so we're gonna invest in it, so that will grow as a percentage.
I think we know that we're investing in Team17 Games Label's own IP, so whether that's Golf With Your Friends, whether it's Hell Let Loose, Worms or The Escapists. So we don't set targets for the percentages, but it's currently around 36, 35%, and I expect that to grow. I don't think it's gonna be, you know, a majority, you know, it's not gonna be the majority of the mix, because that third party is still a very strong part of our back catalog, but I do expect to see that to grow. It will grow. Look, it will fluctuate from year to year. When we have a launch, obviously, it will spike, and then it will drop down a bit.
But they are evergreen titles by their nature, and that's why we continue to see them grow.
In terms of marketing, my observations of the world of gaming launches is, it's almost like a playbook, and most launches tend to launch in the same way. A trailer is produced, some advertising spend is put behind that trailer, there's some paid social, and there might be a small amount of community or influencer activity. And pretty much every title that I've seen in my time within gaming, whether they're triple-A, double-A or indie, tends to follow that same model. What I'm talking about in terms of a disruptive, innovative way of launching a game is, it's almost flipping that on its head. So there's a launch that we've got in the back end of the year.
So again, I can't go into details in terms of the name of the title, but what we're actually doing is, we're not gonna follow the traditional, "Let's do a trailer and spend some advertising on it." We've got influencers and a community of influencers, who are almost gonna take ownership of this title for us... and they are going to be the ones who are breaking it, who are going to be launching it, who are going to feel as though they have some form of ownership of it, even though they don't from a commercial perspective. So suddenly you can start to see that gamers believe influence is far greater than advertisers do. People actively reject advertising in the world that we're living in today, so just relying on that as a strategy of spending more and more.
I think the model that a lot of indie publishers use has almost been taken from the AAAs, 'cause the AAAs will spend tens of millions GBP on marketing. We don't have tens of millions GBP, so therefore, we need to think about what we do. As Mark said, sometimes you can just capture something. An influencer, a country singer in the Midwest of America, got hold of one of our games and started talking about it, and suddenly there was a huge spike in it. It's those things that don't feel normal marketing that will suddenly create an exponential impact in terms of the way that we go about doing things.
So it's constantly challenging ourself and asking ourself a question: Is this going to create the participative experience that we want the gamer to feel, to then go on and do something and buy the game? So it's not an answer that you may have wanted in terms of, "Here's the title, and this is what we're doing," but it's a title in the back end of the year, and it will be very innovative, pretty unique, and I'm very excited about it.
James.
Hi, yes, James Lockyer here, Peel Hunt. Just two questions on sort of strategy. Sorry, one second. There's been a trend in linear content for sort of the younger generations preferring short-form content over long-form content. And there was an interview with Peter Moore, former president of Sega early in the year, saying he thinks that could happen in video games over time and even used the phrase: "Snack-based content could be where things are going." Oh-
That's what I said.
Well, exactly, right?
Can't believe it.
Yeah. Exactly. I thought that's why I thought I'd quote that specifically. I guess the first question is: Given you are... that is where what you do, are you already seeing a trend towards the younger generation preferring that, preferring the smaller pieces? And I guess especially thinking about 2024, given that the big, some of the AAA players have said no new big franchises launching this year, could 2024 be interesting for you? And then as a follow-up, the logic could be that AAA games could eventually form the basis of the distribution channels themselves. Obviously, we've already seen Roblox and Fortnite doing something similar there. How do you see potential new distribution channels fitting into your new sort of action plan and innovative marketing strategy? Thanks.
Probably one more for Steve. I will say, not to take any thunder from Steve, we've always talked about, since I joined in 2019, our indie games being like the small snacks in between the main meals. So I don't think that's necessarily changed. It might be growing, but I think it's always been that way, and I think we've always complemented the AAA and AA marketplace. I think where it gets interesting is where they're discounting heavily, and then they're putting pressure on lower down price points in the marketplace. But I think we've always seen that, and I think, you know, part of the indie and part of our approach is to be agile, nimble, and stay ahead of the marketplace. I think we're doing that.
So I think, if anything, it plays into us going forward, but it's not a change in that sense. I think that they're really good insights that you bring. Roblox and Fortnite, you can't ignore them. More and more hours are being spent on those sort of platforms. And it is something that we do look at. And I think one of the interesting things about being the publisher that we are, we have thousands and thousands of games that are pitched to us every year, and suddenly you can start to pick up insights from that greenlight process in terms of what developers are saying. Smaller, shorter form content that people can fit between the AAAs is absolutely where we've always been, and I think it is playing into our hands.
I think there is a big opportunity for us. The fact that our games will only take 5, 10, 15, 20 hours to complete. So, so I absolutely agree with, with everything you've said in terms of, is indie going to be more powerful moving forward? Is it going to be more prevalent in the marketplace compared to AAAs? I think AAAs come in waves, and obviously we had a huge wave in 2023. 2024 will be a far lighter year when it comes to, to AAAs, but then it will, it will come back. I think there's big questions around the pricing strategy of AAAs. Do people want to be spending the money that they're having to spend, sort of GBP 60, GBP 70, GBP 80, and beyond pounds on a, on a game?
I don't think people necessarily want to do that now because they can get this snackable content in either free form or relatively low cost base. So good insights. It's something that we are totally looking at, Roblox, Fortnite, how those platforms operate, and the role that we could potentially play alongside them. But yeah, I feel as though it's a positive step for us, the fact there's not going to be as many AAAs. But as I said earlier, the fact that we're not trying to compete directly with AAAs is a really good thing, and I think it goes back to this point around realignment around indie, rather than almost trying to drift into the world of AA and think that that's the way for us to go in terms of risk profile, because it's definitely not.
Hi, it's Jasmine Rand from Numis. Couple of questions. So firstly, I guess kind of a sort of broader question, but it's clearly been a difficult environment for indie publishers. We've seen a lot of kind of studio closures or people struggling, layoffs, et cetera. Have you seen any change in your greenlighting environment as a result of the environment for indie developers? Has it kind of changed the type or quality of ideas that are coming through, or changed what maybe developers are looking for from you guys as their publisher? And then secondly, a question on StoryToys. Clearly a really strong year. But it looks as though maybe the active subscribers have slowed slightly.
Just wondering how much is growth driven by the subscriber numbers building versus traction with new apps, updates, or price increases for the subscription? I'll leave that there.
Sure. Why don't I take the first one, and then you can do the Story Toys one. How about that? Yeah, I think what we're seeing from the greenlight process is even though we're very clearly an indie publisher, because the market is tough and because people are struggling to get the financial investment that they need to actually publish their title, we're getting pitched titles that are 5, 10, 15, 20-fold more than we would be willing to spend. So it's a pure play AA titles will be coming to us. "So now, have you got GBP 20 million that you can invest in this title?" And it's a very quick conversation. "No, that's not what we're all about." And I think that's the beauty of having realignment and refocus on the spend limits that we have within the business.
We are getting an awful lot of opportunities. Some of those games, I'm not saying they're AI-created games, but AI is playing a role in terms of how developers are pitching their ideas to us. And the thing about that is, some of the ideas that are being pitched don't have a core strategy, insight, or clear story associated with them. So you can see they've been, "Well, we've got a seed of an idea, let's put some AI overlay on top of that," and then suddenly we're getting pitched an idea, and that's not what we're about. So what it requires is far greater scrutiny around what makes a great title. But we're seeing a definite uptick in terms of the quantity that we're getting.
Because we will only sign less than 1% of those titles, we just have to continue to be as hard as we can. I think because we can close down conversations almost immediately if they're not within the sweet spot of investment that we're looking for, it makes it that much easier for us to find those fantastic titles moving forward.
So I think on StoryToys, look, it's an area that the team focus quite strongly on, and they're very driven. I think there's more competition on the mobile side. So, you know, I think we haven't seen a reduction in conversion of downloads, so that's okay. And typically, we're converting, you know, decently both to in-app purchases and to monthly and annual subscriptions, and so that hasn't changed. So it is growing. It's slowed down a bit, as you say, in growth terms. I think it does get harder as you get bigger to carry on that growth. I think what the team are looking at is looking at innovative ways to drive more people to their apps. And we're starting to see some of that work starting to come through.
Then there's the other point, is that they've launched new apps on, in StoryToys. So you saw the Marvel HQ, Barbie, et cetera. And what they—those, unlike indie titles that typically have their launch and then, then it's about managing the life cycle over time, the new apps tend to grow over time. So I think what we'll see is that it will go, and it will continue to pick up. But yeah, look, there's definitely more competition. I think what we do know is that with their growth rate, you know, if you look at the top 10 in the edutainment sector, they've gone up in the rankings, so they are doing better than everyone else. Not everyone, but they are doing better than other people in their sector. So I...
Yeah, it's something that, but it's something they're focusing hard on.
Thanks very much. Alastair Reid from Investec. A couple from me. I think, Steve, you noted there're sort of opportunities for some more collaboration within sort of teams and between divisions in your slides. Just wondered if you could sort of talk a little bit about how you think about actually making that happen in sort of practical terms. Then, so secondly, again, you sort of noted the lower risk ROIs in indie, but how do you think about those returns that you're targeting when you're investing in a game? Thank you.
So, in terms of collaboration between the businesses, and it's not as if we've got hundreds of businesses within our group. We've got StoryToys, Games Label, and Astragon. And if you look at Astragon, and if you look at Games Label, their routes to market are almost exactly the same. It's PlayStation, it's Xbox, it's Steam, predominantly. And what was happening, we were having multiple account managers with Xbox. So Astragon would have an account manager, and Games Label would have an account manager, and suddenly it just didn't seem to make any sense. Why would you not pool our resources? Why would you not have far more of a connected sales team and business development team?
Suddenly, you could see I sat with Xbox, and I sat with PlayStation recently at GDC in San Francisco, and we started to talk to them about that. And they were like: "This makes absolute sense." And suddenly, you can start talking about license deals where you've got a sim game, and you've got a Games Label game, and suddenly they're coming together in terms of package. So that's just a really simple way of bringing together two different functions, bringing together two different teams, and making sure that we're creating greater bang for our buck and greater... our IP being appreciated that much more. Because the account managers within PlayStation and Xbox viewed us, in effect, as separate businesses. And that's not their fault. That's the way they've always done it prior to the acquisition. So that's one example.
Business analytics and data is another part of our business, and I chatted about it earlier on. Publishers want data because it gives them confidence that we will be able to provide the lifetime value... in terms of sales. So how can we pool that data? How can we pool decades of experience that Astragon have, and how can we take what StoryToys have done from a mobile perspective? So we have a really tight leadership function within the business now. We've also recruited some people, so a legal director, again, who will be a group legal director, a people and culture director across the entire group. And it's not gonna be loads and loads of people. It's like two or three people that just sit in that group function, that allow us to have far greater understanding and efficiencies across the entire group.
So it's something that my previous business, I had 14 different agencies around the world, so it was something that I was really passionate about, trying to create those efficiencies, while also understanding there are cultural idiosyncrasies within those individual businesses that we've bought. So we're not trying to smash everything together, we're just trying to benefit from the skills that we've got at group to be able to benefit the business.
In terms of ROI type, when we're looking at signing titles, look, we look at initially at protecting the minimum, so we wanna recover a certain minimum hurdle. I think where we have is, on the portfolio, we're gonna have titles that will get several times over, times their investment back. Some, like Dredge, will go way past that. We don't forecast for those, so we forecast through commercial evaluation of those titles. We've got business analytics teams that will scrape data for that genre, for, you know, where we see those titles and where they've been price pointed in the marketplace, and we'll run our kind of commercial due diligence, firstly on the bottom end of what we expect to return, and then what we see might be upsides. We don't factor in license deals and things like that at that point.
That will all be on the upside, because I think we've seen, and everyone has seen in the marketplace, you, you shouldn't depend on things like that. So we look at predominantly protecting the downside, but we know on a portfolio, some titles will remain small and will do a literal, a minimum ROI. Some titles like Dredge, Hell Let Loose, and other titles, will go on to, to deliver multiple times that. And again, equally, if you're-- There are different hurdles for the different businesses. If you're investing more in a simulation title over three or four years' development, then you have a different life cycle. So... And as I mentioned earlier with StoryToys, their apps grow over time, so... But it's all about, for us, trying to make sure we protect the downside.
Admittedly, last year we got some of those wrong, and that's why we took those impairments, but that was more to do with the upfront decisions, not getting those right. We've fixed those going forward, so it's about making that happen for us as a business.
Just take a couple of questions from the webcast before we go back to the room, 'cause there've been a few questions on the indie market. You know, we said an $8 billion market size. You know, what kind of share— Do we have any ambitions for what share we can gain, and what kind of growth rates do we see in the market?
We don't... We haven't set an internal target, 'cause obviously, if we're saying it's $8 billion, the indie... And that's relatively conservative. Obviously, there isn't a book out there that states that. That's our own calculations based on what we know from talking to Xbox and PlayStation and Steam and everything else, but it could well be higher than that. The truth of the answer is, we haven't set or we want to be X% of that indie market. Obviously, at the moment, if you look at the revenue that we generate, we're about 2% of that, so there's a huge amount of opportunity within that. But we're not gonna be sitting here today or even internally saying we want to be X% or Y% of that, 'cause I think that would just be foolish.
What we are doing is saying it is a massive market, we are just scratching the surface at the moment, and if we want to be the indie powerhouse within the market, which we do, then we have to start thinking about growth within that $8 billion, $9 billion, or $10 billion, whatever the figure you actually want to base that on.
Okay. Thanks, Steve. Freddie, you want to-
Freddie Hindley from Stifel. I've got three questions, if that's all right. Firstly, I wondered if you could give us any more info on your development CapEx this year, and whether you give any kind of breakdown in terms of how that's, you know, between the three labels, how that might look. And then, also, I wanted to ask: You have a pipeline of 10 new games for this year, and given you had 17 launches last year, obviously, I appreciate that not every game is equal, but I wondered, based on that, would you expect a, you know, back catalog to be a larger part than last year?
And then my last question was just on gross margins and what you'd expect for the year ahead, and if we could have any color on any changes to that, and what your current annualized run rate of operating expenses and, you know, what you're budgeting for in FY 2024.
Yeah, look, on development CapEx, I kind of pointed this on my slide. So what we're gonna see is, and we've given a breakdown in the RNS by division, this year to try and give a bit more color to that. Because of the changes we've made and implemented into reversing that indie signing model through the greenlight, we're gonna expect to see the investment spend in Games Labels start to reduce. I mentioned, though, going the other way, that we're seeing investment increasing in Astragon, particularly where they've, you know. Their development cycles are three to four years, and they could spend EUR 5 million-EUR 10 million on a game title alone because they're complex and intricate.
So we are helping them in building out their ambition to grow their own IP portfolio, so that, we're gonna see that continue to grow. So that's gonna become a bigger part of the mix over the next couple of years. And then as StoryToys, they've broadened out their license app deal, so they're spending a much smaller proportion, as you've seen from the RNS, a couple of million GBP. So they will be remaining where they are, some slight growth. So overall picture for 2024 is a slight increase in capitalized development cost, but then as the impact of the decisions at Games Label start to come in, we'll start to see that drop. But really, increasing spend in Astragon because it's around building out.
They've got four very good own IP titles, and I mentioned Police Simulator is now, you know, a really high-performing title that they brought out of early access last year, in 2022, sorry. So, you know, that's a strength, and that's why we're investing in it. I think, in terms of gross margins, look, one of the points I made in my conversation was, you know, part of the mix on cost of sales is physical goods. Now, Astragon have an important part of their business is on physical, and coming up, it goes in cycles for them. Every couple of years there are some major launches, and they're expecting some major launches with their retail partners, so that's going to have an impact.
Steve mentioned on, if you remember his chart, with top right own IP, making margins, bottom left. Look, it still makes great cash, and we're not gonna reiterate the cash, but it makes a much lower margin, so that's gonna have an impact. We're gonna start to see expense development costs drop down. I mentioned earlier, royalties are gonna be about flat. So, you know, and then amortization dev costs are, we're seeing that still, that flow-through from that investment over the last two years. That will take a little while for that to flow through. So, you know, overall, you know, we think we've got- we know we've got control of it. We know we've got, our kind of operational costs in track. We've seen a slight reduction going through on, on the sort of salary costs.
Obviously, we hope this year that we're gonna smash all the numbers and pay bonuses to all of the teams, so that's a difficult one to match with the year before without paying bonuses. But marketing costs, which was a big, you know, overspend for us relative to... We don't have very high admin costs relative to the size of our business, but those were elevated last year. We've fixed that process, as Steve talked a lot about, in terms of smart marketing as opposed to spending just for spend. So that's gonna bring us back online. So I think we've got really good control of operational side.
In terms of your question on titles, just very, very quickly, yeah, it says at least 10, but there are some that are in the back end of the year that we're looking at the moment, whether it's better to put them in the highly competitive Q4 zone or 2025, so that's internal discussions that are going on at the moment. I think the one thing that I would say is, it's definitely a quality not quantity game, and we'd much rather sign fewer games of higher quality than just suddenly blitz, we've got loads because it sounds as if we're developing more games. So the Greenlight process is so rigorous and streamlined, and we have to make sure that we're signing only games that we think are gonna be value additive to the business.
In a similar way to M&A, we have to be selective. The minute we start signing average titles, then our Steam user scores will go down, they won't sell through, and there's no such thing as a guaranteed success within gaming, and we all know that. But, we are and continue to be very selective.
I think it's normal. I'd say this time of year, we'll talk about things that we've got clarity on what's being launched. There are always, as Steve said, other titles in the pipeline, and for the very reason, as you say, Steve, that timing of those launches are to make sure we get the best possible launch. It may be that some of those drop in this year, some others, and some will drop out, so it will always vary.
Okay, we'll take our last question from Ross.
Hi, Ross from RBC. Just a quick one. You've mentioned that with the expected improving cash generation, that M&A could well return to the table, obviously post StoryToys and Astragon. Could you give us a bit of a clue in terms of the balance of where you're looking, whether that's complementary businesses or whether you're perhaps looking more for the try before you buy with existing third-party IP? Thanks.
I'll start and then Steve can add some. Yeah, Ross, you're right, I think the IP and content is a real push and a drive. You know, we've demonstrated some great deals with things like Golf With Your Friends and Hell Let Loose. Love to buy some of our other titles if we could, and those are always an opportunity. But actually, I think in the broader marketplace, IP and content and lack of available funds elsewhere with other businesses not necessarily having the same cash funds mean that there are opportunities out there for us to acquire other IP, and indeed even look at portfolios of IP, potentially from companies that don't have the funds to carry on that development.
So I think primarily we'll be looking at content, but equally we're open to, as we have done before, to look at alternative businesses that fit the model for us. But I think they're likely to bring some content and IP with them in that sense.
Nothing to add on that at all. I think Mark summed it up perfectly.
Great! Well, in the interest of time, we better wrap it up there. But if you have any follow-up questions, please reach out to myself and the team, and we're happy to take any, any further questions offline. Steve, any closing comments?
Thank you very much for coming. It's really. Honestly, it's really good to see so many of you here. I know there's a number of people who wanted to be here who are having to dial into the webcast, but no, it's been, it's been really good to meet you all. Thanks ever so much for your time and appreciate you getting up early and coming in to see us. So thank you.
Thanks.
Thanks, everyone.