Good afternoon, everyone. Please, can we get the last people in so we can start? It is 1:30 and we have a lot of people participating online as well, so they expect us to start sharp, I believe. Any more out there? No? Good. Super. Thank you very much for coming, spending this afternoon with us. We have had a range of discussions, of course, about the business of the last year. We are very much looking forward to discuss the ideas we are having, the ambition we are having for the business going forward, and particularly, of course, for you meeting all the founders, all the people who actually is going to execute all of the stuff that we have been talking about. We have a very tight agenda.
I can tell you that the material that we have prepared and will address, hopefully, all the things that you would like to discuss. The only thing that I am afraid of is actually if we can manage to do it in time, because luckily, we do get carried away sometimes when we talk about our businesses. Four different sections. I will start giving the overview of the new company, the MTG company, what we will try to achieve together with Maria, of course, who will talk about the new financial ambition as well, and also the new reporting structures. We will talk about the verticals, how do we see the verticals, how do we see the verticals interacting. It is quite important. The VC investments that we have made. We will talk about, of course, our gaming companies.
Last but not least, the esport companies, where we have the founders of DreamHack and ESL, like we have the founders of InnoGames and also Kongregate in Emily. Full team here. To be fair, I hope that this is going to be exciting afternoon. As always, we do scout for very talented Counter-Strike players who can participate in our tournaments. We do need even more players to play. Sounds crazy when you see the intake of esport players around the world. We have invited one of the very strong Swedish teams, and a guy playing that team called Lekr0, who is from Ninjas in Pyjamas, the Swedish. He became a legendary in Katowice. If it is too boring, what we are talking about here, out to him, and then there is a new career in esport, I can tell you.
Also you need to be a little bit fast, to be fair. Good. That is the agenda. Most of you are familiar with Modern Times Group. 31 year, long history of transformation. It is in our DNA to transform. You can argue, we constantly have seized the opportunity or executed the opportunity when we saw consumer trends changing. That is what we have delivered throughout the 31 years. Very entrepreneurial company. Came out of Kinnevik in the early days, 31 year ago, when we launched first our disruptive model and challenged the monopoly for advertising TV in the Nordic. Listed in 1997. The last five years, we have had a very rapid transformation towards global online gaming and online esport, of course.
For good reason, because when you see where consumers today are consuming their entertainment, when we understood that a lot of our traditional products lost customers, obviously we wanted to understand where they went, and they went to gaming entertainment. They went to games, and they went to esports. Luckily, we managed to invest early. We managed to go in exactly. We spotted the trend and managed to go in early in esports, which of course has been a very interesting journey so far, which we'll talk more about later. The transformation was a big thing for management, for the board, because we wanted to divest a range of our very well-functioned companies. Lately, of course, Bulgaria now. We do hope that this transaction now will go through. We have sold to somebody who's not strategic, so I think it will be difficult this time not to approve it.
We have then put all those funds into these fast-growing online global companies. The same time, we paid our dividend, paid our record high dividend. It has been a very interesting journey for us, of course. Very well supported by our long-lasting shareholders, which I can see sitting in the room here today, so thank you very much for the support. Also the market, as you can see over time, actually has appreciated very much what it is that we have started to build just some few years ago. I think we started in July. We can see 2015 with the first acquisition. That was actually ESL. Now we have the last leg left in this transformation. That is that we're spinning the Nordic Entertainment Group out of MTG.
We had our EGM the 7th of February, where the EGM approved that we could execute the spin, and NENT will be listed the 28th of March on the Stockholm Stock Exchange. All MTG shareholders will then get one NENT share equivalent to the amount, of course, of shares that they're holding in MTG. If you hold 10, you get 10 NENT shares. Very exciting journey for us. Right time to do it as well. Two distinct equity stories, to be fair. You saw there the Capital Market Day yesterday, some of them, it's a very strong story we have in the Nordic group.
We have built it up over many years. We, of course, are very excited that we're now able to present to you two very strong stories. We do hope that you find them as interesting, so you will, of course, continue to stay shareholders in both companies. The new MTG, meaning the company which is then left when we have divested or split the company and listed Nordic, is a very interesting pure-play global digital company focusing only on esports and gaming. Over the last 30 years, we have built a lot of companies. We have bought a lot of companies. It is in our DNA to have what you call a build and buy strategy. We're not just an investor. What we want to execute is to have very active ownership.
We want to work with the partners, therefore, I'm very proud to show all of them here today. This is very important for us, I will of course discuss that with you later, but they are simply stellar performers in their areas and, of course, the ones who know their businesses best. Global footprint, and that just mirrors where we are positioned, actually. That meaning that as a global company, half of revenue, plus or minus, is coming from the U.S., the rest is from Europe. But the main part, as I said earlier, is the team. We offer so much more than money when we go out and we are onboarding new companies. Obviously, the people up to the left from you is people you probably know, for many years have been doing businesses, have been buying businesses, operating businesses in easy environments, challenging environments, changing environments.
As I said earlier, we are known for a 31-year transformation now. We are constantly on the move. We are very familiar with a range of the revenue streams we are talking about here in our investments. That was a very important deliberate strategy for us. Contrary to many of our peer groups, was to invest in something we understand. Today, you will see video, that we have done some years. You understand the revenue streams about esports is completely similar to all other revenue streams around sport. That is something we understand as well. Of course, the storytelling, the whole creative process is something we have done for many years.
That was a deliberate decision to make sure that the teams right here understood what the next journey was for the company, instead of going to travel agencies or mobile banks or whatever we have seen some of our peers have invested in. This team is unique obviously because paired with the portfolio CEOs, we can offer those young entrepreneurs who we are onboarding and who want to have faster growth in their company, we can offer them so much more than money. Many more capabilities, which is a unique selling point for us, of course, when we are engaging with companies that we see potential in, and that we would like to onboard.
It goes without saying as well that the changes that we have had just the last 24 months or the last three years when we embarked this journey, you know it's been fairly busy year for us with first with some M&A opportunities, then all the divestments, and then also the split of the company. Despite that, we managed to deliver record sales in 2018 and 24% profit increase. That requires a complete special organization who has a can-do attitude, super passionate about what they do, of course. Strong track record you will see for those people sitting here.
It is something unique and that is difficult to explain, but obviously when you see the performance of the group, when you see the amount of times that we have capitalized on changing consumer behaviors, it requires a very unique bunch of people to constantly to follow and constantly to be ahead of the curve when we see those trends coming. It is a responsible organization as well, that's important for us. We have a very strong CSR platform, built it up over years, very high rate, and that is something we continue to do. We're working right now with Esos to make sure that we are fit for purpose for the new MTG. In that exercise, we also did a benchmark to understand where are we compared to the peer groups. Obviously, as you can see, we are way ahead.
We score 18, where 22 is the best when it comes to the disclosure of our CSR and our ambition in that region. That's, of course, something you get as well when you have had a company who has invested so much into the CSR platform. As I said, we are on the journey right now. We have spoken to shareholders right now. We made the risk analysis, the materiality analysis, and now we are embedding the complete CSR strategy into the companies. Our executives are measured as well on our CSR goals, like me, my targets are to make sure that we are very strong in this area as well. We have had a very interesting start, to be fair. The beginning of the new journey looks very strong for us. If we look at the esport part, world-leading, 20% market share is what we're talking about.
Has done fantastic with ESL DreamHack, transformed the market, driving the market, you will hear that today, very much in the forefront. A very good start when it comes to that vertical. The same goes for the gaming, where we have big studios, smaller studios, we have publishing capabilities and are looking for much more, which Arnd, of course, would like to discuss with you as well. Then last but not least, super interesting, the VC investments that we have made. Of course, it makes us understand the markets, it makes us understand the trends, it explores hopefully as well some opportunities when it comes to M&A. That has been very, very important for us and also for us, of course, to embark on this customer journey we talk about, watch, intact, learn and share. Very important that we can offer the whole ecosystem.
Together with the founders of those companies, we have made some massive improvement just the last three years on massive results. Look at the esport business. We have doubled the revenue since we first engaged with Ralf and his team. I think it's the first time, at least that I've seen, that a seller's case has been beaten on revenue projection. We are actually selling more than we believed when we acquired the company. Ralf will, of course, tell you that of course we do that because we know what we do, it is quite a nice surprise, at least for us. We have talked about the owned and operated products that we're having. Very important for us, these strategic owned and operated product, and that we are growing very fast as well, around five times since we acquired the companies.
Last but not least, as I said, the company today has a massive 20% market share of the esports market. If you look at the owned and operated business, which Maria also will talk about later, we actually managed to grow 41% last year. Growing faster than the market actually when it comes to the owned and operated product. Same goes for the gaming business. Since we engaged with Hendrik and Emily and the teams, we have grown the revenue by 40%. Hendrik has had a fantastic transformation, we'll talk about today as well, from browser also into mobile games, growing that 37% in 2018. Luckily also had his best year in 2018 ever for the company. I think that is the 12 years or whatever that he's having revenue growth and profit. The guy has never lost money.
That is a very interesting partner, of course, that we are having there. Aggregated, the team you will see today presenting have delivered 60% revenue growth since we acquired the company and 80% EBITDA growth. Very strong performance, very focused performance, very strong entrepreneurs. That, of course, also mean that the approach that we have to investments are super dedicated, meaning that we want to understand that the companies we onboard can make the difference. Companies which support what we like, the culture that MTG is having, is super important for us. For us, gaming is not a one-hit wonder. As many people talk about one game will make the difference. That is not the case for us, and you will see that today.
That is also a deliberate decision, how to invest our money, how to allocate capital, is to make sure that we understand that the companies we are buying is more than a one-hit wonder company. That's a different approach that you will see with many of our peers. In all fairness, we are ready. We have been there for some time now. After the 28th, we have a complete global online gaming and esports story. One of the few, to be fair, I haven't found them yet out there. Dedicated. There's a lot of peers, or not a lot, there are some peers on esports, many more on gaming.
When you look at what we have achieved the last 30 years in building companies, making sure we have created relevant, very competitive products together with founders, acquired companies, take the founders into the system again and build and grown their companies. That is something that we would like to do now, of course, in the future to come. That is my introduction to you, to the new company that we are about to roll out. Obviously, many of you have heard the story before. Many of you who are with us online, might be the first time. As you can hear, we are very excited. We see great opportunities in the markets we are in. Hopefully that also what we can demonstrate for you during the day. With these words, over to you, Redin.
Thank you, Jørgen. Good afternoon, everyone. I will then bring down a little bit more details into the financials, that you can also bring with you as you then will hear the company CEOs presenting later on today. Also, as you may have seen hopefully this morning, that we have a revised disclosure structure that I will present and also an ambition what we will deliver in both the 2019 and also the midterm outlook. Before I want to go into the more details on how the new company will look like, I just want to show you one picture on the journey to becoming what we are today.
I mean, as Jørgen said, we've been on a transformation path for the last, to be honest, several years, and I think that what we used to call MTX, which I hope several of you are familiar with, we actually started in 2015, just three years ago. That was with the acquisition of the first esports vertical. We acquired ESEA, ESL and DreamHack in 2015, and we later then added the gaming vertical in 2017 with a 51% acquisition of InnoGames, and then later in the year, 100% acquisition of Kongregate. That means that we, over the last three years, have had a CAGR of over 100%. Of course, that is a combination of both having acquisitive growth and also an organic growth.
To Jørgen's point, I think it's important to highlight that we actually have driven the value and the sales top line growth over 60% in the assets during the period we've owned them. Also more important also to say on the esports side, we've been growing as a double digits. We actually double the value and double the turnover of these businesses during our ownership since 2015. How we then break it down, I mean, we basically have 60% almost of our revenues built in our gaming vertical, and close to 40% in our esports business. We also have Zoomin.TV which is a digital video product that we then define into other, and we're currently working actively with that business to transform it.
The digital video business in general is changing quite rapidly, and that's why we're also transforming that asset, and that is currently held in the segment called Others. Before I want to go into the disclosures, I just want to make one comment on the growth levels as well, '17 to '18. To Jørgen's point, we did many great things in 2018. We grew our own operated revenues in esports, which is our key focus area in esports, 41%. We also had a stellar year for InnoGames where they had a record both top line growth and profit growth. There was also some transformation. Because of the strategic shifts that we've done in esports, where we're focusing more on the relevant work for higher services or ESS and also our own and operated, we've also forgone from some sales, which then negatively hampered the overall top line growth.
Similarly, we are transforming Zoomin into a new type of company within that business and segment area. Also in Kongregate, we were very successful the first year of ownership, where we launched many new interesting games. We are less successful in 2018, which I think that we also have addressed with you, which also means that the total growth in the Gaming segment is negatively impacted by Kongregate in 2018. We're also addressing that, also Emily will talk more about that today. That means when you look at the total growth of 12%, which is pro forma, you've probably not seen that number before. Pro forma and reported numbers means that the underlying organic growth in 2018 is about 5%, which is not what you should look at going forward.
What you hopefully also read this morning, that we have overall an ambition in 2019 to have mid-teens. That's going forward. When I present the new numbers, you should just bear that in mind. The new disclosure structure we presented this morning will try to bring a bit more granularity, both on the overall group level, but more importantly on the gaming vertical and the esports vertical, moving into the new company. I will not go through, there's a lot of text on this slide. I will not go through all the details, but I think three things that are important to highlight. First of all, we're going to start disclosing both the Nordic Entertainment Group and International Entertainment segment in its totality as discontinued operation starting Q1, which means also Bulgaria, which is expecting it to close in Q1. Sorry, Q2.
That is going to be cleared out and all reported on one line, discontinued operation. We're introducing also new performance metrics, Adjusted EBITDA, to help you better understand the actual underlying operation performance on a profit level, on both group level and also on the vertical level. Also to Jørgen's point, this is a starting point. We have big organic initiatives and growth ambitions, which the companies will present later on today. We also have an acquisitive ambition, which Arnd will talk to you later on today. This is a starting point when it comes to disclosure structure, and as the company will evolve, this should also evolve with it. This is on the snapshot overall level how it looks like. Talked to you about where starting point is the turnover of SEK 4 billion.
Drill down into the three verticals that we have, two key verticals we're having. We're moving in 2017 from EBITDA adjusted loss of SEK 98 million into profit of SEK 41 million. What I want to show then is the bridge. What is then the adjusted EBITDA, which we want both you to focus, predominantly us to focus as an operational performance metrics. Where previously on the EBIT level, which we disclosed as MTG, focus on the items affecting comparability to take out the big distorting items from our bottom line profitability. That we will continue to do also going forward. We're not changing anything in that metrics per se. We're adding three more items, two of them which we always talk about in the report that we have never really adjusted for.
We have the long-term incentive plans, both cash-based incentives or management incentives plan, which we talked about in the businesses that we have already today existing in the gaming verticals management incentive program. We are also introducing a new one in the esports business, so you should expect costs to go up there. We are also introducing a new one for the corporate overhead, which we will bring to the AGM, which is an equity-based LTI plan. Those items we adjust on the EBITDA level. You have what we call impairment of capitalized development cost, which is predominantly relating to the Gaming segment, where you have games development that from time to time you should expect that we will make impairments. We have previously written about this in the quarterly announcement, but we never actually took it out from the Adjusted EBITDA level.
We will going forward do this, and for 2018, that amounted to SEK 30 million. The final item, as we will continue to be acquisitive in our ambition, we would like to buy more companies. We will also adjust for the cost relating to these acquisitions, the M&A cost. That was SEK 33 million. In 2018, this is predominantly related to the Split as well in 2018 isolated. For 2018 in its totality, outside the items affecting comparability, you had SEK 59 million of adjustments to derive at what we then consider Adjusted EBITDA level of SEK 41 million, which is the starting point for the new company. Looking on the vertical levels, we have always before broken down the sales in esports, gaming, and other. The numbers will change a little bit what you have seen before because we have now taken out Split.
In other line, it is only other, which is Zumi, and then some internal charges. What is new is of course then on the vertical Adjusted EBITDA, and here you can also see the central cost. The central cost year-on-year improves, if you want to look at it that way, from SEK 294 million- SEK 240 million. The SEK 240 million should not be an expected run rate going forward. That also includes some of the old legacy costs for the old MTG and also the new. We look probably more into the Q4, which we disclosed this morning, as being the starting point of the new MTG, even though slightly too low what we expect in the run rate going forward.
Important on this one is to show the vertical Adjusted EBITDA, where we actually improve year-on-year from SEK 196 million- SEK 281 million for the totality of the operating verticals. Same structure we then follow on the two verticals. This is Esports. What I would like to highlight here as well is Jørgen's point as well. We are very successfully growing our owned and operated, where we shifted the focus as well in 2018. We still want to do a lot of ESS, but we want to do the right ESS, the quality services when it comes to that. We want to drive our own properties, which is our owned and operated IPs and the monetization back on that.
We're growing those owned and operated brands 41%, and total revenues to SEK 1.5 billion, which is then over doubling to what the value was, or turnover was the first year that we acquired them. Losses increased year-on-year for esports. That is on back on both turning around the company on the change of the strategy, and also ramping up and investing in these owned properties and brands that we have. What we saw in Q4 is also what we disclosed this morning, is then you start to see the scaling of these revenues, which we see very positive that you actually start to see the proper monetization to build up on these esports properties and also the resetting of the cost base.
This will gradually then transition into 2019, and drive the underlying improved profitability, except for Q1, where you have only one master event compared to last year, you actually had four. You will see a shortfall in Q1, and then you have a gradual improvement on back on this momentum we saw in particular in Q4. The revenue financial metrics is the same that we talked to you a lot about, and have already mentioned quite a lot today as well. It is really about owned and operated, and to drive growth in the owned and operated and the relevant esports services. These numbers change a little bit to probably what you've seen before. We have refined the definition between owned and operated and also esports services. The starting point is to having 65% growth now in 2018, up 41% from where we were in 2017.
The way to think about it also, when you drive growth in your owned and operated brand, what you're really driving is the high-quality revenue streams, sponsorship, and media rights. That's why you should also focus on the totality of your owned and operated growth. As a company, we're truly global now going into this year. Show the map that Jørgen showed. Roughly 51% of our revenues come from Europe, and another sort of 35%-36% from North America with a small presence in Asia Pacific and the rest of the world. We talked a lot about the owned and operated properties and to help you understand a bit more what it actually is. We normally talk about our master events, and we talk to mega events or Grand Slams of the world. We also label them.
We're trying to structure this, and this is what we call our Zero to Hero pyramid, and I think that Ralf and the team will later talk a bit more about this and how they actually work with this and with the different properties. I think it's important to understand that whilst we focus a lot on these master properties, which is the Grand Slams or the Formula One tour of the esports world. We build a mass audience in our open ecosystem and in our challenge ecosystem, and together they become our esports properties. This is also how we show the KPIs going forward. We're not going to show so much on the ESL Open and ESEA because that's roughly 12,000 events.
We're going to focus on the DreamHack festivals, then the Challenger tournaments, and then the Master tournaments, and then have them on a quarterly basis reported. Today, the vast majority of our revenues come from the Challenger and the Master events. Moving into Gaming, which is our other segment. The setup and the structure is the same. 2018 is the first year of fully consolidated numbers, which means that year-on-year growth becomes a bit distorted because it was also because of when we actually consolidate the business. The starting point is SEK 2.3 billion in turnover, and we're reporting a margin of 22.4%. I think what is important to highlight here is we are transitioning both Kongregate, and especially InnoGames from being a browser sort of gaming company to becoming a mobile gaming company.
When we acquired InnoGames in 2016 first and moving up to 51% in 2017, we actually announced that we had a margin of 20% ambition, and we actually grown that margin to 22.4% Adjusted EBITDA margin, even though having, for example, in 2018, 37% mobile growth and also consolidate Kongregate, which we even up front in the acquisition said it's going to be margin dilutive. Underlying, we have very strong performance in our gaming asset. Looking on how the revenue breaks down. Today, we're actually roughly 50/50 split between browser and mobile. That is, of course, on back on much faster growth on the mobile side. The vast majority of revenue sits in our in-app purchases, with a small proportion of advertising revenues. If you look at then also the geographical split, it is largely the same split as we have for Esports.
It is Europe and it is North America. For the gaming part, it is also the type of games that we produce that appeals to that audience. Our activity level, we measure on the daily active users and the monthly active users. The daily active users that we reach, we have a reach of about 2.7 million, day-by-day basis. Then on the monthly active users, 12.3 million. As you see, the trend looks slightly downward leaning. The reason is the same goes back to unfortunately Kongregate, where we have seen both the trends in publishing in general and also the fact that we have been less successful launching games in 2018 versus 2017. We've seen the underlying trend shines through more in these overall KPIs.
Whilst we actually on InnoGames have stable or slightly improving daily active users and monthly active users numbers, which is very important because, of course, InnoGames is the biggest asset we're having in the gaming portfolio. Then on Kongregate, we have a firm plan that we're working to turn around this company and see improvement in 2019, and Emily will talk further about that. The other important financial metric is the ARPDAU or Average Revenue Per Daily Active User. You can see, we have a very nice growth in that chart over the period of time, the eight quarters. That is also, of course, reflected in the underlying improvement in growth revenues of the company.
If you look at the ARPDAU together with DAU, you get an approximation of the revenues for the businesses. Game concentration is something that we often get asked about, especially on Forge of Empires and so forth, how much does that constitute of the total revenues? What we try to show and illustrate also the broadness of our portfolio and IPs is actually take the top three games that we have in, saying, how much does that account for as a totality of our revenues? As you've seen over the period of time, we've been quite stable. It's not about a one-hit wonder business. We've been hovering around 70+% over the last eight quarters.
Going out of Q4, we have about 73%. Going forward, as we launch and roll out more games in both InnoGames and Kongregate, of course, we would like this one to go down. At the same time, we have very strong IPs with a long tail, and the top three games is two from InnoGames and one from Kongregate, and they're all our own IPs. That's sort of the current business as it stands. Looking forward as well. As Jørgen said, we want to drive organic growth, we have a great starting point of the position of the assets that we're holding in the portfolio, but we want to do more. That's also why we're starting with a net cash position for the company. We also expected the SEK 1.8 billion approximate proceeds from Bulgaria.
We're expecting closing in Q2. We're hoping for that is going to be the initial war chest for our acquisitions. That is quite important to make sure we state that. We want to drive organic growth in our existing business, we also want to do more, that is something Arnd will tell you more about as well. The facility with Nordea will be canceled when we receive the proceeds from Bulgaria. Other effects from the split, I think many of them we talked about. We will have a central cost, as I said, the run rate going forward for 2018. Q4 could be the better picture to look at for the full year. It is going to be too high, we're expecting approximately SEK 180 million on Adjusted EBITDA level. The tax rate will unfortunately increase.
One item is because we're moving away from the Nordic, we have higher tax rate in the markets we're coming, it's about also where you make profit and losses. It will over time go down. I also showed you how we are geographically spread. You can see, we're very global. Predominantly focused in North America and Europe, which means that USD and EUR is going to be our key currencies going forward. We're reporting in SEK. In the volatile markets that we're seeing, you should expect that we have high translation effects going forward, both on the top line and the bottom line number. We should expect no dividend going forward, that we have already announced as a part of our information brochure from MTG.
To sort of set the ambition and also for you to understand where we have an ambition to drive the company and also hopefully you feel comfort when you then listen to the portfolio CEOs later on today. We were looking at 2019, we have an organic sales growth in the mid-teens that we're projecting. We have an Adjusted EBITDA margin in the mid-single digits, and that is inclusive of our group central costs. The phasing of this will be, which I think that we have also talked before, it will be second-half skewed as there are some legacy revenues that are being reset. We're also transforming especially Kongregate and revamping that, and we also have a scale-up in the monetization of our own and operated revenues, whilst we continue to see, of course, InnoGames having underlying strong performance throughout the year.
Looking in isolation of Q1 for the reason I just mentioned as well, you should see very low single-digit growth and rather flat EBITDA adjusted year-on-year compared to last year. Given that we have a strong momentum built into the second half, that will of course continue into the years to come. That is when you then extract the sort of outlook and what is our ambition then to the sort of midterm future. We would like to progress towards having sustainable sort of mid-teens revenue growth and the EBITDA margin between 10%-15% for the overall group. I think on back of that, I think that concludes my part, actually on time.
I think before we move on to the next presenters and Arnd, I think that we would like to have Q&A, to take a quick Q&A session. I think a lot of the questions which relates to the future development of the businesses, let's wait and hear, hopefully, the founders being very strong and very precise around that. If there was questions to our reporting, our ambition for the companies and so forth, then I think we should have it now. Yes?
Johanna Ahlqvist from SEB. One question to you, Maria. If you can elaborate a bit on cash flow outlook, and I guess the sort of two unknown parts, the working capital and the CapEx, what do you expect there going forward?
Yeah.
I have another one.
Yeah, we haven't mentioned the specific on either of them, but you should not expect us to be cash flow positive in 2019, nor were we in 2018. Also, which I usually highlight is we have a minority owner in InnoGames, which we also have a dividend distribution to do so I think Q4 now. Which was a bit greater than what we normally do because that was the first time, you should expect us to pay an annual dividend as well to the minority interest in InnoGames going forward. Those also the factors you should bring into effect when you calculate the future cash flow.
One more, if I may. The daily active users, are they paying users, all of them?
No, they're not.
What's the share?
We have not provided that.
You should ask Hendrik, he might answer. No. Yes?
Anders Hedberg, Catella. I just wondered, a lot of your companies have minority owners as we talked about. What's your kind of thinking long term? Is that a structure that you think is likely to continue? Do you think these companies can survive without the minority owners' help? How important are they for the culture, et cetera? Can you elaborate a little bit on that kind of medium to long term?
Yeah, no, we definitely want to keep owners close and create value, build companies with them. That is something we have done as you know, throughout the years, and something they want to continue doing. That is also to Maria's point, that we have different arrangements in place now when it comes to InnoGames. There's dividend opportunities and so forth. The owners are very important for us. We like what they have built. The culture, as you point out as well, is something, of course, which is very important for us. That is a strategy to make sure that we, to the extent possible, of course, and they want to stay with us, that we can keep them on board. We just prolong the earn-out as well for the ESL guys as well.
Luckily, Ralf and the team would like to continue with us as well and be much more aggressive when it comes to the esports going forward. That is the structure. Businesses majority is very important for us. We would like to be an active owner, but of course, we want to do that in combination and a partnership with the founders of the companies.
Hi, Tom from Citi. Just a couple of questions. One is on M&A. Is there any sort of template, M&A structure in terms of returns or anything that we should just look out for in terms of when you're doing these deals, sort of KPIs that you're benchmarking them on? Secondly, on FX, are you hedging it at all?
The first question, Arnd can address about the companies, what is our ambition with the companies. There's no template as such. We want, of course, to make sure that the companies are relevant, competitive, Arnd, he will talk more about that. The currency?
On the currency, we don't hedge, for the moment. That is something we'll revisit, short term, I don't expect so.
Yes. Yeah.
Hi. Mikael Laséen, Carnegie. It would be great if you can say something about the guidance for 2019 when it comes to top line growth, mid-teens. What does it mean for esports and the gaming side?
Yep. Yeah, if you look at, that's the aggregate numbers. If you look at the outlook on the market, esports is expected to grow faster than what the mobile gaming is. That is also how you should look at it. You saw the underlying growth, what we saw in owned and operated, and that is also going to be the key growth driver in 2019.
Do you expect to grow in line with the market in 2019? I guess 25%, 27% expected growth.
In terms of esports or what?
Yes.
Yeah. I think, again, what we're looking at is, as you can see, the owned and operated, we actually managed to grow faster than the market in 2018, and that is the focus area as such. You say no to a lot probably as well, which we didn't want to do because we couldn't see, I think we talked about the quality and the revenue, something which will never translate over time to either being strategic or generating profit. We are saying no to things. I think the owned and operated part is where we're looking very much also when you look at the different drivers, what should drive the future of esport. Sponsorship is very important. We have a very strong track record there and very strong pipeline. The same goes, of course, for media rights. That is the focus area that we are having.
You should see our owned and operated growing very fast and then eventually less the ESS part. Yes? Sorry, okay. Yep.
Hi. I'm sitting here right at the back. Rasmus with Handelsbanken. Hi. Here I am. Yeah.
Hi, Rasmus.
Can I ask you, when you talk about the midterm profitability of 10%-15%, isn't that implying a very low margin on the esports, or am I missing something? Could you give some sort of range of where you think that the esports are in that evolution?
First of all, it is a midterm, so it is gradually going to build up, but we're not going to give, as of right now, the individual vertical sort of EBITDA guidance.
It's going to remain lower than the-
The way to think about it is that you're starting now on SEK 170 million sort of Adjusted EBITDA losses, which gradually we turn around. Yes, it will not be what we talked about before in the sort of next two, three, four years on those margin level. No, it will not be.
Thank you.
We have a question here.
Hi. Martin with DMB. My question is on this expansion plans, potential for expansion into new key markets with or without a strategic partner. Can you comment anything about that?
We want to expand, of course, we are mindful what markets to expand into and where you eventually would need a partner. That is something we have discussed as well with you, that if we would go to China with our esports business, I reckon that is what you're referring to, it could eventually be good with a partner to help accelerate. The partner and the strategic partner should help us grow the business, grow it fast. That is also independently what country it is, to be fair, because if we can have somebody in Germany who can help us or somebody in U.S., whatever, that could be an opportunity for us as well to grow esports fast and that partnership we would engage in.
The bigger, more strategic market, bigger market open door, whatever, there you need probably a local partner, particularly China, which I've discussed. We are strong in U.S. as is right now. We'd love to team up with others. Yesterday we announced a big deal with AT&T, not strategic, but very important deal for us. We are getting the inflow there. China is eventually something we'll be looking at to enter with a partner.
Any views on timeline?
No. When the deal is right, when you are strategic, there needs to be a strategic reason. You need to commit to some strategic thing. It's not just an investment. That is quite important as well. We haven't seen that yet. So a lot of people definitely would like to engage with us, and we have a range of commercial partnerships in China, as an example. We haven't seen this real commitment from a strategic say, "Okay, this I can do for your product in our markets." That I haven't seen yet, or Ralf and the team, Marcus haven't seen yet. When we see that is, of course, something we'll look at.
Thanks.
Yeah. Very good. That concludes the first session. We'll hand over to you, Arnd.
Wow. That's my alter ego. Now you already know a lot about myself. I'm 49, I'm Arnd. Great to see you all. Before I tell you about the magic we want to do with our vertical strategy, I think we should get to know each other a bit better. Let me first ask you a very personal question. Who plays games? Who considers themself to be a gamer? Great. At least we can see huge progress four years ago. The question is, why do you play games? Yeah, it's rewarding, but I believe because your fantasy come true, and you can become the hero you always wanted to be. Thanks to technology now, you can play anytime, anywhere. If you're bored in a meeting, you can meet your friends, you hang out with them.
It's pretty cool because you have a dream, probably. You want to become a pro gamer, like Ralf. Yeah? He is chasing this dream since 18 years. The coolest thing is, now you can even broadcast your gameplay. That's the most exciting thing about this new entertainment world. That it's so interactive that you can create content and share it with the world. When you've broadcasted it, yeah? You realize that you can become an influencer, a star. The other key driver for this new entertainment world is it is basically the marriage of technology and storytelling. That's how value has been created. Games are already a culture phenomenon. I only say one word, please show up who hears this word and is discussing over dinner about this game. That's Fortnite. I mean, it's a huge phenomenon.
If you look at these three games, they have innovated on a new genre, a Battle Royale genre. These are multibillion-dollar franchises, they haven't even existed three years ago. That's exactly the reason why we are in this business and why we become a leading digital entertainer. Show me any other entertainment product with such a value creation potential. The way how we want to capture this value is by investing along the customer journey. That's the other important thing to understand, because it all starts by downloading a game, you spend hours, you develop your skills you might want to show off. Upload the video on a streaming platform. You start competing as an amateur on a team, you see the virtual cycle closing, because you might become famous.
You end up in a professional team, other people watch you playing because they want to improve their skill. We have invested in two highly synergetic verticals. That's the result of our following this customer journey. These two verticals are esports and games. We'll talk later about the vertical concept because that's important to understand. There are synergies. The interesting thing is we can address now a huge overlapping audience, creating network effects. There's another capability, probably Ralf will talk later about this. Now we are able to spot very early new upcoming hit games and trends because these guys at ESL, they've seen the first Battle Royale game, PUBG, super early, there was only a small developer in South Korea. We can cross-promote games and use our marketing muscle.
The other important thing is we know what it takes to build a digital entertainment company. Jørgen has talked about our capabilities, now we apply them in a new fashion, we know how to scale operations. We have the funding. We have a great commercial network. We know how to develop IP, that's the key value driver. With our teams, the investment managers, portfolio managers, resources, we help the entrepreneurs on their journey, depending on the maturity of the company and the growth phase, all the way from very early stage VC investments, which gives us access, where we provide capital and open up our business network to the rapid growth phase, where now ESL, Kongregate and [inaudible ]. There we are much more involved.
We help them to develop a strategy, set the priorities right, have discussions about processes, even sometimes when it's hurt. In the end, it's about how to set the company for growth. Then there's a more mature company like InnoGames, they've picked us because they knew we would be a great partner, we steer here more the business through the board and offer our framework for reporting. Let me just summarize the market opportunity and our value proposition in a short video.
Digital gameplay has been around for half a century. It's more popular than music and print, will soon overtake film. Playing games has always been a basic human need. Gaming is massive, and it's getting bigger and bigger. Mobile is the driving force, but other platforms attract big audiences too. The gaming industry is enjoying a renaissance fueled by innovation. Indie developers create new game genres, new ways to monetize and attract new audiences. Entertainment industry giants learn from them and try to replicate their success. Original titles are key for generating high revenues and reaching billion-dollar valuations. Story-driven games with immersive narratives become pop culture hits. Esports bolsters the whole industry even further by driving huge viewership and new audiences to gaming. The gaming horizon keeps expanding into mainstream, creating unsaturated markets full of growth and investment opportunities. Making gaming the entertainment of the future.
Where does MTG fall in all this? Well, we are perfectly positioned to lead this new era of gaming. We are number one in esports. We have an unmatched foundation in the indie developers ecosystem. We are multi-platform, storytelling is in our DNA. We are well on our way to becoming the ultimate home for gaming entrepreneurs, for a value-driven company like MTG, the future definitely is looking bright.
Yes. There are a few key trends in the gaming industry which also impact esports industry. Let me just highlight three of them. Indie developers like Epic and us, they drive innovation. Super important. It's not the big incumbents. Esports has become mainstream, there are new mega hit games emerging, like Fortnite, where ESL and DreamHack built the esports ecosystem around it. Let us first look into the esports industry, what is driving the hype. It is already $1 billion market this year. It's forecasted to grow to up to $1.6 billion, very much driven by sponsorship, media rights revenues. Another super interesting fact which fuels and makes us super optimistic in the long-term view is this sport has a super young audience, 79% under 35. This is everything a traditional sports want to be. This is a future-proof business.
The most interesting news, this sport is highly under-monetized. Yes, you have seen this slide. Again, if you look and compare on the left side here, the viewership number in 2017, so not last year, two years ago. In esports, we're already on par with Major League Baseball. We're bigger than NHL. There's a huge gap in revenues. SEK 655 million in esports compared to SEK 10 billion MLB. This is not a global sport. It is early days, that's important to understand. There's no reason why the money shouldn't follow the eyeballs because it is highly relevant. With our two leading global esports brands, DreamHack and ESL, we are well-positioned to capitalize on this hype. DreamHack, deeply rooted in community, the biggest really digital gaming festival organizer and esports operator.
ESL, world's leading esports brand, league operator, content producer, and also developer of B2C products. It's important to understand we are an open ecosystem champion. We are shaping the industry, building it out. We have cemented our center position in this ecosystem. By bringing more new publishers deal on board, we're working with even more. Growing our owned and operated leagues, which are the key value driver, by 40%. To give you more proof points how centrally we are positioned in this ecosystem, this slide looks familiar to you. It's super important to really understand each stakeholder. Ralf and Marcus and David will talk later about this. One proof point, we're working with more than 25 games publishers. All top teams are playing our tournaments. We run 70 properties in esports.
At the core of our product strategy, this is another key slide, that's why I bring it up again, is this esports pyramid, which offers this great story From Zero to Hero and accessibility for any gamer. This is also a big differentiator of traditional sport because you can play immediately with your friends on our open platforms, on tournament platforms. Then you can start to compete in national championships, we're running more than 14. You can end up in a pro team in the Master Series. Playing all platforms from console to mobile, more than 40 titles. This is only one part of our four-layer operational model. That's another key thing which protects us, which is an entry barrier. I want to remind you, we're the only global esports company running such an operational model with four layers.
Underneath these products, you have a bot infrastructure. From very sophisticated tech platforms, software modules for esports, arena, studios. This is operated by the best talent in esports. You need to be very credible, bring the street credibility as a gamer to create an esports product. We have the relationships with the teams, to the influencers and to the talents who are building and running these 70 esports properties. On top, we've built up a strong commercial network where we bring on board more non-endemic partners from DHL, Mercedes, and others. Ultimately, it's all about the community. Something we shouldn't forget. We want to provide the community with the best esports experience in the world. Let me summarize. We have a rock solid foundation in this ecosystem.
We are focused very much on the key value driver, which are our own operating leagues, the branded leagues. We want to grow the number of games and publishers and drive monetization and sponsorship revenues and meter reads. This is a SEK 1 billion market. This is only a subset of the much bigger gaming opportunity, a SEK 140 billion market, the gaming market. Very much driven by the growth of mobile games. Already one hour per day is spent by gamers on their favorite games. What we want to build, our ambition in this vertical, is to build a new kind of platform. We call it the next generation games publisher hub. We exactly know what we need to build up in terms of capabilities. Everything from best-in-class user acquisition, marketing, to multi-platform distribution, live ops, and build up a broad audience network.
This is a portfolio game. We try to increase those chances to find the next mega hit game. The platform where entrepreneurs want to connect with, want to be part of it. With our two cornerstone investments, Kongregate and InnoGames, we have laid the foundation for this games vertical, where the vertical is much more than the sum of the parts. InnoGames, still a growth story. When I met them first time, they were always profitable. 12 years of consecutive growth. A developer and publisher across platform games in strategy simulation, running seven successful games. Kongregate helped us a lot to build up a great reputation as a potential owner, because Kongregate sits in the hotbed of games development in San Francisco. It's the publisher across multi-platforms for indie developers. They give us access to the talent pool of upcoming indie developers.
2018 was a super strong, interesting year for our games business. We've launched new IP, new mobile games. We've done 15 VC deals, Scott will talk later why they are so important to really build up a strong M&A funnel and get access to promising IP. For our future growth, we've laid the foundation also by identifying and engaging with promising M&A targets. Our whole investment approach is based on this portfolio framework. This is one of really the key slides. That's why I bring it back, because this is the way how we navigate. This is our map, how we select companies, how we allocate capital, and how we ultimately want to build this highly profitable portfolio of games companies. Let me walk you through it. At the bottom on the right, this is the profitable core, a very conservative approach.
A company like InnoGames is really the manifestation of this profitable core. More than one or two successful games, track record in running and marketing, scaling them. Not a crazy growth plan, solid growth, but profitable. Then the capability game, where we get all the capabilities in by investing through VC or M&A. These companies will benefit from these capabilities. At the upper right, you have this promising upcoming companies, which might turn out after two years to become the next mega company. In the end, it all leads to this bucket, where we reduce now the risk of our investment, and we've already identified over the last three years, these potential mega companies, meaning one game can do more than SEK 200 million in revenues. It should be a well-balanced portfolio.
The underlying strategy is driven by the idea to become a mid-market consolidator. We want to do roll-ups and make sure we focus on strong IP and story-driven games, competitive games, and idle games, because these are the biggest revenue pools. We are focused on the Western mid-market companies, whose sweet spot is between SEK 20 million- SEK 150 million in revenues, profitable. Mobile-first approach. If it works, also cross-platform. This strategy is executed by super experienced team of experts, games entrepreneurs, investment professionals. We know each other since many years. Just to highlight a few. Chris Carvalho up here, ex-COO of Kabam, very experienced investor, a board member. He joined our games advisory board. We have Chris Bergstresser on the left and down. 25 years in the games industry. He screens M&A and VC targets in Europe.
You are going to meet Scott later, together with Jan, who represents us in U.S. and builds up our reputation and doing deals there. It is super important to understand and have this expertise in the games industry. This team has screened more than 400 companies over the last years and has built up a strong M&A and VC funnel. That is not only about the money. It is more about presenting our concept of the vertical, where entrepreneurs really want to become part of it, always based on clear investment criteria. That is how we are looking now at 8- 10 priority A deals, which we could execute, and more than 10, 15 VC targets. Understanding what entrepreneurs are looking for is key, again, because that is our advantage, our USP. To offer them an environment, a platform with great values and corporate culture.
I would not underestimate, if you want to work with Emily and Henrik, how important this long-term view and the whole corporate governance around it is. We try to keep their independence, give them a long-term value creation plan, and support them with best-in-class tools and services. Ultimately, the end game is to really bring this vertical to life where you have strong center capabilities, where you can scale games companies, they focus on the IP development. Then over the next three, four years, build a synergetic portfolio where you can realize synergies in revenue and costs, and really bundle, leverage the knowhow. This is also how we position ourselves as a preferred partner. Let me summarize the key takeaways in gaming. We have the right foundation, nice, profitable, growing games business. We have a clear plan for our M&A.
We have already launched and proven that we can run successful mobile games. A key thing is to become really the home for entrepreneurs, because then you have a different motivation why you team up. It is not that we maximize the price, it is really the full package. In the end, it should reside in a well-balanced portfolio of strong IP, because back to my Fortnite example or Forge of Empires, this will have longevity and will deliver the profits and create the value. Now I am looking forward to introduce you to Scott Rupp, who I have known since, yeah, more than 10 years. He has been in the gaming suite for a long time now, and he is chasing these VC targets and has launched our VC fund, which we have announced 2017 in U.S. Please welcome Scott on stage.
Very grateful to the creative team for this lifelike depiction of my abdominals. Get us off on a positive footing for this section. I'm Scott Rupp from San Francisco. I've been leading MTG's U.S. and VC efforts. I'm very happy to be here with all of you today in Stockholm to tell you more what we've been up to. The VC fund ties very closely to the games and esports verticals that Arnd has told you about. In fact, we are already one of the most active early-stage investors in games and esports in the Western world. We've done this quietly over the past year and a half or so, built a fantastic portfolio of companies across a range of businesses, but with a very clear investment criteria focused on the sectors with the most strategic relevance to us.
Obviously, games and esports, but also a little bit of AR and VR. These are minority investments, typically six to low seven-figure checks. Some cases, we have a board role in these companies. You can see some of the themes we're interested in across games and esports. It's things like the next wave of great esports titles, the next gaming platforms, voice, and so on. We're complementing our direct investment efforts with strategic LP positions in the two best seed-stage esports and games funds, BITKRAFT and Play Ventures. I'll tell you a bit more about that, but it puts us down at the bleeding edge of the market, which is super important. That's a bit of the what. Let's talk about the why a little bit more. We've got a clear return objective with the fund, but we also have a very clear strategic mandate.
A couple of points just to tease out here. When you're out there talking to entrepreneurs, hundreds of them, you have the privilege of having somebody distill his expertise and passion built over years into an hour. Imagine meeting hundreds of these guys a year and taking that insight and that passion, the best of the best, bringing that innovation and insight DNA back into the group, feeding that into our executives and our founders. That's what we're doing with this fund. The other thing that's important is we are playing a long game here. We are getting close to the best gaming entrepreneurs in the world, and we're doing it early. You have to be with them when they're starting, scaling, and selling. We want to be the ones on the other side of the table when it gets to that point.
When you take those two things, leveled up innovation DNA and better M&A pipeline, that means you're going to be much, much better on your biggest bets, whether those are M&A decisions or organic investments in your core businesses. That's a big part of the benefit of the fund. We've put together a very cool platform. In this strategy, we have our own fund, but we also have two partner funds, as I mentioned, BITKRAFT and Play Ventures. With this, we've really built a really unusually industrialized innovation lens on the global gaming and esports market. These funds are looking at probably 500 startups a year, feeding that through their evaluation criteria. Over a period of years, we'll put together a portfolio of about 100 companies. All of these companies are part of the MTG family. Every one of them feeds our business development pipeline.
Everyone feeds into our M&A pipeline and our insights pipeline. We're getting co-investment opportunities through our partner funds. And really importantly, if you look out there in the market, as far as I can tell, there is no other Western gaming company that has built an early-stage investing lens on the market like this. This is a huge advantage in building the next innovative global leader in the space. We've taken a lot of inspiration from companies that we admire, like Tencent, who have done this. But if you look at other sectors, Google and Intel have also become some of the most active VC investors in the world to feed their core strategies. Let's talk about some portfolio companies. You've probably been wondering where all these strange animations have come from. I'm going to introduce you to Tonk Tonk Games.
Okay, we did that investment with our partner fund, BITKRAFT, and this is exactly the type of investment we're looking for our fund. An amazing entrepreneur. The founder used to be one of the best spine surgeons in New York City, and decided to do this instead. With disruptive products that are totally relevant to our core business. It's got this amazing proprietary facial animation technology that literally puts you and your friends in the game with a whole other level of emotional competition and resonance when you're playing, and a really cool viral distribution strategy when you share literally clips of you beating your friend in the face on Facebook and Instagram. It's a great product. It's innovating in a core genre for esports fighting games, which is overdue for something new.
And if these guys do it right, they'll be at the forefront of mobile esports in the West. Great partner for us to have. Next one I'm going to tell you about is Boom.tv. Boom.tv is the esports entertainment platform for the Fortnite generation. With their software, literally anyone, you, me, the world's most famous streamers or pro player, can instantly host an esports tournament and broadcast it with one click of a button. I'm going to show you a trailer for their influencer tournament, Code Red, which they did with Apex Legends, EA's hit game. They were able to surf this wave literally within weeks of that game coming out. Check it out.
Code Red. [inaudible]
[inaudible] Dr. Disrespect.
Boom did this tournament with some of the biggest streamers in the world, including Ninja, Shroud. Dr. Disrespect, you can see, is a great personality and not just a great gamer. This is just scratching the surface. Boom has 20,000 streamers using their tools, including 40 of the top 100. For their Code Red Fortnite final, they drove 400,000 concurrent viewers. That's more than the Overwatch finals. These guys have figured out a way to scale esports content and to drive audiences to content that people care about. They're able to surf these waves within weeks, as I said. With their tools, they're literally democratizing the creation of esports tournaments and content.
This is a company we've got to be close to, as we think about B2C strategies for ESL and DreamHack, I think you can start to see the value of these types of investments. The last one I'm going to show you is a company called Phoenix Labs, which was started by a couple of executives from Riot who wanted to launch a free-to-play Monster Hunter style game. This is a mini Fortnite. Let's watch and I'll tell you why.
The Shattered Isles. Fractured by aether and the depredations of savage behemoths feeding on its power. Against their endless hunger stand the slayers. Our last hope. There are more [inaudible] turning up on the frontier everyday. Like it or not, you lot are all that stands between them and the good people of Ramsgate.
Got it.
Today you prove you're not just recruits. You're slayers.
Dauntless already has millions of players on PC. It's about to launch on console and on mobile. When it does, it will be the second truly cross-playable game in the world after Fortnite. It's also going to be the first service-based game featured in the Epic Games Store, putting this game in front of hundreds of millions of Fortnite players. Soon they will be launching in China with a world-class partner there. For us, this becomes a front seat on this incredible cross-platform gaming phenomenon that's letting audiences form around content at unprecedented levels. It's giving us a peek into all of these new distribution channels that are emerging. We get to see firsthand how you successfully attack a beloved console genre and make something relevant for free-to-play gamers.
I hope this gives you a good feel for what we're putting together in the portfolio. This is just 3 of 15. The rest of them, I assure you, are just as cool and just as interesting, so please check out the portfolio on the website. I'd like to now bring up our partner, Harri, the co-founder of Play Ventures, which is one of the funds we've made a strategic investment in. Harri will tell you about Play, their views on the market, and how we work together to reach even more great gaming entrepreneurs.
Thank you, Scott.
Yeah.
Thanks, Scott, and thanks MTG for inviting me. My name is Harri Manninen, I am the founding partner of Play Ventures. Play Ventures is a brand-new $30 million venture capital fund just focused on games and gaming services. Our investors include some of the best and brightest in gaming, including MTG. In addition, other gaming companies, gaming executives, and gaming entrepreneurs. Me and my partner, Henrik, we are gaming entrepreneurs previously ourselves, so that allows us to be very confident in our strategy to invest very early into the best gaming companies, and also to add value to the companies that we invest in. We strive to add value on different fronts, in product strategy, in hiring, also in follow-on financing rounds, and that is a core part of what we do at Play.
Also, we collaborate, we collaborate with the world's best VCs, and also gaming strategics such as MTG in investment opportunities and co-investments. A little bit about me and my partner, Henrik. We are both gaming entrepreneurs. My partner, Henrik, founded NonStop Games in Singapore that he sold to King in 2014. Myself, I founded Rocketpack in Helsinki that I sold to Disney in 2011. Since then, we've been investing our own capital as angels into more than 15 companies. We've been in the gaming industry since the early 2000s. That's a bit of our track record in gaming. These are all companies we've either founded, invested in, or advised. Those companies have created more than $100 million in exit value, and they've raised more than $125 in follow-on financing. There you see NonStop Games there, Henrik's company.
Rocketpack was my company, then we've invested in some industry leaders like Huuuge Games, Futureplay, Traplight, Matchmade, Data Tiger, to give you a few examples. Our core thesis is investing very early. What does that mean? It means that we invest in people, not products. We invest in the best teams. We look for founders who've built games for years, have worked together, have shipped games together. That's the best sort of founder DNA we're looking for. We're also looking always to have a technical co-founder in the team. Obviously, the mileage may vary, but you understand that we mostly look for teams. We don't look at products because we understand that sometimes for a new company, it might take them a while to get rolling, and it's very rare that their first game is their best game.
Social product is another one we look for very closely. We think that games are inherently social. That might mean a multitude of things. That might mean that the game has multiplayer components, real-time PVP. It might just mean that it's very community driven, it has user-generated content, but it has a social at its core, and we think all of the best, all of the biggest successes in gaming have been games that have a social component, especially lately with online. Free-to-play is a core part of our strategy. We're not really looking for premium studios. We are looking for free-to-play studios that scale both on mobile and on PC. We continuously also scan for new platforms such as blockchain, VR, and AR.
We think those are still pretty early to what we're trying to do, but we keep a close eye on all of those emerging platforms. Fourth is important, big ambitions. Even though you can build very profitable and successful lifestyle companies in gaming, if you make it, we're looking for entrepreneurs who want to build the category leaders, best companies in the world, and strive to be valued more than SEK 100 million. We look for those big ambitions. Our deal flow is very global. Some of you may know, the gaming community is absolutely a global community, and us being in the industry since the early 2000s has allowed us to build a global network. We do a lot of network-based sourcing, that means that most of our deals come through our networks and those deals all over the world.
I live in Helsinki, that's where my home base is. My partner, Hendrik, lives in Singapore, we see deals from all over the world. As you can see, we've looked at more than 250 companies since the inception of Play Ventures late last year. We are looking at all over the world, especially the hotbeds are still the same. Nordics, obviously, a great hotbed for gaming. We're seeing more and more great teams come out of Southeast Asia, for example. We definitely look at teams on a global basis. How do we work with partners like MTG? MTG, we were super happy to have them interested in joining the fund and getting them on board because we think that MTG is uniquely positioned as an industry leader in games and interactive entertainment.
I was super happy about how bold they were in stepping from traditional media and understanding the value of interactive media. They understand the value of esports very early. We were super excited to have them on board as an LP with us. Obviously, we share our deal flow selectively with our LPs, MTG being one of them. As we go in, we go early versus our LPs are more late-stage. We think that's a very complementary strategy. We think that MTG has a lot of opportunities to co-invest in the growth rounds of the companies we invest in very early. Also, maybe we'll get to see some of the opportunities that MTG discovers, which is too early for MTG, and we can look at that opportunity at that time. Also strategic value add is very important.
I think from what we've seen as entrepreneurs and very early-stage investors, we can offer some insight into some of the opportunities that MTG are pursuing. Likewise, I think MTG will offer us a lot of insight into some of the early companies we are looking, especially in the categories where they're super strong in. Just to cap it off from my side, to look at some of the key trends we are seeing on the earliest stages of gaming.
How we look at teams or our thesis is that there's going to be a lot of great free-to-play teams coming out of the bigger incumbents in the upcoming years who know free-to-play games, who know gaming at the very highest level, but may be first-time entrepreneurs, and that's where we want to come in, and that's where we feel that we can provide a lot of value. These are some of the key trends we've seen. Obviously, the success of Voodoo in hyper-casual, the hyper-casual titles are dominating the free download charts. That has driven a lot of new studios to try out hyper-casual. Obviously, a very difficult category, but a category that has been successful in monetizing through ads. That's a very interesting one. We've done one investment in that space just recently that we're super excited about.
Also, casino game core mechanics combined with more casual meta-game mechanics. There's a game now doing very well called Coin Master from Israel, that's combining slot machine mechanics with city building and very lightweight PVP. These are some of the trends we're seeing. From a classical standpoint, there's solitaire games that are now being sort of combined with a deep meta game. Those are some interesting categories we're seeing. Like I think Arnd and Scott were talking about narrative games, also a clear trend, especially toward female gamers. We're more and more seeing teams who want to also look at narrative and interactive storytelling for male core audiences. That is a category we're super interested in. Multiplayer social gaming, obviously, real-time multiplayer on mobile is getting more and more popular, PUBG Mobile there being an example of it.
But also these more lightweight MMO and IO style games that are essentially multiplayer games on mobile, but very casual. The real-time gaming component is getting more and more popular. We're seeing a lot of new studios going after the IO opportunity, for example. The last thing is the new interesting geographies. We're seeing teams from India, Southeast Asia, especially Vietnam, and even China, younger entrepreneurs in China who are trying now to build games also for the global audience. The traditional story was let's innovate in the West and try to take our games to Asia. Now we're seeing more and more innovation coming out of the Asian markets. These entrepreneurs are really interested in building for the global market and not just their local markets. Those are some of the key trends we're seeing.
Once again, thanks for inviting me, MTG. I'm looking forward to working with you closely. Thank you very much.
Okay. Thank you, Harri. Just to quickly wrap up. Just want to summarize, we've had a chance to tell you a bit about our early investing strategy today. I hope it's been helpful. We have invested or committed SEK 20 million so far across the funds and investments in the portfolio. I want to leave you with just a few key points on this part of the strategy. One, we're really happy with the portfolio. It's really high quality, it's performing well, it's on track to generate attractive returns. We're going to have wins, we're going to have misses. That's the nature of this business, and you should expect that. So far, we're really pleased with what we have and what we see. The deal flow is getting better and better.
We've never not been able to get into a deal that we wanted to get into, which I think is a testament to what MTG can offer entrepreneurs versus other funds. Second, this is a really powerful lens on how the global games and esports markets are changing, and our peers in the West don't have it. Lastly, this is super important for informing our biggest bets, both M&A, organic initiatives, and it's a key way we're building up this M&A pipeline. Thank you all for listening. Hand it back to Jørgen or Q&A at this point.
Yeah, Q&A.
Okay.
Yep. Any questions? Yes
Yes, I was interested in how many games do you have in total, and if you can place them in I know, Arnd, you showed the box, like the BCG matrix with the stars in the end, and where if you can plot the numbers in each box.
You mean of each single game?
In total, how many games do you have in each box?
Right now, as I said, just the start. If you take InnoGames, seven games you can place in the lower box, plus Kongregate games. This is now the foundation to start. You might want to continue with the whole PC portfolio. I haven't done the math for each single game. I rather look at the company itself, where they are focused on what would be their growth profile. Based on this, we allocate the capital and identify the targets we want to engage with. The important thing is when we had started discussion with the board and management team really four, three, and a half years ago, sure, how can you mitigate this hit risk, hit drivenness?
As a matter of fact, it's the most predictable business because all based on KPIs, as you're going to see later when Emily and Henrik will present, how they spend marketing, how they go from soft launch then to full commercial launch. Once they launch, they know what will be the returns over the next two years of a game. Now the bigger picture from 30,000 feet is this portfolio view, because we have met companies where you have one game, and this is scaling like crazy. We met them already three months after launch. We could see it already then. Probably we were not ready two years ago to invest in such a company, but with this portfolio approach now and the foundation we're having, now we're ready also to place these bets.
The majority of the capital will always go into the profitable core companies like InnoGames and Kongregate.
Yeah. I think you need a microphone because the online participants can listen as well.
Hi. When you look at direct investments and indirect via the funds, how many of the companies typically do you have in the direct side, especially change of control clauses or first right of refusal if there is to be a change in ownership?
I'd say typically, we do try to play by the rules that other VC funds play by. We don't often ask for unusual terms like that. We do have a couple of cases where we have call options to upgrade our stakes and one unique circumstance in particular. For the most part, we're not looking for unusual rights compared to financial investors.
Good. Yeah. Yes. Just need a mic.
A couple of questions. One was on the competitive landscape in that early-stage investment area. You put a lot of emphasis on being the only Western company sort of taking this approach. Can you just give a bit of a global context? I suspect companies like Tencent are putting quite a lot of money into this space.
Yeah.
Can we scale that? That's it for the moment. I'll leave it there.
Yeah. I'd say Tencent historically has been super active in the venture markets. Alibaba has launched a fund which is partially driven by getting publishing rights in China. We've seen a little bit of a cooling with Tencent lately, I think related to some of the regulatory uncertainty over there. I will expect them to ramp up again. I think the proposition is just fundamentally different from MTG. It's a different mix of assets, I think it's a different corporate culture that we offer and different ways of being able to support the entrepreneurs.
Very good. I think it is time for a break. We have 15 minutes break now before we continue with the gaming vertical.
[Break]
I'm Hendrik Klindworth, Co-Founder and Chief Executive Officer of InnoGames. Today I want to present the sustainable growth story of InnoGames. Before we start, we have prepared a small video showing our games, our game trailers, our team, and our office. All right. InnoGames already started back in 2003 when my brother Eike, a good friend, Michael, when we together created our first game, Tribal Wars. This became so successful that we decided to found the company InnoGames. Nowadays, we are a company of more than 400 people, and all this growth, as has been presented by Jørgen, has always been profitable. Every year for InnoGames was a growth year. Our games have been translated to more than 30 different language versions and available on worldwide level. We do not focus on the Japanese, China, and Korean markets because these markets are different.
The player expectations are different, they have different games they prefer. We have built over the years a portfolio of seven live titles. Each of them has live operations, gets regular updates, and is contributing to our success. Our players spent last year together more than 750 million hours within our games. Our games are available both on the browser and on the mobile devices. Most of our players nowadays play on mobile. 56% of our players are playing every day on a mobile device. Of our daily users, 32% are playing on a browser. We have some very loyal and some very engaged players. 12% of them, they're playing on the same day on both of the different devices, both on browser and on mobile. These are our most loyal customers. New games are being primarily developed for mobile.
As Arnd has mentioned, the mobile market is a huge market. We at InnoGames look a bit more into the different genres at the mobile market. We use some external data and also some internal classification to understand which are the genres on the mobile market. There are different genres. We always look at the world without Japan, China, and Korea, because these markets are not relevant for us. We see that the strategy segment is a huge one. At InnoGames, we focus on two specific genres. We focus on strategy games and simulation games. Because these are the games where we built up the best experience over the years, where we learned a lot, where we have great success, and we know and understand what our players would like to have. Even within these genres, there are different subgenres.
We have different subgenres, like within the Strategy segment, the Big Strategy MMO Bubble, which contains lots of different games. We have action build and raid games, which is a subgenre of the strategy game, or the simulation puzzle games. Even within these subgenres, we are not active in all of them at the same time, because focus is, for us, very important. We have built very successful strategy games. With Warlords of Aternum, we have a heroes collection strategy game. We are creating new games, a City Builder, a resource management games, and especially in the City Builder genre, we have one of the leading, or most of the time, the leading city builder on mobile, which is Forge of Empires. This is a very relevant subgenre for us. Also in the other subgenres, we are seeing good success with our games.
Over the years, at InnoGames, we have built up a portfolio of different hit titles, and four of these games have reached EUR 100 million of lifetime revenue, or are on a clear trajectory to reach this number of lifetime revenue. Our very first game, Tribal Wars, which is still out there and still played by many players and still getting updates, it's reached more than EUR 100 million of lifetime revenue. Our third game, Grepolis, also doing very well, launched in 2010. Also a couple of years ago, that we already reached EUR 100 million of lifetime revenue. Our today's biggest game, Forge of Empires, a city builder game, has already reached more than EUR 400 million of lifetime revenue.
Elvenar, city builder in a fantasy setting, launched a couple of years ago, clear growth trajectory, has already reached more than EUR 70 million of lifetime revenue and is in a good way to continue to reach also the more than EUR 100 million of lifetime revenue, as it has a very good trajectory. Today, I want to focus on our biggest game, Forge of Empires. Forge of Empires is a game which shows the history of mankind, starting from the Stone Age or Middle Ages, Industrial Revolution, and then going to the future and to the far future. This is a setting which is very interesting, very relevant for many people out there. When we developed the game initially, it was available only on a browser with the Flash technology, which was relevant back in the days.
Nowadays, Forge of Empires is available as a HTML5 game on browser and especially on the mobile devices via the app stores. The great thing about it is that the players can spend their time on all the different platforms and continue to play the same game account. When you're building up your city and going through the ages, you can maybe in the morning start on your smartphone, maybe if you're at work, take some break or whatever, play on your browser, and in evening, play on a tablet. Always the same account, which is really great because it's really good for the player and also for us to get a lot of activity. Forge of Empires has many players. Just want to share with you some of the demographics and some statistics about our players.
One thing which maybe not everyone would already imagine, that the average age of the Forge of Empires player is already 40 years. Most of our players are male players, but also one-fourth of our players are female. Among our players who have more than three log-ins, the active players which have more than three log-ins, we have a payer share of around 9%. That's part of our business model. Most of our players, they play for free. That has always been the way. That's totally fine for us, but we also have these very loyal customers, of course, who pay money for our games and make sure that we as a company can continue to grow and build up a sustainable business. A typical player maybe spends five sessions a day.
Typically, the sessions on mobile are a bit shorter, sometimes a bit more sessions. In general, it's logging into your account, improving your village or your city, building some buildings, collecting some resources, having another session couple of hours later. Throughout the day, you can continue to play this game just in your breaks, which is very good. You can combine it with your real life. You are not affected by this. Most of our players nowadays spend as a primary platform on their Android mobile devices. It's by far the biggest platform. Apple is a smaller platform from a number of players. On the other hand, typically, the players on iOS, they spend more money in the games. We have one-third of our players who play Forge of Empires primarily on the browser platform.
One of the great things about Forge of Empires is that we are always providing fresh content for our players. Every two weeks, there's a technical update, nearly every week, we launch some new content for our players. Sometimes are big events, seasonal events, celebrating carnival, celebrating the summer, or celebrating Christmas, whatever. We have many ideas out there. This is something which we can provide to our players, every week there is something new for them. One thing which is also very great about this game is now we built up content for more than five years. When you start playing Forge of Empires now, five years later, you will still have some content.
At the same time, while you are playing, we are adding new content to the game, you always have some great things to spend your time within Forge of Empires. We built up more than 1,000 different buildings you can collect and build up in your city, which is amazing and probably one of the records in the app stores. For our players, of course, we also understand them. We're also giving them right offers. We analyze what's going on in our game economies and making them good offers to increase their customer lifetime, customer lifetime value, always provide something new for them. What's really important is to run a game over so many years, it's really also the combination of having a good tech platform combined with strong analytics to always improve the game, then CRM offers.
At the same time, also very important is our community management aspects, always give great service to our customers. It's really important to understand about these games. It's not that we are shipping out a game and then we are done. Our real work starts when we launch the game, when we provide service to our players and provide them a really good time within our games. That's our work, and that's where we are achieving also with Forge of Empires. If you look at it, we also see it from financial results that this strategy is working. Over the years, the revenues of Forge of Empires have been growing month- by- month, quarter- by- quarter. Sometimes you will see, especially if you would look on a monthly basis, that there are fluctuations. We launch a great new event, the revenues are spiking.
Sometimes there are months where we don't have so exciting new content. For example, last year, November, there was not so much exciting stuff. It was good. It's a great game, but not so exciting new event in Forge of Empires. This was the reason why, for example, last year in November, we didn't have so much great content. We moved some content releases to beginning of this year. In general, you see it's going steadily up and up, and we can also always predict and rely on our players because our player base is very stable, and many players are there for many years with us. We are bringing in new players, but we also have a very stable base of players that likes the game, enjoys the game, and stays with us through the journey, through the ages.
Forge of Empires is just only one game in our portfolio, obviously. Also, many of our other games have shown very good long-term trajectories. As you can see, our very first game, Tribal Wars, which is now 13 years old. It peaked maybe after seven years or so growing, and then still doing very good. It's still very stable game. Grepolis had its peak couple of while ago, but nowadays it's stabilizing and also showing how long a game can be run. Elvenar is clearly in the growth mode. We are really excited about this game. It's also already out there for a couple of time, but still clearly growing, and we have many ideas what we can add to the game. There's lots of opportunities, and we are very excited about this growth opportunities. Warlords just recently launched and is one of our new games.
We have Warlords launched last year. It's heroes collection strategy game that's really focused on turn-based battles. As a player, you walk through a campaign map, always fighting against the orcs, trying to free the provinces, and fighting also against other players, which is a very good mechanic, where you have really good fun turn-based battles, and at the same time, you are, of course, collecting regiments and improving them to have even more exciting battles. We acquired this game in 2017 from Wooga because they made a strategic shift, and the game fits good to our portfolio, and we launched it last year. It already has some revenues, but there are still some things to do before we can fully scale and go to a higher level. We are improving this game, especially the player journey beyond day 30, beyond day 60, especially.
That's where we still have to offer a bit more content to our players, a bit more excitement. That's where we have some work to do. Then we have another game which is currently in soft launch, but also available already in U.S. and E.U. It's called God Kings. I'm very proud of this game. It's a MMO strategy game. This all this experience we have at InnoGames, which helped us a lot on building this game. As a player, you build up your city in an ancient mythological setting, and the game already is soft launched. We have promising KPIs, so things are looking very good. We also are able to do marketing for this game on a profitable basis.
If things are going well, we can further scale marketing throughout the first half of this year, then especially later in 2019, we can continue to scale it and build up a significant game. Oops. Okay. Of course, we are creating new games, which is part of our DNA, which we have done for many years. For this, it's also important to have a structured process. Game creation is a good mix of science, creativity, hard work.
It means we have a process where we starting from initial strategical goals, going to a pre-production where we really prove that what we want to do makes sense, then going through the production, launching the game on a more silent scope in few test markets, seeing the numbers, sometimes have to tweak the games, then later going to the soft launch, then to the full global launch. We have built some shared components, which our Game Starter platform, which helps us to reduce the cost and improve the time for creating new games, especially because we as InnoGames are active in segments where the players are expecting a lot of content. Strategy and simulation games, these are not small games. These are games where we have to provide a lot of great stuff for our players.
It helps a lot if you can reuse some of the components and save some time there. To be fair and clear and transparent with you, it always happens that during the production, we have to stop game productions. This is a normal part of the games industry. You start developing a game, and during the production you see that a game is not working out. Then it's of course better to stop at this point, invest your team and also your resources into another game to make sure you're really focusing on the games with the biggest hit potential. It takes from the idea to launching it more than two years. Budgets nowadays are in the range of EUR 5 million if you consider all the costs affected with producing a hit game.
It's a significant investment we take as a company, but we are in a strong position that we are able to invest into these games and still stay as a company very profitable. We at the end have a portfolio of games in different states of the life cycle. We have three new games which are currently being produced. Of course, they're generating no revenues. They're creating costs for us at InnoGames. We have games which are in the early stages, especially God Kings, also Warlords. They are also not making profits for the company. It's just an investment into the future, which is important.
We have games in the growth mode, which are clearly showing growth like Elvenar or Forge of Empires. Especially Forge of Empires, we're always very happy that we see that we can continue to grow this game year- by- year. Happy to stay in the growth mode. These games are already very profitable in the growth phase. We have games in later stages when they're established, like Grepolis or Tribal Wars. We don't do many marketing investments for these games, but they are still very important for us as a company. They are often very profitable on an individual game level, so they are very good for the whole portfolio mix to have these games. We have older games like Tribal Wars 2, which never became as big as Tribal Wars or The West. We still maintain them. Our players love them.
For us as a company, we can run them with small teams. It works out very well. Especially for The West, we are very stable for many years now. It's small part of our business, but it's nice to see that our players like it, and it's good part of our business. These are the games which are very important, and the live ops and the community management around it, which is very important. To grow nowadays, it's also very important to have strong marketing capabilities. At a very high level, marketing sounds very simple. We are investing always on a performance-oriented basis. When we do marketing activities, we always know what amount of money we spend where, and we always have ways to attribute the registrations we are getting from these marketing activities within our games. Sometimes it's easy for the typical mobile advertising.
TV marketing, for example, is a bit more challenging to correctly attribute it. Sometimes it's even, in this case of TV, a mix of art and science. It's working out very well, and we can allocate it. Of course, the lifetime value of the players, what those players will spend when they stay with InnoGames should of course be higher than the cost we pay for marketing. At the very high level, it's super simple what we're doing on the marketing side. When the work for the individual teams starts, there's a lot of detailed micro-optimization. There's a lot of trying out new marketing assets, trying out new placements, always understanding how good the return on our ad spend is, changing budgets from one channel to the other.
This is a process which is very important for us as a company because this is our biggest area where we spend money, and of course we need to be very good on the process side to make sure that we are spending on the right way for the right channels, for the right games. One important aspect to make the right marketing investments is, of course, to understand what the Customer Lifetime Value will look like for the new players who get into your game. At the time where we do the marketing, of course, we need to already know or have a good feeling how the customer value will look like. The good thing is we have a lot of historical data and also a lot of good models which help us to predict this.
Just one point to prove this is, when we're looking back to cohorts from the year 2016 over the next 30 months, you will see that the different cohorts starting in different months, they are quite close to each other. There is, of course, a bit of fluctuations, but overall, on a blended basis, all of them are very close together. Typically in the beginning, the players, of course, will spend more money in the game in the first and the second months because some players we are just losing on the way. We just can't keep everyone. We have, on a blended basis, it looks like this, and it's getting also very stable. What we typically see is, if you look at the Customer Lifetime Value for the first two years, which is for us important KPI, important number we always consider.
We have nearly half of it already in the first six months, and then the other part in the remaining 18 months. What we also see is that in the month after the two years, we still have good contribution for this. We don't consider this in our return on ad spends calculations because two years is a long horizon. The great thing for us at InnoGames is we also have a great customer lifetime also after year two, after year three, and year four. Overall, with this approach, after a couple of days, we are able to estimate the future Customer Lifetime Value with a 95% accuracy, which is very important to always understand if our marketing investments are the right ones. Which is also good is that we have a lot of this payout already in the first six months.
At the same time, also a strong, very sustainable payout in the later days and months after the two years. Marketing is important, and to have successful marketing, in general, we have three things. We build a lot of in-house technology to automate many of these aspects of marketing to make us efficient, and also trying out a lot of different opportunities which our marketing partners are offering us. It's always good if you are one of the first companies trying out something new and innovative, and we can benefit from this. We build up, for our teams, good processes that work out very well, especially when you have to make many adjustments. If you have many people working on spending your marketing budget, you need to have strict and clear and good and flexible processes, and this is what we developed over the years.
Of course, you need also the right algorithms to reduce the effort from analytics perspective, scalable systems. We are starting also with automation, starting with rule-based automation is something which is already in place, and now gradually moving over to even more automation, going to first steps of artificial intelligence automation to further optimize the spending of our marketing budgets and make our teams even more efficient and can do more and better optimizations. This is very important for us because this is one area where we're spending a significant amount of money, and which helps us to grow as a company. Of course, for the future, we will continue to grow. One important area for growth is the mobile market. Browser revenues have, for InnoGames, always been growing, but the growth rates are not as high as on the mobile side.
The mobile growth was 37% in 2018. Of course, now you may ask, the mobile market has the App Stores. The App Store providers, Apple and Google, they take a 30% fee, which, of course, can affect the margins of gaming companies. You typically also see lower return on ad spends on the mobile platforms than on the browser platforms. This is something which already was, well, I would say, kind of known within the industry for many years. Also for us, it was clear that this is something which will happen. This has also been considered in our financial planning. We benefit from economics of scale as a company. We keep our operations very efficient. When we grow our revenues, we have not grown our other costs so much. We are able to invest into marketing to get new players.
We have also proven this in the past. We have improved our profitability as a company, even though at the same time, we significantly improved our mobile revenues. This worked out for us, and we are also seeing this will work out for us in the future. To summarize this, to further grow as a company, we will especially grow our existing games, Forge of Empires and Elvenar, on both platforms. We will create new mobile games. We are also considering buying games with very strict criteria that perfectly fit into our portfolio and which we could run then and make even more successful. These are the three pillars which are important for us. Just as a key takeaway, for us at InnoGames, we have focused on strong teams and getting the best talents for us as a company.
Our strategy has been proven to be very sustainable over the years. I think one aspect where we are proud of is that we have a real portfolio of games, and with games in different stages of their life cycle. We have made the transition to mobile successfully. We have first proven this with Forge of Empires, but now also seeing good revenues from the other games coming in. In the future, our growth will come from the mobile platforms, maybe some browser consolidation opportunities. This will make us very successful and allow us to continue as a growth company also in the future. That's what we are here. What we will do is for our players, make great games for them where they can enjoy our high-quality virtual worlds, play and have a great time together and enjoy our games.
That's what we are looking forward, and great that you support the mission. Thank you. Now, Emily.
Yeah. Hello, my name is Emily Greer, and I co-founded Kongregate with my brother back in 2006. Clearly one of the portfolio strategies for MTG is to buy gaming companies started by siblings. In those 12 years, we've achieved quite a lot, particularly on mobile with more than 60 games published and more than 200 million mobile installs. One of the things that I think is most special about Kongregate, and I'm highlighting here today, is our reach with developers and how many we've interacted with. We started the company with a mission to help independent game developers succeed and grow. Over the years, we have worked with more than 30,000 developers in 125 countries. This spans the entire range of game development, from teenagers making their first games all the way up to Supercell, EA, and Ubisoft who've had games on our platform.
As an asset and network and reputation, it's something that's really special about Kongregate. Here's a little video showing our business. As you can see, we're doing a lot. We're doing a lot of different things and working with a lot of developers and working on a lot of games. That, sort of, you can divide up into three basic pillars for Kongregate. It starts with platforms, which is where we started, where we nurture indie games and gaming communities. Third-party publishing is something that we started back in 2013, when we looked around and realized that we wanted to help game developers succeed beyond our own platforms, and particularly on mobile.
In the last few years, we've added first-party development, working with some studios so closely over the years, it only made sense to bring them in-house and make them part of the Kongregate family, and improve the margin a little bit as well. Why do we have all of these things? Why do we not just concentrate on publishing more game development? The reason is because all of these things work together in a way that makes a greater whole. In particular, it creates a really nice funnel for us. Starting at the top with our platforms, we're able to interact with developers in a self-serve manner and work with literally thousands of developers that we could never meet at conferences, that we could never find anywhere, often in small places or regions that don't have established game development.
From there, the platforms and the players playing them surface talented teams, really innovative games, whole new genres to us, and give us an insight into them before the rest of the market sees it. We then move to partnering with them more closely, usually through publishing, and then we work on a more exclusive basis, giving deep insights into the team and helping level them up and succeed other places. At the end, you see working with teams closely, you see what they're made of, what their talent is, who they are, and what they want. We can acquire developers without the normal information asymmetry you get where one side is showing their best side, one side is showing their best side.
We really know who they are, we know who's talented and who's great, who has the goods to keep making games for a long time. A great example and case study of this is our relationship with Synapse Games. We first started working with Synapse back in 2011. They had started in 2010 as five guys, who were friends, starting to make core games for the Facebook market. They were interested in our platform and brought one of their games, Tyrant Unleashed, sorry, War Metal Tyrant, over to the platform. It's a collectible card game set in a sci-fi, post-apocalyptic universe. It did really well on Kongregate. It was one of our most popular games for a long time.
When we started our mobile publishing, they were one of the first teams that we called and said, "Do you have something that you'd like to bring to mobile? Can we work together?" The result of that was that the first game that we launched on mobile was the sequel to Tyrant, again called Tyrant Unleashed. That was our first big success on mobile, with more than SEK 20 million in lifetime revenue, that's still growing. After that great partnership, we worked together on several more games leading up to Animation Throwdown in 2016. We'd had a lot of success working with them to improve the depth of spend, going from Tyrant to Tyrant Unleashed. Got them to redesign the game in a way that players could spend more on content, and they went from making two transactions on average to 17.
Tyrant was a little bit limited in terms of its broad reach. It had high CPIs. Only a few people were interested in that world. We brought in the Fox IPs. We worked on the early onboarding and making these games accessible so that we could have a really mass-market top grossing title. With that success, all of the years in working together, we were able to acquire them in 2017, with the help of MTG, continue to partner and grow the studio. Of all of what we do, publishing is the core. Hendrik gave you a great presentation on a lot of the things that are really key to help a game succeed in the very competitive mobile marketplace. You need really good analytics. You need really good marketing. You need to have a lot of expertise on monetization and live ops.
For small studios, it's both difficult and really expensive. Oh, sorry. What happened here?
I think it wasn't you, to be honest.
Okay.
It was just project down here. [crosstalk]
Okay. Anyway, for a small team, it doesn't make sense to build up everything that InnoGames has. They don't have the capital. They don't have the expertise. Working with us, we can create those systems within Kongregate and allow both our first-party studios and third-party studios to plug into the types of services that a really successful company like InnoGames has built, and then have a small team have access to the market in mobile that they wouldn't otherwise possibly have. A good case study of this is our game AdVenture Communist. This is the sequel to one of our earlier hits, AdVenture Capitalist. Communism is winning, by the way.
It originally launched in Q4 of 2017, we could see really great marketing metrics, the retention and the monetization of the game wasn't there. Players were getting confused, they were getting frustrated, they were churning out. Looking at the analytics, looking at other games in the market, we worked with that team to redesign the game and simplify it, make it more accessible, yet add enough feature in gotcha boxes to really help them drive retention. That relaunched just a few months ago in October and November of 2018, it drastically improved the game. Hendrik talked about how important it is for players to be playing for a long time.
D30 retention is one of these metrics that in games we think about a lot, we talk about a lot, with this change, AdVenture Communist went from below average in our portfolio to top of our portfolio with 15%, which is a really impressive number. At the same time, players were spending more money. In aggregate, we increased the player value by 7x and went from having marketing be marginal and unprofitable to really profitable. We've grown the DAU 20x in the last few months and are continuing to scale it. We're very excited about the potential for this game in the coming year. You've heard mentioned that 2018 wasn't a great year for Kongregate, but it gave us an opportunity to really look at what our publishing strategy was and take a hard look at some of the things we were doing.
We realized that we were trying to do too much, and needed to focus more. This year, we have pulled back and are focusing on fewer launches and focusing on just a few genres. Genres like collectible card games, idle, strategy, and launch games where we've already had success. We're also spending a lot of time on marketing. In past years, you could have a lot of success on the app stores with Apple and Google features, but those have gotten weaker over the years, the only way you can be successful now is with successful marketing. That expertise, that tech, is really crucial to our success, a really crucial gate to our decision to launch any game. Some highlights that we're looking forward to coming up are in our existing portfolio, as I mentioned, a lot of growth from AdVenture Communist.
Even with all the metrics improvements, we still think that there's more to come, with limited time events coming in Q2. We're seeing continued expansion and growth on our largest title and our first-party title, Animation Throwdown. That's going well into its third year, and seeing on a monthly basis revenues similar or higher as it did at launch. We're also going to be, as mentioned, launching somewhere in the range of 6-8 games, depending on where we see metrics. The key first-party releases are a new game from Synapse called Rift Heroes in a sort of a Strategy Builder genre. From Ultrabit, a game called Idle Frontier. With third parties, some of the ones that we're looking forward to, and this is just a handful, we will be doing more titles, is a Powerpuff Girls game, coming in Q2.
This is based on the Burrito Bison game we had success with back in 2016, and I think it's going to be a lot of fun. We have a very promising looking premium title for PC and eventually console called Flotsam, which is one of the most wishlisted games on Steam and made many of the most anticipated games lists for 2019. Finally, Cosmos Quest is another idle game, one that we discovered on kongregate.com. It's a small developer in Spain, and we're seeing good metrics early in test markets. I'm very excited to announce a really big title for us coming in 2020, which is a strategy game made by Synapse, with the Teenage Mutant Ninja Turtles IP. We think that that has the possibility of being a very substantial title between the combination of a really accessible IP and a great team.
Key takeaways about Kongregate. We've got a really broad network and strong reputation among developers. I really think it is unmatched elsewhere in publishing, but even among platforms. We're really known as being indie friendly. We use that to create a proven funnel to identify talent and games, and pair that with the UA tech and expertise that you need to be competitive in the mobile market. With that, we also get a really broad lens. Because we publish so many games, we figure a lot of things out more quickly. Whether it's ad monetization or limited time events, we get a lot of learnings that we sort of filter through the portfolio and can make games better, faster. Now by concentrating on just a few genres, we can have that cycle move faster and make sure that we're giving the proper resources to all our games. Thank you.
Thank you. I heard that you mention free TV as an advertising media.
Yeah, of course.
It's by Anders Jensen probably.
We use the channels that work for us.
Yeah, exactly. It's marketing. Any questions? Yeah. Down here.
I had, actually, a question for both of you on internal game development. Ralf, you mentioned that if it doesn't look like a game's going to succeed, you cut the process relatively quickly. Can you give us a rough idea of how many make it all the way through the funnel on first party development? Actually linking back maybe to a question from Maria, actually, with the Adjusted EBITDA calculation, you obviously exclude impaired capital development. Does the EBITDA include non-impaired? Isn't that an amortization, that sort of capitalized development expense?
Okay. Verifying that. Microphone for Maria. Maybe I can also answer the process. Typically, the most games are being stopped before pre-production. It can happen, you have initially more than five ideas, clearly, but also during the pre-production you stop a lot. Yeah, multiple games per each game that goes to pre-production. During the production, I would say roughly 50% is being stopped. It is still, of course, makes sense to stop games, also, if they don't make sense. You should better find it out before you're starting into the full production.
For us, those numbers are a little bit different, and it varies studio to studio. Our Ultrabit Studio is a much smaller, leaner team, so they can make a game in 6-9 months with three or four people. A lot of those will sort of get through to launch and see in test markets and then maybe kill in test markets. There's a very high rate of getting to test markets with those games. With Synapse, that's a little bit more like InnoGames where you're making a larger game with a larger team and while for us probably the majority still launch. There is a little bit more, little lower chance that we're going to take it to the full success. This is one where our strategies on do you launch or not is just a little bit different.
Okay.
Okay. On your question on the development call, yes. After certain tollgate, you start amortizing or sorry, capitalizing your development costs. Ideally, the vast majority of the games goes live, then we depreciate over a period of time. If they don't go live, if we actually decide to then pull the game, then we impair it. What we do now going forward and historically, we actually taken it over the EBITDA. Going forward, we'll actually exclude it from the Adjusted EBITDA. We'll put it in the bridge, and then on the Adjusted EBITDA, it will then be embedded. That's the way to think about it.
Yeah. The question there.
Question on InnoGames. How should we think about the EBITDA impact from the focus on the new game releases and the marketing spend, for example?
In general, we will keep similar EBITDA levels we had in the past. We had already invested into marketing for Warlords, and we will continue to do that. You will see, of course, some deep movements on a quarterly level, but we will never go into negatives or something like this. It is clearly from our clearly positive way possible to invest into these game launches.
No big change to the EBITDA margin from the focus on new game releases this year?
No big change. Right. Yeah.
Thanks.
Hi, Henrik Mawby Nordea. Obviously, with the huge growth in mobile gaming, it is attracting a lot of investments and a lot of new entrants, and to my understanding, the return on advertising investments is dropping quite sharply in the industry in general. How do you think you can handle that going forward?
I think the biggest wave of investments already happened a couple of years ago or so, I would say. It's a more metro market in which we are now active on. We have seen similar patterns on the browser side, where also the CPIs were increasing significantly. To some extent, we could say it was for InnoGames even a great time because we could move forward better than some of our competitors. It's the same goal now also in the mobile phase, where the market is getting more challenging. Recent times, I think the level is rather on the stable level. Then, of course, you need to have, especially in the marketing side, you need to have the right technology in place. You need to have the right people that have this experience.
I would even say in this segment for the games we are making, it's very hard for a new company to enter this market because if you have not built up this experience in the past, now it's clearly too late.
Thank you.
One down here.
Yes. Oscar Erixon with Carnegie. I have a question on acquisitions. You mentioned, Henrik, acquisitions is a potential growth avenue as well. What kind of acquisitions would you consider? Genres and so on. Thank you.
For us, it's an additional opportunity. We are very narrow focused and selective on this ones. Just to set the expectations right, there won't be many games in the world that fully match our criteria, but we are looking for this also using the GDC as an example, our next conference to help us there. The games we are looking for, they need to exactly be in our genres. That's important for us. They already have to be proven KPIs from a soft launch phase or similar phase that we know that there is a potential there. We don't invest into new game development. We don't do third-party publishing also. Of course, for us, it's clearly only if the opportunity is there to take over the full game.
Our criteria are very narrow, which means realistic expectation is with this criteria, there will be maybe one game, maybe two games over a couple of years we will find. It makes sense for us, but this is what fits for us. I think if it's for different ways of collaboration, there are other ways in the MTG group that would fit for other developers.
Okay. One more question, if I may. You mentioned the mix between browser and mobile games. Can you speak a little bit about how that strategy has changed, that you perhaps focus on mobile games first? See that Elvenar has been trending strongly, but also the browser traffic seems more negative. Thank you.
Browser has been growing for us, but if you look at the years to come, we are a bit more cautious there. We don't see a significant growth potential on the browser side, rather sideways development. Therefore, we are investing into mobile. From what we know, we have grown our market share on the browser side. This was mainly getting players from other competitors, getting players into our games, not growing the overall market. This is also the strategy on the browser side for the years to come. Super profitable, and allows us to invest into mobile gaming, and we want to keep and defend our strengths on the browser side. If we want to continue as a company to grow significantly, mobile is important for us, and therefore we are investing into mobile.
Okay, thank you.
Oh, yeah.
Hi, it's Rob Berg from Berenberg. A couple of questions. The first one, we've had obviously the mention a few times the rise of the huge games like Fortnite, Apex Legends, and taking engagement. I'm wondering if there's any been noticeable impact on your respective businesses. The second is on Kongregate, probably more specifically, the own IP versus licensed IP. Is the different economics behind that, and how do you prioritize allocating capital between one game or another?
Maybe I start with the first one. With Fortnite, we didn't see some relevant noticeable impact on our games or acquisitions. On the other hand, you can say it is quite a different kind of game. Fortnite, in some way, relates to Forge of Empires like Netflix relates to Forge of Empires. It is still a way where people can spend their time on, but it's not a direct competitor which was relevant, and could be seen in our marketing results.
I'd say similar. It didn't have any sort of direct noticeable impact on our marketing, or on our overall business. It is pretty diffuse. It would be sort of hard to pinpoint the moment of that. One thing I would say about Fortnite is it is a pretty young audience. You saw the average age for InnoGames. Also for us, it's not quite that high, but it's higher. Players tend to be older. Our audience tends to be older and therefore probably a little less directly competitive with Fortnite. In terms of the concrete question about own IP versus licensed IP, we always look at return on ad spend. Our main decisions are always going to be our marketing decisions. That's our largest spend. It's significantly larger than the development costs. There, we're looking at what the return on ad spend is.
For a wholly owned IP with no royalty costs, that's always going to look favorable, but if the metrics of a game are much better that is licensed, then that marketing can outperform. We sort of will move our money around, and our allocation around based on that. Overall, though, we hope that we are not in competition, and that we're able to sort of fund the ad spend in all ways. In terms of our portfolio, we try to balance our risk. First-party development, because you're starting from concept, it could take up to two years. You have to absorb all of the internal costs. That has a higher risk. It's a higher risk, higher return. Third-party publishing, we're not taking on those costs. We may have some relatively modest advances in order to return it, and the turnaround is much quicker.
We like to have the balance of a certain amount of first-party from concept games in our portfolio that we can count on, as well as a mix of opportunistic games that we're bringing in from third parties that have a little less upside, but also have lower risk and create opportunities for future acquisitions.
Super. Thank you very much.
Thanks.
Well done. Thank you.
All right. Thank you.
Next on stage, we have the esports companies. I think you, Ralf and David, floor is yours.
Good afternoon, everybody. Does this work, David?
I don't know. Yes.
Yeah. Perfect. Thank you, Jørgen. My name is Ralf Reichert. I'm founder and Co-CEO with David of ESL.
My name is David Neichel. I'm Co-CEO with Ralf. I spent the last 18 years in the video game industry and a little bit in the media industry.
Sure. As it's late, right, we're going to try to jump through. The time is wrong, so we have more time than we've got here, but that's a different story. We start with a video to wake everyone up. See how that works? Yes.
We've come far. Experienced so much. Been to so many places with so many people, with one destination in mind: to create a world where everybody can be somebody. A sport where every fan has a voice. A movement where anyone can come in. People came from all over the world to be a part of it, to prove that if you want it enough, anything's possible. There's a hero hidden in all of us, waiting to leap out of our bedrooms and onto the world stage.
When all of us here grow older and our children grow older, we'll tell them about how it all began.
A generation came together. Friends turned into leaders. Superstars stepped out of the shadows and inspired a whole sport to do the same.
You are the people who found esports, drove esports, and believed in it.
What happens next? Well, that depends on how we write it.
We're here for today, right? When we started this journey in 2015, we came out of this phase where we founded the company in 2000, where we had a vision that meant that this is going to be a sport and people will accept it. When Arnd came to Germany and told us that the grass is much greener on the other side in Stockholm, Sweden. Back at that time, we thought, okay, we're going to grow this now. We had products to become a sport, to become actually a relevant entertainment method. Now, 2019, I think we're talking about a pop culture phenomenon. It's much deeper. I am actually a rock star when I'm with women of my age, talking to them. Not because I'm looking so good, but they ask me to find jobs for their kids, right? A career path.
Either they want to become influencers or, that's where they're going to get caught next time with me, or they become esports athletes, they think I can help them. It's really changing. The conversation is changing, we're super excited to be on that journey. You can see a little bit on how we just did a brand refresh, where we had to fight with all the people in our board, I'm not going to say names, Jørgen, about colors like yellow and green. Our target group is 16 to whatever, it's not 44 like I am, or even older like other people are. We're talking about pop culture here. That's what we need to be. That's what we want to be. We want to drive this sport. We want to build this sport.
We've been on the forefront, we want to stay there. That means we are consistent with where we come from, consistent with our vision to make this the largest sport in the world. Consistent with our mission to build these stages, to make these stars, to help them to become these stars. I think we're refining and evolving the how. How we do that. Four or five years ago, we would talk a lot about events, which we still do, which are super important. Nowadays, we would be more precise. We want to build ecosystems. We want to take a game, build an ecosystem about it, where someone become from zero to hero, where I can help these moms to build a career for their kids. We're not there yet, right?
We're still in the very early days from a product portfolio, we have clearly the tools, let's say, on our hands to build this. In certain games, Counter-Strike, we already quite advanced with it. To build this across other games, across not 50 games, but a handful of games, that is really the journey we're on. That journey really has just started.
Cool. You will join the other side of the screen.
Yeah.
This is where we are today. Obviously, we spend a lot of effort and time to make sure that we establish across the world. We are now very much present in the three big regions, how we structure the company. Americas, Europe, Middle East, and maybe someday Africa, and then Asia, Pacific, Japan, and sometimes China. We start to be quite with a very strong structure, which is very important for our vision. ESL is very much committed to deliver growth for the industry. Our growth engine is based on owned and operated. All the transformation we had in the last years was really to invest in properties and make sure that we build strong brands, that we build something which is scalable. The key part of the growth engine, I would say, first of all, expand product verticals.
You will hear a little bit about that. We are very serious about continuing to have more games and continuing also to have more ecosystems. We'll go to that. There is a part also about growing regional products, having more events. What makes sense, and that explains also why we are so keen on having entities in the main countries, we want also to grow regional product. We just launched a lot of new product in the U.S., domestic products or collegiate, national championship and different things. Like we do across the world.
Across the world.
We do a lot, exactly, in Asia right now. It's very important for us to have this grassroot level, because if we build an esport, we have to have all the layers, not only the Champions League over there. Then, of course, part of the growth engine right now are also monetization. A lot of this is increasing our brand partners. We start to have a highly professional team, and we continue to make sure we get the best talent between New York, Cologne, and now Singapore to go after the big brand out there and play with the same rules like any big sport. In term of media, we also continue to increase our reach, to increase the quality of the content we provide, but also the monetization we get from our media partners.
One thing which is not there, which is the fans, which are somehow people we are working for. This is another growth engine, which is not short term, but which is also very important for us to build the platform, have the direct connection to the fans, and this B2C strategy also something we'll come back to. Yeah. As Ralf said, we build esport ecosystems. You will say, "It sounds very fluffy or cheesy or whatever it is." Actually, for us, we didn't find any better word, so if anyone has a good idea, please, we can share that.
Yeah.
The main point is that this is more than competition. What we try to build are real pyramid from zero to hero, from local to global, and that's the vision that ESL is driving. It's very aspirational for us to build this esport into the greatest sport on Earth. For this, how we do, usually, where we try to position ourself is really to make sure that we can define the best strategy to build an esport ecosystem, that we customize also all the competition format. What is the best worldwide approach to have a full competition format for a game vertical that we can, of course, operate the production, but also manage the content and monetize around that. Usually, here you have incomplete pyramid. Usually what happens when the game is successful is that you have community-driven little competition here and there.
We start into play with ESL Play. We start to do online competition, which is the basis of the pyramid in every country, in different languages. Sometimes then we start to have a top of the pop event. That's what we call the sandwich approach, because we start from the top and the bottom. Then, of course, the goal for us is with, usually together with the publisher, because of course, that's absolutely essential, we try to go to mature ecosystems. Having mature pyramid is very important because it brings longevity, it brings also engagements, and it's also what the key for publishers to make sure that they continue to grow in-game monetization. As you know, there is always a correlation between the core players, between the engagements, and the monetization.
It's a formula which is always working, and there is tons of example out there from StarCraft to League of Legends to Counter-Strike and maybe tomorrow, a Battle Royale genre. If you have an esports ecosystem, you can have a long, evergreen life cycle for your game. You can, of course, quite monetize this. Very fast, the game pyramid are different layers. Here we start from what we call the open level, which is for us mostly online, but can be also offline and which is with, of course, a lot of participants. We move to the challenger level, which would be typically in the ESL world, national championships on different level. Up to the top, what we call master level, where you will find product like IEM, like ESL Pro League or ESL One. One more.
This is really to understand how we envision to grow esports to this global entertainment and sport. One of the points for us is to make sure that we continue to add other pyramid. Of course, it means we need to have Fortnite, we need to continue to work also on Supercell. We need to continue to work on different pyramid. At the same time, you have from the other side, some things which are coming from the esports services. Typical example is Rainbow Six. With Ubisoft, we work since a couple of years. This is also an ecosystem we built as a white label for a publisher, but both going in the same direction. Somehow they can blur also in the middle because the goal for us is to bring people from esports services also to our O&Os.
Obviously we love pyramids and we claim every copyright around them.
Yes.
Just to be clear.
It looks like. Yes. That's something you all know that the company has been transitioning quite a lot, again, versus three years ago into building our own properties. There is another transformation that is more difficult to see here, is within ESS, we move away from a lot of non-strategic work to focus again on more and more top strategic publisher long-term cooperations. We will continue to develop esports services, but really focusing on this long-term partnership and building pyramids and ecosystem that will help us also to grow our own. One more, one example, of course, we had two weeks ago, Katowice, which is one of our flagship events. The main point here is that we want to have in all the top 15 countries where esports is quite relevant in the world, we want to have flagship events like we have Katowice in February.
This is a mix of the strong support of the local team. This is a mix of the strong strategy also from a global point of view, but this is a way to put a flag on the map, on the world of esports. Katowice is a little bit the Wimbledon of esports. We think there is space for a lot of different events. If you see again, Katowice is continuing to grow, we are thrilled with the result to see that 52 million video sessions-
Just to be clear, that's just through one stage of one tournament.
Yes.
The overall number will be much higher. The press release will be much more impressive.
Is in the make. Let's say a lot of our KPIs were continuing to grow very aggressively, and that's the key message here also is that esports has a huge potential still there, and that's something we need to consider as we build the company to make sure we have a sustainable way also to deliver EBITDA and profit, also capture the growth and make sure that we take a space, a big position in this world.
Fans, players, and teams. This presentation will go a little bit on the wheel David said and go through all these stakeholders to give as complete picture as possible. If we talk about participation and people playing in our B2C approach, this is still very early if we're speaking about it. We are mainly focused around playing there. We have two core products. One is called ESL Play, which is a Swiss Army knife of participatory tournaments. It's not the center of our strategy, but enables us to do, in the bottom of the pyramid, many different tournaments and entry-level competitions. ESEA then is our subscription service, which is a high profit margin, very integrated solution for Counter-Strike. We'll continue to work on both of these products and approach, but what we want to add is to think more in game verticals.
You see the guiding pillars are these four things. Play, watch, learn, engage. We need to offer and not build internally ourselves, but partner with third parties. Buy or build solutions for each and every one of these pillars to offer them throughout the specific game hubs, which are core of our business, and we're going to launch this year in a few games. On top of that, have platform hubs. What does it mean?
It means that the user access, we're changing from if you go to a platform where you can virtually play any game to, hey, I'm a Counter-Strike fan, there's an ESL Counter-Strike hub which guides me through play, watch, learn, engage from the bottom to the top of the pyramid, so that my [inaudible], I can clearly point to go there and make sure your kids go through this pyramid and becomes a pro gamer and a rock star of the 21st century. That is the strategy behind it. We're still in very early stages around this, but you're going to see some of these products being launched this year and being announced in the next few weeks. On teams, obviously, that's another relevant stakeholder, next to the players and fans.
We work with the best teams in the world, that competition is getting more fierce, but we continuously will be able and continue to attract them. In Counter-Strike, the Intel Grand Slam has been a huge driver for us in making sure that we have participation of the top teams across every tournament. In Dota 2, it's a little bit more regional difference. In Dota 2, the competition is highest and, let's say in events like India, we don't get the full talent, but then we get that in our triple-A events like Birmingham and Hamburg. In Rainbow Six, which is an ESS pyramid, it's obvious that we have even attracted a lot of the outside talent and a lot of teams from outside of Rainbow Six to enter this market. There's a number missing on this slide, a little mix-up.
We have 13 teams in WESA, which is one of our tools to work with teams, work with publishers, and continue to build these ecosystems as a joint venture approach. It means we're going to continue to offer tools to open new markets, to open new games and give a game publisher/the teams the direct access to the tools we have built throughout other ecosystems. Well, it's not working. Yes. All of that goes back to the story we started with, a world where anybody can be somebody. Last weekend we had the Counter-Strike major final, the team from, let's say, the close qualifier, that means qualification round number 2, made it to the finals, made second place, and is the perfect Cinderella story where we believe that these open ecosystem, even though from Finland, right?
Nicely put.
Being here in Sweden, which hasn't been on top of Counter-Strike for quite some time, being in the shadow of now Finnish and Danish teams is might be challenging. I'm from Germany, so I'm even the worst spot here. Don't worry about it. No, this shows exactly the Cinderella stories that open ecosystems can build. We could speak the whole day about how we believe that it's a superior product to have an open ecosystem, how on the long run, if you think about as a game, as a platform, and as a platform that should survive decades, an open ecosystem will help to achieve that goal. Yeah, we had the perfect story last week and are incredibly proud about it and have some great numbers even on linear TV, which David will speak later about.
Game publisher are another important stakeholder in our ecosystem. Actually, what we try to do is to position ourselves like the best solution provider for them. I'm not going to mention all the advantage that we try to bring to the table. That's exactly where we try to position ourselves, and this positioning starts working. We want to move away from just being a supplier, an operator, but to be a preferred partner or an advisor and someone who brings full-fledged solutions. Here, also to show how many different partners we have. Actually, we have something like 40 games under license. I know if we talk about Valve, now we have ongoing license contract with them, which is not limited in time. It's also a very important sign of recognition for the work we do.
We continue to work also with a lot of different one. This is a journey. This is not something that will happen overnight. Our strong belief is that, we talk a lot about open, closed ecosystem, is that publisher want to have control about their IPs. Normal. That's their baby. They want to make sure that they keep also the control about what happens to their game and their community. We should be here, the trusted partner to help them. It's not their job to develop a full Otherwise, if you have SEK 500 million, and if you want to hire 400 people and start to have a network of different teams across the world, that's a strategic decision you can do.
What we believe is that publishers, really their main focus is to develop games and satisfy players and make sure that the gameplay is the best. Then, if you want to develop an esports ecosystem, you can do it yourself, but you can also knock at the door, to people like ESL, and that's where we want to be there. We see a trend right now happening with more and more publisher moving to the open ecosystem and committing to that, which we believe is really something that is happening. Even the one who try to do everything on their own, they come back to delegate again part of the work because they understand that it's not an easy ballad in the park, actually. Here, just to show again the diversity of different things we have done with different publisher last year.
Of course, we can mention the ESL Katowice Royale Fortnite. I will come to this in one minute. We had also one of the first FIFA 19 Major together with PlayStation and Electronic Arts. We had the QuakeCon organization for Bethesda. We continue to do the BlizzCon and different things for Blizzard in Anaheim. Yeah, I don't want to mention everything or the Arena of Valor league with Tencent. We continue to work very seriously with different publishers. Here it was in ESL Katowice Royale. One of the largest competitive Fortnite tournament to date organized in the world. Of course, it's in the infancy, it's something which is starting. It's not because the game is a huge success that it can turn immediately into a competitive sport, of course. That's our job. That's what we try to do.
A lot of our teams have been working to figure out how to turn a Battle Royale genre, which is a very different one, into something that can be a competitive entertainment. We were very happy with the results. Also, in terms of viewership, it was extremely high. It is one of the highest competitive event that they had so far. Also, as you can see, we start to talk about serious prize money for a start. It was a very good start. One other example is Rainbow Six. Rainbow Six, 2015, you have to imagine when Ubisoft launched the game, it was the same week, I think, and the same window as Black Ops 3 and Star Wars Battlefront from DICE and EA. The game was not completely perfect, and it had some flaws, and it was not doing very well.
Today, if you look at Rainbow Six, it's 35 million users. Active user base, it's huge. It's one of the biggest FPS out there in terms of also monetization. If you look at Ubisoft results, you will see that it's something which is really contributing quite a lot into their positive results. What they did three years ago in 2015 was very courageous, was to build something around esports and in-game content. They do not do any other big marketing around Rainbow Six. The only thing they do is to build esports, and they started it with us. We are in another three-year contract with them, so it's a long-term relationship. It does not mean that they will work only with us. They can also work with some other people.
This is a very interesting story, and we see, of course, that the different esports activations always transform into high viewership, always transform what you do not have here into high peak of in-game monetization, which can be quite a lot, as you can imagine. Of course, in terms of in-game engagement and longevity. This is one of the pure cases of how a game that started at a certain level can continue to grow and really amplify and monetize over time, thanks to esports.
Three years ago, it was exactly that sandwich approach that you were explaining earlier to start esports from top with some major competition, from bottom with a lot of grassroots. That continuous investment has built this to one of the largest esports. It's not just to build SEK 100 million top league on top. It's much more that's needed actually to do that. Brand partnerships. How do we make money with this stuff, right? We obviously have the most amazing target group in the world, compared specifically to just traditional sports. Traditional TV, I can talk now about bad as well, right? No. We have the young kids. I think I've been hitting on that enough already. What we achieved with that throughout the last few years is a world-class brand partnership portfolio. That slide still blows my mind if we look about it because where's ESL?
On the right. Probably the nicest of these portfolios. It's on par with the largest esports sports properties in the world. Even for monetization, we're not that far off on brand management. Still a 2x, 3x, compared to a few years ago, where it was a 10x, we already started a big catch-up and going to continue to do so. We've, I think, shown that we can make this into reality and continue to do so. Let me check a little bit on the how are we doing this? I think by being innovative in what we're doing with these partners. It's not about, and probably everyone in the room knows that, a Mercedes-Benz will not give you money to put its logo on the wall here. They want much more.
They want a story to be told, how to engage with that sexy target group I was talking about. Here's the case on how we did that with DHL, by taking them and having them as part of our show. Because we are vertically integrated in how we produce our content, we do that in-house. Most of the sports league nowadays do that. They still have third-party distribution where a lot of their creativity is probably lost, but we produce all of these world feeds in-house and can therefore perfectly place these partners and tell a credible, trusted story.
Took DHL, which is probably not an endemic brand to that audience, put them in the stadium, did a lot of activations around, created in-game advertisements, advertorial, which were basically telling their story within the game of Dota and how that Effie Bot cute robot will help the players on site. Did a lot of customer engagement, that all on their first weekend led to fans going crazy.
DHL. DHL. DHL.
Probably the first time in sports history the crowd was not cheering for Ronaldo, SK Gaming, NIP, Astralis, but for a sponsor. Just by telling the story credibly, and this is not plannable, don't get me wrong. I'm bragging here and we're extremely proud of it, and we have extremely good results across the board with each and every of our partner in terms of engagement. This, though, is a holy grail, but it's based on hard work and little bit of art and a lot of hard work in the end of the day. With brand partnerships, we're extremely confident that we're going to continue to be successful. The founding showcase of ESL as a company and probably one of the best examples on how you do a successful long-term partnership is Intel.
I literally had an email thread with a guy who did our initial partnership in 2000 with us by buying 40 Pentium 4 PCs for us to have this crazy thing with computer games being done on Intel CPUs. We started 2000 with them. We prolonged in 2018 our partnership for three years, which is a new record there because usually it was one or two-year deals. Just shows that the industry's maturing, our company's maturing, and the partnerships are, too. On brand partnerships, there's still a lot of room to grow for us, but I think compared to a year ago or even two years ago, we made a lot of progress.
We have also media partners. Here you have a selection of the one we are working with. Let's start with these people. We explored last year exclusivity with Facebook. I think it was the right thing to do. At the same time, we now move to a non-exclusive relationship into 2019, we continue to partner with them. We continued also during the time to partner with people like Twitch, YouTube, or Twitter, but we added also some new people into this table here, like Mixer or Caffeine TV. At the same time, we continue also to work with a lot of more local or regional things. Here, I think one of the trend is that we work more and more with telco partners. Because they're also very interested to have esport content into their OTT solution.
This is a big trend, and it's also something that can help us a lot into valuing our content and continuing to spread. Then, of course, what we see also is now the emergence of linear TV. It start to be working extremely well, esports content start to be absolutely relevant for linear TV. We'll come to that. One of the example is here, ProSieben, where we work with them on a partnership since couple of years. That includes also some live finals that can be broadcasted on the main channel and which manage sometimes to have quite high market share. The other example I think is also very interesting. The final of Katowice, of course, you had the Danish team in there against the Finnish one. For example, on TV 2 Denmark, it start to have quite good scores.
We see here, of course, it was not exclusive, but something like 34% market share in the target group of 21- 30. Just for a Counter-Strike final, it starts to be quite relevant. We see all these trends going there, and it's, again, like for brand partnership, we need to make sure we have the professional approach, long-term view with partners to build the relationship that will help us to monetize on the long run our content. Another example is China. We had the new tender last year, and we ended up by having two partners working with us for the Chinese market. We worked with one of them before. The main point here is that they both, we see a huge growth. This is here the comparison of Katowice reach in term of million of sessions and unique viewers in China.
We compare year-on-year, and we see that it's really going to the roof. China is not the biggest Counter-Strike country, actually. It's really going quite up in term of viewership, and we see our content establishing very well in the Chinese market with these partners. Oh, okay. This is the same slide as Arnd, or it's a little bit how we position ourselves into the ecosystem. Very important for us, this direct relationship to our fan and audience, that's the people we want to satisfy. Very important also how we work close by with the players and the teams. We want to have the best players and best teams to all our competition.
ESL, when we take a game vertical seriously, we want to make sure that the events we organize, we always have the top, the Federer or the Nadal of this world playing in our tournament and not going to any other one. That's something we have a lot of attention. Media partners, I mentioned before, they're also very important to drive the content to fans, and they will help to extend also the audience. Then of course, game publisher, very important partners, and brand partners. A lot of our work, if I think well, nowadays, everyone is interested into esports. The biggest problem for brands or people is to say, "How do I enter esports? How do I do?" Before, couple of months or two years ago, it was more, "What is esports?" Now everyone knows this is something happening, they just don't know how.
Here we need to help. A lot of our work, I would say, is to build relationship. That's where we will be successful if we have the proper talent in the company and, actually, we are a people company if we think very well, make sure that our employees are all giving the best services and the best relationship to partners. Building stories with game publishers so that they have the trust that they can work with us and that we'll help them to build this ecosystem. Brand sponsors the same, that they renew, that they're happy with us, and they continue, and then we can continue to drive, increase the value. Same with media partners, same with teams and, of course, make sure that we have this strong direct relationship with our fans.
Yeah, I mean, to add to that is probably the art of our business, is that we need to be world-class in all of these things. That's really the barrier to entry into this business, that each and every of these stakeholders is somehow interconnected with the others, and we need to have these stakeholders ready at one point in time, at one event, at one tournament, at one league, and have all the functions like marketing around it working as well. That's really what we've been building. That's really what we want to continue to scale. What are we today?
I think we're clearly the number one independent brand, the leading esports company in this fast-growing market, in this sport of the future, which gets visible for more and more people that it really is that future and it's not just the idea of this 44-year-old German guy. It's building esports ecosystems. We're going to hit on that. We'll continue to do that because, again, we're not a production company. We're not an events company. We want to build these ecosystems. If you really look at in the larger successful sports, they have this full pyramid. They have this full regional to global zero to hero career opportunities. Only then a sport will be sustainable and will be successful on the long run.
We have an experienced team which gets in great people all the time, like David, like a guy who just give us today his approval. We're going to announce hopefully next week. We're going to continue to add external talent, but as well to groom and grow our own ones, which needs to come out of esports. The combination of that has always been part of our success. We have this huge portfolio of publishers, brands, and media partners, right? Our company will not be built, and this sport will not be built on one game. It's not going to be built on one sponsor. It needs to be a myriad of that. Our job is to bring them together at a certain point in time. Again, to little bit repeat of what we said, how do we grow this company?
By building more pyramids, that's a product. By growing monetization, make more money with the existing revenue streams, but add more as well, partly through B2C, to have more direct relationships with our partners, with our fans, and players. Last but not least, by being the brand and not being a brand. Thank you.
We are good on time.
Cool. Thank you for showing our big brother, ESL. My name is Marcus. I am the CEO of DreamHack. My journey with DreamHack started 17 years ago when I signed up as a volunteer at one of our festivals. For the last 12 years, I have been working full time with this. It is a pleasure to be here today. I am going to start off by showing a small little video of what DreamHack is all about. Powered by MTG. 25 years ago, DreamHack was founded in a small little city of Malmö, in Sweden. At that time it was Commodores and Amigas people brought together. They were sitting in a small school cafeteria. Now 25 years later, we are looking to attract 350,000 visitors for our 15 global events.
We host three mega esport tournaments, similar size as IEM or Katowice, IEM or ESL One. Two of them are Masters, one taking place in Dallas, one taking place in Malmö. We are also hosting a Dota 2 Major taking place here in Stockholm next week. In your gift bags, there is vouchers if you want to come and attend, sign up this week because it is sold out, so I need to give it to my friends otherwise. We are also hosting 12 festival events, and the festivals is what I want to dig into a bit. The festivals are now hosted in eight different countries and in four different continents. We call our festivals the Ultimate Gaming Festival. It is based out of three different core pillars. It is experience, it is participation, and it is community.
When it comes to experience, we are organizing a lot of different esport tournaments. Just as ESL, we are doing everything from Counter-Strike to Halo to Rainbow Six to Fortnite and everything. These tournaments are the tournaments that people can come and watch. Typical festival is three to four days. We run 24/7, we never close the doors, which is highly unique. We have a lot of music activizations, we have exhibition areas, and of course, people can bring their PC. Our biggest LAN ever hosted 9,600 PCs where people brought them down to Jönköping here in Sweden, and that is still the Guinness World Records, no one has ever beaten 5,000 after that, it is pretty unique. On these festivals, there is also a lot of grassroots esport, meaning you do not have to be a pro player to compete. It means that I can come down.
It can be that the girls sitting at home playing Candy Crush can go down and play in a mobile tournament. Everyone can sign up, and everyone can become a professional. I would say that everyone from GeT_RiGhT to all of the professional CS:GO players here in Sweden have been playing the small grassroots tournaments down in Jönköping before. Of course, there is also other activities at the festivals. It is console free-to-play areas. We can try out the latest games, and this ties back to how we work with publishers. There is also a lot of different other activities in terms of meeting in the fan zone where you can meet your favorite players. You can sign up for autographs. You can watch your favorite Twitch and YouTube streamers on-site, and there is endless opportunities at these festivals.
The biggest difference between an esport event, an IEM, a DreamHack Masters versus a festival is that people are in the venue 24/7. They are enjoying it, they hang out, and they are hanging with their friends. How do we tie a big class to the publishers? At our events, DreamHack is organizing a few different properties ourselves, which I will come to later, but we are also working closely with the publishers. DreamHack has its own publisher service part where we are bringing and working with the publishers. Just as ESL has been working with ESS over the years, DreamHack is doing the same for Heroes of the Storm, StarCraft II, Quake, Halo, et cetera. What we have is an opportunity to bring them to our events. We do not have to go out and build a physical stadium separate event. We can let them come to our events.
Either they organize the tournament at our event, or we do it for them. A kind of unique mix in that one. When it comes to CS:GO, everyone has seen the growth history, and I think 1999 was the time that CS 1.6 was started, and then in 2012, Counter-Strike: GO was started. Here you can see especially how DreamHack is working in the bring your own computer network part at the festivals with the grassroots competitions, building it up with our DreamHack Open circuit, and then in the end, standing on the main stage for our DreamHack Masters tournament. As you can see, the number of tournament is growing with the amount of festivals that we are organizing. Over the years, it is just becoming more and more.
Lastly but not least, I am running it fast, I feel, but we are doing a lot of esports by ourselves. We have our two signature series with DreamHack Masters, Dallas and Malmö. Nine events for DreamHack Open. It is a SEK 100,000 CS:GO circuit traveling around at all of our festivals, tying all events together. Just launched last year, Rocket League, which is a car game where you drive a football into a football goal. Totally different compared to the shooting games, but extremely popular. We also launched this year our DreamHack Mobile Series. We are seeing a big shift when people are coming to our events. Before, it was only bringing their computers. Now people are bringing their tablets and their phones. We are trying to continue this trend of being agile and adding on the content that is needed for the festivals.
Dota 2 DreamLeague, very unique. Please check it out next week in Stockholm. It is our Dota 2 circuit, running two seasons per year. More of a Jimmy Fallon kind of, not proper esports tournament setup. It is more showcasing, what to say? Totally lost world, but more of a, yeah. Of course, a lot of different fighting games, everything from the smaller ones to the bigger ones. In the last couple of months and last year, we have really been focusing on sports games. To give kind of a more introduction around that, my co-CEO, Peter Nørrelund, will take over and explain what we have been doing-
Yeah.
with the eSuperliga and eAllsvenskan here in Sweden.
Yeah. Thank you, Marcus. Yeah, just like Marcus and Ralf, I have 20 years experience in T-sports, traditional sports. I started as a journalist, reporter, host, commentator, and for the last decade, I have been doing sports acquisitions for MTG and being in charge of the sports operations in all countries. I have seen the value of sports IPs and the impact that sport IPs gives broadcasters. I used to call it the real differentiator when the program people was standing beside. I've also felt the price increases on this content, which is highly valuable content. I'm convinced, Ralf, that esports are on exactly the same journey as we have seen with traditional sports. They started out 30 years ago, not big revenues in terms of media rights, and we all know the story today.
It's right that we have been looking a bit at the sports games. If you take a look at the big sports IPs, the highly valuable T-sports IPs, what is it they bring? What are the characteristics for them being a very, very valuable product for broadcasters from telcos also and media partners across the world? It is live. It is unique. There is only one Champions League, only one Premier League, only one Formula 1. There is a seasonality, which is super important if you want to use it to sell subscriptions. There is a strong narrative around it. With the narrative comes a fan base. Super, super important. It's high quality. It's high quality in terms of the competitiveness, and it's high quality in terms of the production values. Is it possible for esports to tick those boxes? Yeah, I think so.
We're already a good step ahead on that journey. We were looking into the sports games. Of course, with my T-sports background, I said, "Why is there no decent esports on FIFA?" Football, the strongest sport on Earth. I think even Ralf will say that.
You remember our last match?
Germany won in a game against a combined Scandy team. Ralf played a very, very good game, that's right. Apart from that, some of the strongest brands in the industry, strong players, really, really strong stakeholders, big, big fan base. We have then this FIFA game from EA, also very, very popular. We haven't seen any real esports on this product. We decided to create together with the leagues in Denmark and Sweden so far, eSuperliga and eAllsvenskan. That is, the construction similar to virtual JVs you could say. We own a stake in the leagues. The clubs uses their normal traditional brands known from the leagues, and then they hire FIFA players. If we look a little on the Danish structure of the tournament, then we see they try to say, "Okay, we need to tick the boxes that I showed you before.
How do we do that?" That's a tournament structure which gives us seasonality. Here, seven weeks, regularity in the programming. We wanted to do a really, really nice look and feel. Apart from having the best FIFA players in Denmark present, we also wanted the product to look good. You only get one chance to make a good first impression. Very important is to look like top-tier sports coverage. Then the TV elements, creating profiles, working on the narrative. Most importantly actually, that we got a broadcast partner who saw an idea in this, who saw this as a way to get younger viewers and a way to get more users on their OTT platform. Discovery saw that and took a bet on this. If we look at the KPIs from Denmark, from the first season, which took off three months ago.
On the regular season broadcast, Monday and Tuesday nights, we had in three plus age group, three times more than the 10 previous weeks in the same time slot, and more importantly, in the commercial target group, the eSuperliga outperformed the normal slot five times. The playoffs was ridiculous. Much more compared to last year. Actually, a more interesting comparison is the comparison to the traditional Superliga, which is broadcasted on the same channels. If we look at the commercial target group, the blue is eSuperliga, the green first pick. It's actually second pick. Anyway. Discovery's first pick, which is second pick, almost the same amount of commercial viewers in reach, and eSuperliga outperformed the fifth pick in reach. That's a product priced at EUR 20 million per season, the traditional Superliga. Very compelling figures.
In terms of display, which was an aim for Discovery to drive usage there, it outperformed their budgets two and a half times. The playoffs was the 12th best day on Channel 9 in 2018. That is a channel which broadcasts 36 weeks of Superliga, traditional football. They broadcast Europa League. Anyway, eSuperliga playoffs turned out to be the 12th best day. Here's a little video from the playoffs.
The esports tournament culminates in the final playoff event. This event was the biggest eFIFA event in the world to date. Live audience, live entertainment. Eight full hours broadcast on both flow TV and streaming. With a prize pool of EUR 50,000, eight teams fought for the title in epic matches. Quarter, semi, and a fantastic grand final. Massive support from the fans and massive coverage on social media helped make the tournament and finals a great success and fantastic experience.
A great event in Forum, in Copenhagen, which also showed that even though this was the first season, there's already a grip in the fans, we saw exactly the same things as we see with the big traditional sports IPs, that the fans are engaging. There is a good story around it, and therefore also a good media product. Second season just started for the eSuperliga. Another four seasons is agreed. Season 1, eAllsvenskan started a week ago, two weeks ago. We are in advance discussions with a lot of other leagues out there, because this is, of course, a scalable product. Very good to the nature of DreamHack, where we have a company which is able to work in many different geographies and operate locally. There are also more to come on the sports game side, where there are lots of other games than football.
The most interesting thing here is actually that it has and can have a similar impact as the IPs, sports IPs, traditional sports IPs we are talking about. David has the humble French approach. He said it was quite good figures on TV 2 Zulu, the Counter-Strike. That weekend of Counter-Strike made the second best week for TV 2 Zulu in more than one and a half year, and outperformed all other sports content that weekend. Super promising. Marcus's key value drivers for us, expansion of festivals. Definitely 3-4 per year.
Yeah.
Still delivering the arenas for casual and competitive gamers. We are connecting the publishers to the grassroots. We can use the festivals to scout what are the esports titles of tomorrow, and then we will launch a lot of more sports game leagues. Thank you. Thank you.
Yeah. I think if we can get you up here, Ralf as well, and David. Q&A session here. There's a mic for you over there's chairs we have lined up for you, actually. Yeah. Where to begin?
It's Rob Berg from Berenberg. Lots of questions. I'll keep it to one, just in the interest of time. Feels like we're at such an early stage of multi-year growth for esports, and with so much growth potentially to capture to keep the barriers to entry up and stop any new entrants at such a nascent stage in the industry, it could be debated whether you should be making any profits anytime soon. I know Alibaba, others have already said that esports will be loss-making for some time. How are you guys thinking about the market capture opportunity versus profitability?
Yeah, I think I'll take that. If it is okay. I think, for us, it's super important to be competitive, meaning that a lot of things are changing. I think if we strive towards profitability at an early stage without, of course, sacrificing whatever we're doing, it's not that we are letting go of something which would be strategically important for us. I just think that we have seen many companies being very aggressive, digging big holes on a range of assumptions, which then changed like 18 months after. I don't want us to be in that situation. I want to make sure we're agile, and we can continue to invest where it makes sense. Now we had a big partnership as well with Fortnite. We have suddenly over, more or less, a new game coming out called Apex, and we want to invest there as well.
We want to make sure that we are very competitive, and therefore, we will make sure that there's a reasonable, when it looks to the revenue and our profitability, that we have some reasonable approach there.
If I can add one thing. I think this is very important because, as you say, there is a lot of people just throwing money out of the window just to be on esports. It's very complicated to raise the price if you give all the value for free-
Sure.
for people. What we do as a real value, for publishers, for brands, for media partners, for us it's very important that we make sure that people understand the value that they get, because it's impossible to raise after that. Of course, to your point, it's a balance between continuing to invest in the growth, and then making sure that there is an operating model which delivers also a profitable thing. No one has done it before on esports as far as-
You're right, and when we look at the benchmark, and just as well to be fair, I think we have losses of SEK 300 million the last two years in the companies as well in the esports vertical. It is not that we are not investing. That I can guarantee you. It's not that we are losing opportunities, but for us to be mindful. There's so much more you can do. There's a lot of things you can invest in. We also tried originals and a lot of other stuff which didn't pay off, and that we can continue to do, of course, but we couldn't see that the revenue we invested in over time would turn into profit. That is our approach to it.
We see competition as well, particularly in this so-called white labels area, where a lot of people are giving a lot of value away in order just to get into esports, and we don't want to participate in that. That I could do, and then we will lose more money. That is the balance that we are having. Of course, we are in a different stage than many other companies are. To David's point, it's happening now. Yeah. What we see here with the data we get in for sports and sponsors, this monetization, the value of the eyeball is increasing. Also, just the fact that we mentioned Q1, on the esports, we have three fewer events.
We still managed to grow the esports vertical in Q1 as it looks right now because of the very strong events that we have, in particular in Katowice and the monetization. Is that okay? Good.
Thanks. Tom here again from Citi. Thursday, and apologies to Henrik for calling him Ralf for the last question, sorry. I'm actually going to ask the real Ralf the question now, actually, on concentration. Have you given any numbers on this level of concentration on particular sort of publisher brand? I'm particularly thinking CS:GO and Dota 2. How much of sort of viewership or how much of revenue is linked with those two key brands? The second question is, can you just give a little bit of a, put yourself in the feet of, or in the shoes I should say, of a publisher. What are the choices that you're sort of thinking about when choosing to either allow you guys to do something for them or try and do it themselves? If you can just give a bit of insight into that thought process, that would be great.
Sure. I don't think we release these numbers. They're significant, but they're not crazy. That is probably the best guidance I can give you. I think on the shoes on the publishers, it's actually fairly simple, right? Either you say, "I have a game which is esports ready, which might work or might fail as an esports, so let me hire 150 people and spend SEK 100 million on building an infrastructure," or, "I have these really smart, good-looking people who have a proven track record in building it. They have a small brother, which looks awesome, too, and they might even be ready to help me on getting faster distribution, getting better monetization, and might even take a risk on building the whole thing, so maybe I trust them." That is, let's say, our dinner pitch. The breakfast pitch looks different, but that's the dinner pitch.
I think the breakfast pitch is, of course, that we are relevant, and we are relevant for the publishers, meaning we can do so much more for them. Obviously, if we have a global network of distribution partners, if we have sponsors who basically just want reach, they would like to have a range of properties around the world. That is, of course, something that we then eventually can offer given publishers, given the connections that we're having or the products that we're having. We offer so much more. The communities, Ralf, it's a very important part, I reckon, as well, for the publishers as well. Obviously, to be able to participate in one of our big events, be able to participate in contribution, whatever, is, of course, quite important for those publishers.
There's a lot more to add, right? It starts with reliability. Running an esports tournament sounds really easy. You just put 10 PCs somewhere, but it's actually a science, right? We have specialized teams, Marcus has specialized teams who know exactly how to install the right Windows version, the right driver, have the right fix on every latest Windows version, which has a problem with this CPU or GPU. We have a network which are DDoS protected, as banks. It goes through broadcast innovation, where we have a full team of, I think, 10 plus people who do nothing else than are programmers on designing macros and code, how to run smarter in-game video observer slots. Meaning they build their own software of how in Fortnite, how in PUBG, how in Counter-Strike, how in Dota to have better in-game observing.
There's a lot of these extremely specialized skill sets, which some of them you can't really buy for money as well, which come together and you need to have the right project management to put them on time at a place and then get actually audience there, which is sometimes easy, sometimes not. I think that is a whole art, and sorry if I was a little bit too
No.
One more thing is the pace. If you look at how fast it goes now on the gaming market, how games go very fast and then go. How fast you can be in esport is very important, and we start to have live example of that. Actually, that's also something we bring that if the infrastructure is existing, it can be faster, but also avoiding to make mistake. As Ralf said, this is a different work, and we have done all the mistakes you can do not me too much, but we have all done as a company-
I have done, what do you mean?
All the mistakes you can do in the last 20 years. We know the things, the do and the don'ts, and we have seen a lot of very high investment building things that can look very nice from outside, but then that can do also mistake and maybe fail in some future. I want to be more precise. It's very important. Do the right thing is important, can save a lot of money, and that's where we can help also the publishers.
Can I ask you about the sponsor or the brands that support you? It's quite obvious that Intel is quite a natural sponsor. DHL is probably not, but was quite entertaining. How about other tech companies? Why aren't they among all the top five in order, because they want to recruit at least the youngsters in order to work for them? Or has it been a deliberate policy from you to have a more spread sort of range of brands supporting you?
Maybe it's a little bit of a misconception of how we presented it, just because, let's say, we've been chasing to get the non-endemics in for the last 10 years. The focus on the slide is going to be the non-endemics. Just to give you an example, we either work with Acer, have a global three-year contract, I think. We work with Republic of Gamers, have announced a partnership around Intel Extreme Masters this year, work with Logitech, work with Razer, work with all of these tech companies who are, like in traditional sports, very close to the sports, like an Adidas, and continue to do so. They're an incredibly important part of that industry. Really the capital market story today was we went beyond it and maybe we forgot about where we started.
Yeah, they are super important and continue to invest, and continue to invest actually to sell their product first and foremost, and out of brand and other reasons, secondary.
An example of tech company we got last year, I would say, is on the telco side, with AT&T in the U.S. and Vodafone. Both have been quite heavily engaged and especially Vodafone. It sounds like a natural fit to them. Of course, if you are a telco company and you are sponsoring, I don't know, traditional sports, you have to build a story. If you are a telco company and you are sponsoring esports, it makes complete sense because our pro players are the best demonstration that 5G can be fantastically doing well, or that the fiber can be bringing better bandwidth, et cetera. Yeah, we have some tech companies joining us.
Hi. Lars-Ola Hellström from Pareto Securities. This is a question for Jørgen, and I don't know if you will answer, but in a more mature state with the esports set up within MTG right now, where do you see EBITDA margins? In six, seven, or eight years' times, or in what kind of range do you see the margins?
Yeah. I don't think I'll go into that in six, seven years' time from now. I think what we talked about was also the medium term for the group, and that what we talked about 10%-15% EBITDA margin. That is what we can talk about now.
I tried it first.
Yeah. Yes.
Hi. Henrik Mawby from Nordea again. Maybe tying into that question a little bit. One concern you could have here is that as monetization booms, assuming that it does, you could be scared that publishers will want to get a larger share of that monetization as well. Based on the discussions you're having now with your publishers as partners, what do you think is the long-term end game there and what is the contract structure to expect with publishers?
If I just may answer just before you take that. I think the whole idea for us is, of course, to build the biggest sport and whatever that brings, meaning that brings, of course, much more money to the teams, much more prize money, bigger events and so forth. That's the whole idea. That is also could be the idea to do that together with the publishers. We, of course, hope that we will enhance the whole ecosystem. Look what Premier League and others, how they have benefited from much more money coming into the industry. Right now, the esports are so under-monetized. The idea is, of course, that the more money which comes into the industry, the more we can share and the more professional we can make this business as well, to the benefit of publishers and fans and so forth.
I think that is the way we think, is that we're not afraid of prize money going up. That'll be fantastic. We want to pay more money than you pay whatever in tennis or whatever around the world. That is, I think, our ambition at least, is to grow this sport to become the biggest and most relevant in the world. Publishers.
Agreed. Maybe to add to that, there's many different games, and not all of them will make it to the top. We can see already and we can see nowadays, there's never been such a big diversity in terms of top games. We can pick if there's someone totally unreasonable, but would love to give the publisher money because we're making so much that we're happy to share. That is really the core ambition of it. It might sound crazy now, but I don't think it is.
Okay, thank you. One more question, if I may. There has been some concern regarding the potential for Battle Royale genre or format as a format that is suitable for esports. You've tried it with PUBG, and you tried it last weekend with Fortnite, and you've tried it in a few other events as well. What are your learnings and the feedback you're getting from these tournaments so far?
It's harder than we initially hoped for. That is very clear. I think that it will still take some time until to find the right format, there might be a format that's more participatory driven rather than, let's say, the traditional format of 10 people being on a stage and 10,000 watching. It might be a little bit more closer to what you're doing with the Grand Prix for Hearthstone and things like that. The game genre is so big that there will be a participatory element to it, then there will be a broadcast element to it. Just think about traditional sport, right? There's a beauty about football because it's so simple, 11 versus 11. There's many other sport, like a marathon, which probably never became a big media product, but still are a huge participatory thing.
Maybe Battle Royale is somewhere in between, the honest answer is we don't know yet. I can assure you we're going to keep trying.
Could you just elaborate a bit about the announcement you did yesterday when it comes to-
For mobile?
-with AT&T?
Sure. We just announced a tournament series, so to speak, and a small event series in North America about mobile. If you think about how actually we started Intel Extreme Masters as an aggregator for games with an endemic sponsor, endemic partner who really was a catalyst now 13 years ago. It's very similar to what we just announced with AT&T, where we say, "Hey, we take a few mobile games, do a big tournament about that," start more participatory and then try to develop into a media product. We'll probably going to do something similar with telcos around the world, because AT&T is obviously North America only. That is a good example for different formats coming up that not everything is like we do as either one now, like with IEM, like with Pro League.
Things might start on a different way, in a more participatory way, and then develop over time into a media property.
Thank you very much.
Good. You came up again here.
Again.
Let me see, sir. Good. There we are. Yes. Questions further now we have them. There was a question earlier today about WESA. Can you explain about WESA? That was a question I got from-
Sure. In 2016, we started a joint federation with teams, meaning we want to work closer with these stakeholders, right? We will have going forward internal all of the, if you remember the wheel with the five core stakeholders, teams are one of those. WESA is our first iteration of working with them together. We started a federation which organizes our, or actually governs our ESL Pro League. That is an ongoing project. We announced last year that we started under the WESA umbrella, a partnership with Hi-Rez around the game Paladins. There are different projects in very similar scope under way, but it's the first iteration of working there with the teams, and we're going to continue to do that. Our job, again, going back to what Jørgen said as well, is we think about ourselves as about a platform, right?
We're in the middle of this ecosystem, it's our job to create things where teams can make money. That might be league products, but that might be booth space at our events. That might be an online platform where we do certain things together. We're going to continue to work with that specific stakeholder teams to enable them to make more money and to create a closer relationship from the ESL side together with them.
Good. I think we are running out of time, unfortunately. I would like to thank you very much for being here the whole afternoon with us. Remember your goodie bags, please, because you will have a free starter pack from Forge. You will have, as Marcus said, two free tickets to the DreamHack Summer. DreamHack Winter is already sold out, they have a high value. You are also invited to Cologne, where we look forward to see you the 5th to the 7th of July.
Castle of Counter-Strike.
Castle of Counter-Strike, actually. Also on the way home, we have a drink from one of the companies I think that we invested in. Thank you very much.
Thank you.