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News
17/11/00 Empire acquires Razorworks
Empire
has acquired games development company Razorworks in a deal worth around £550,000. Razorworks, which was 40% owned by Empire principals Ian Higgins and Simon Jeffery, is currently creating two titles for Empire and
was already signed up on an exclusive basis to publishers Empire. The long expected deal helps to clean up some of Empire's outstanding conflict of interest issues (the founders still, privately, own 50% of
developer Mind's Eye) , whilst bolstering the Company's internal development resource.
05/04/01 Empire announces prelims
Empire continues to
expand with the preliminary results of the year to 31/12/00 revealing a successful move into console games publishing. One title, Sheep, achieved over 212,000 unit sales, an extremely successful figure considering
its relatively low development cost and the difficult market conditions into which it was launched. Around half of Empire's FY00 turnover was attributed to console titles compared to around 7% in 1999. However the
Company's continued investment in new titles has put the Company into loss (£1.7m versus a gain of £0.2m in 1999). The Company currently has 11 titles (12 SKUs) due for release this year including a number of
driving games, Sega PC ports, and some original titles such as GhostMaster and EndGame. The Company ended the year with cash reserves of £2m (although a favourable debtor versus creditor position gives them net
current assets of £4.3m) and a return to profitability next year is expected.
12/07/01 Empire secures major US distribution deal with Vivendi
Empire has agreed a 6 product (15 SKUs) North American distribution deal with French media giant Vivendi Universal Publishing. VUP (formerly called Havas Interactive) was created from the acquisition of
the games divisions of CUC and includes publisher Sierra (responsible for the hit PC series Half Life) and Blizzard Entertainment (creators of the successful Diablo, Starcraft and Warcraft series). VUP is one of the
largest publishers of PC entertainment product in North America.
The deal, analogous to many of the North American distribution deals struck by SCi, Rage and Gremlin in the past, would see marketing and sales
responsibility handed over to the US partner. Typical royalty rates in such a deal and at such a point in the games industry cycle (the early stages of a console's life are accompanied by higher software wholesale
prices) range up to around £8-£11 per console title and £7-£10 per PC title. In addition, Empire will receive a distribution royalty advance although the impact of this will not be felt until FY02.
It should be
said that more often than not such deals do not produce vastly improved financials because the increased sales and marketing difficulties inherent within the North American market coupled with the low importance
traditionally attributed to European product licenses by North American distributors have resulted in disappointing sales levels. Vivendi (even in its Havas Interactive and Sierra guises) has done relatively few of
these deals and, more crucially, has very limited exposure to the console business. Since it has been trying to break into the console market there is a likelihood that above average importance will be attached to
Empire's products (especially those with US brand recognition such as Starsky and Hutch and Antz) although much will also depend on the quality of the finished products that Empire ships. Overall, this looks like a
very positive development for Empire and will give the Company good exposure to the North American console market at a favourable time during the market's cycle.
26/07/01 £6m placing announced
Empire has made good
use of the positive developments with Vivendi and the improving market sentiment towards games stocks by announcing the completion of a £6m placing. The fund-raising, which comprised £4m of new money and a sale of
£2m of Empire founders Ian Higgins and Simon Jeffery's shares (reducing their combined holding to 73.4%) will be used to bolster the Company's balance sheet and provide it with sufficient working capital to grow its
licensing and publishing business. The facts that the placing was at only a marginal discount (at 45p) to recent share prices,
the founder shareholders had managed to dispose of (albeit a small) part of their shareholding and that the placing was not underwritten is in stark contrast to Eidos' recent rights issue. In addition to receiving support from existing shareholders, Empire is understood to have attracted an additional 7 major investors, further underlining the growing institutional interest in the games sector.
27/09/01 Empire FY01 Interims
Empire
announced a positive set of results for the 6 months ended 30/06/01 with sales up over 270% to £4.6m and losses before tax reduced to £1.6m. As indicated in previous news, Empire has used the fund raisings it
undertook at float and since to increase its momentum of product investment and releases. With the games industry entering it next major growth cycle, Empire's timing is good although the fruits of this investment
will only truly be felt during its FY02, in which the Company is set to return strongly to profit. In the mean time, as development costs are written off as incurred, the continued product investment for this period
(and beyond) will result in further downward pressure on the bottom line. Investors should therefore take a long-term view and pay more attention to the Company's cash position/cashflow and its development
expenditure (the former obviously determines the boundaries for the latter) during FY01 than the sales and bottom line as these will determine the upside potential not just for FY02 but for FY03 and beyond.
25/10/01 Empire concludes new deal with Sega
Empire
has continued its long-running relationship with console manufacturer-turned independent publisher Sega with a new European PC conversion and publishing deal. Empire has secured the rights to develop and publish two
major Sega titles, the 1m selling driving game Crazy Taxi and tennis simulation Virtua Tennis 2. In addition, Empire will publish the PC versions of Sega Marine Fishing and action game 100 Swords. All four will be
released during FY02. The deal is relatively low risk with the Company incurring a development cost but one that, as a conversion, is relatively small compared to original product development, and is only incurred
on the two high potential titles Crazy Taxi and Virtua Tennis 2. Sega will handle the development of the other two so Empire only incurs a marketing and sales risk in publishing them. Empire can expect a typical
per-unit return on each.
04/12/01 Release schedule change forces profits warning
Empire
has decided to delay the release of a key FY01 product, PS2 light-gun title Endgame until FY02 and in doing so has forced the company to issue a profits warning for its FY01 year-end. Other delays to Japanese
release contracts will also contribute to the Company's FY01 woes.
Release schedule changes can have a material impact on nearly all games companies, large or small although clearly the smaller companies suffer
disproportionately. However, as pointed out at the interim stage, investors should not be too focused on the bottom line during this, a key investment year. Furthermore, by delaying product from one period to
another one is simply augmenting the later period and so Empire's FY02 should benefit at FY01's expense. Perversely, the delays also serve to allow the addressable market of PS2s (and other consoles) to increase
further, thus extending the titles' potential.
We therefore do not expect FY01 to be significantly different to the Company's FY00 and the losses reported at the interim stage will continue into the second half
of the year.
News
07/03/02 Empire acquires eJay
Empire
has bought the assets of failed German games developer/publisher eJay from its liquidators. The deal, which could also see eJay's British and French subsidiaries join Empire, is worth up to 800k Euros
depending on eJay's future performance. eJay's principal products are based around music creation and over 3m units have been sold in some 50 countries since it was initially launched in the mid 90s.
eJay, which
was listed on Germany's Neuer Markt, had begun to diversify into online music service provision and had struggled to reach break-even. It's annualised revenues had reached over 6m Euros although it is unclear what
proportion came from boxed product sales. Empire will likely continue the boxed product division only and, in addition to picking up eJay's inventory, will continue product development. The first title, on PS2, will
appear in mid 2002 with other SKUs to follow.
The music creation software market has become a popular genre that, in many instances, merges gameplay with music composition. eJay products (of which there are a
large number) tend to be pitched towards more serious musicians and faces a fair amount of competition from similar products. However, the product range will benefit from Empire's superior product marketing and
distribution capability and may well grow to constitute a useful revenue stream for the Company.
11/03/02 Empire extends Vivendi deal to Europe
Empire
has revealed that it has extended its existing publishing deal with Vivendi to cover selected European territories. Exact details of the deal have not been made public (the Company is currently in a closed period),
however, the deal should impact FY02 and FY03 and will likely comprise two angles:
- Marginally improved distribution of Empire products in European territories. Although Vivendi are a substantial player in
the global games market, they are less established in Europe and Empire already has European publishing resources.
- Although not mentioned in the press release, we expect that Empire will receive an
advance payment recoupable against future sales. The exact quantum and timing of this is unknown but should impact FY02 and provide a valuable cash injection in the short-term.
More details as they are made available.
27/03/02 Prelims
There were few surprises in Empire's
results to the y/e 31/12/01. A modest increase in turnover was commendable although losses were worse than expected due in part to low gross margins (54% vs industry average 55%-60%).
The Xplosiv range of budget releases contributed around £1.8m during FY01 but remains a lower margin business. We expect more products to be added to the Xplosiv range, in paritcular from third party publishers.
As explained in December, Empire's principal focus has been FY02 and beyond and with some 9 major new products due for release during the year, the Company is expected to make a strong return to profitability.
The Company also revealed a strong balance sheet with just under £6m in cash. Further licence and company acquisitions appear likely.
09/04/02 Empire gains budget rights to Activision PC portfolio
Empire has secured the rights to 30 of Activision's PC portfolio and will market them through its Xplosiv budget label. Amongst the titles licensed are best-sellers Soldier of Fortune and Tony Hawke's Pro
Skater 2. The titles will be released at either £4.99 or £9.99.
01/08/02 Empire gains budget rights to Microsoft PC portfolio
Empire has continued its budget division expansion with the acquisition of the UK and Irish publishing rights to 9 of Mircosoft's most succesful PC games including Flight Simulator 98, Age of Empires Gold
Edition, Midtown Madness and Links Classic. Although limited to only a few territories, the deal is something of a coup for Empire as some of the Microsoft titles were susbtantial full-price sellers.
26/09/02 Interims and profits warning
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