IND EPENDENT TECHNOLOGY RESEARCH
Sector Update HOW REAL CAN WE MAKE GAMES AND VIRTUAL WORLDS?
July 2009 Imaging Technologies
Digital entertainment is growing at breakneck speed We are spending more and more time in front of screens consuming more and more digital entertainment. In fact each year approximately 16 billion square meters of screens is added to the market. This is the equivalent of over two A4-sized screens for every person on Earth. And we are hungry for more. Broadband internet access is approaching 100% penetration in developed economies and wireless broadband usage is growing fast in the developing world. This has allowed for ever more realistic entertainment to be delivered to a screen near you – from computer games and animated films to virtual worlds and mobile communities. The consumer is pushing the boundaries of what can be delivered using current business models and existing software and hardware.
Demand creates profitability problems for incumbents As the consumer demands more realistic entertainment environments so production costs, using traditional methods, have skyrocketed. Reality is not cheap to replicate. It requires more manpower as well as 3D imaging and animation technology. Whilst unit sales in the computer games industry are holding up in the recession, the share prices of the large computer games vendors are off over 50% versus 12 months ago and off 30% versus the S&P 500.
New online business models popular with consumers New business models and techniques are required to provide the consumer with digital entertainment in a sustainable and ultimately profitable way. In fact, within the computer games industry, for those companies that look at the world differently, there are huge profits to be made. Take ActivisionBlizzard. Its most popular game, World of Warcraft, is marketed, distributed and played online. In addition, it is charged at $15 per month. This is no “one hit wonder.” In Europe, CCP Games has adopted a similar model with EVE Online a space simulation game.
Animation software may hold the key Hugh Campbell
However, the whole film and computer games industry is not going online. To reduce time-
hugh@gpbullhound.com
to-market and to drive cost out of these traditional industries, we believe that a new
London: +44 207 101 7566
generation of animation software may hold the key. Companies such as Natural Motion, Image Metrics and Illuminate Labs allow studios to save costs without sacrificing integrity.
Alec Dafferner alec@gpbullhound.com
Now it is possible to create more realistic and controllable characters, in many cases without the need for actors, motion capture, set pieces or props.
San Francisco: +1415 986 0168 Remy Valette
Whenever a traditional industry comes under pressure, investment opportunities exist.
remy@gpbullhound.com
This report also touches on the advances in hardware, computer peripherals, holography
London: +44 207 101 7565
and 3D systems – all of which help make our digital lives more realistic.
Important disclosures appear at the back of this report. GP Bullhound Ltd. is authorised and regulated by the Financial Services Authority in the United Kingdom
VIRTUAL REALITY
THE OMNIPRESENCE OF IMAGING TECHNOLOGIES Explosion of screen availability for high quality content viewing and interaction According to DisplaySearch more than 340 million 40” screens, 156 million smartphones and 184 million laptops were shipped in 2008 - a total of 15.9 billion square meters of additional screen available to play content each year. This is the equivalent of 2.1 A4 sheets per people. As a matter of fact we are constantly surrounded by screens and displays at work, in transportation and at home. All these devices are constantly visually interacting with us. For example, cars have screens for speedometers, mapping systems and movie players providing information, services and entertainment. As a consumer we always want better image quality and intuitive interfaces. The iPhone is the perfect illustration of a device which answers these needs, the applications are visually attractive and the way to access and navigate them is easy and intuitive. For manufacturers and publishers these requirements mean more sophisticated graphic interface and higher resolution for content. This leads to technical challenges on processing power, communication bandwidth and storage. On the consumer side the situation is much more comfortable because devices able to play such content are multiples, widely available and affordable. Exhibit 1 illustrates visual devices that are constantly around us. Exhibit 01 – Imaging technology devices sample
TV screen PC monitor Portable players Smartphone 3D vision glasses
Source: Ostendo, Microsoft, NVIDIA, Apple, Archos
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VIRTUAL REALITY
Increasing number of imaging technology applications Imaging technologies are employed in the manufacturing or the delivery of product and services in a number of different ways. The main objective is often to improve realism, accuracy, reduce cost or enhance performance. Industries such as entertainment (3D animation), advertising, computer aided design (CAD - 3D modeling), healthcare (diagnostic) and internet (3D virtual world, virtual help desks, interactive websites) are increasingly dependent on imaging technologies. Exhibit 02 – Sample applications of imaging technologies
CAD
Movies & Games
Architecture
Avatar & Virtual Worlds
Healthcare Diagnostic
Source: Autodesk, Dreamworks, AP, Inteliwise, s3.images.com
The fastest growing application where multiple types of content are integrated into a highly engaging and interactive 3D graphic format is virtual worlds. In-stat forecasts more than 1 billion registered users and $3 billion of revenue by 2012, of which 90% is generated from the sale of virtual items. In the healthcare industry imaging technologies are used to improve our understanding of the human body and to cure patients more efficiently. Advances in medical imaging technologies are redefining the way physicians diagnose and treat diseases. For example at the IRCAD-EITS (cancer research center) they use 3D image rendering software and imaging technologies to improve the use of surgical devices as well as sharing medical images with surgeons around the world. This enables doctors to remotely capitalize on the knowledge from other specialists and also serves as the basis for eLearning materials. It is not surprising that more than 50% of General Electric’s healthcare revenue is coming from imaging technologies which accounts for more that $8.6 billion in 2008.
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VIRTUAL REALITY
SUCCESS OF COMPUTER GENERATED ENTERTAINMENT The macroeconomic trend in the entertainment industry is towards a growing consumption of digital content. In fact, a study from PricewaterhouseCoopers and Wilkofsky Gruen Associates reveals that spending on digital entertainment will grow 10% by 2013 in comparison to non digital entertainment which will be flat or declining. Over the last 10 years, after the launch of Toy Story by Buena Vista, computer generated entertainment has become a strong competitor to traditional movies. For example Shrek 2 (the best selling title from Dreamworks) is ranked 11 on the period 1900 – 2009 just behind Jurassic Park, Star Wars and Harry Potter. The Exhibit 03 below shows the ranking of top 10 computer generated images (CGI) movies and video games. The common characteristics between the top ranked CGI movies are a good story line supported by innovative technology. Special effect and 3D animation technologies enable creators to produce more immersive entertainment. The manufacturing techniques have a lot of similarities with the video games industry. Both share 3D animation and character modeling, the key differentiator is the live interaction engine for games which adds a lot of complexity. This prevents video games from reaching the image quality and finished aspect of “single story” of animated movies. Exhibit 03 – Top 10 computer generated movies and video games
Top 10 Movies Rank
Movie
Distributor
Box Office Release date
1
Shrek 2
Dreamworks SKG
$441m
2004
2
Finding Nemo
Buena Vista
$340m
2003
3
Toy Story 2
Buena Vista
$246m
1999
4
Shrek
Dreamworks SKG
$268m
2001
5
Shrek the Third
Paramount Pictures
$323m
2007
6
Monsters, Inc.
Buena Vista
$256m
2001
7
Toy Story
Buena Vista
$192m
1995
8
The Incredibles
Buena Vista
$261m
2004
9
Up
Buena Vista
$275m
2009
10
Cars
Buena Vista
$244m
2006
Top 10 video games Rank
Movie
Publisher
Platform Sales(Units) Release Date
1
Mario Kart
Nintendo
Wii
13.64m
November 05'
2
Wii Fit
Nintendo
Wii
13.05m
April 08'
3
Wii Play
Nintendo
Wii
11.00m
December 06'
4
Super Smash Brothers Brawl
Nintendo
Wii
8.31m
June 08'
5
Grand Theft Auto 4
Take Two
X-Box 360 6.64m
April 08'
6
New Super Mario Brothers
Nintendo
DS
5.53m
June 06'
7
Brain Training
Nintendo
DS
5.45m
June 06'
8
Grand Theft Auto 4
Take Two
PS3
5.25m
April 08'
10
Nintendogs
Nintendo
DS
4.52m
October 05'
Source: www.the-numbers.com, VGChartz.com
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VIRTUAL REALITY
A competitive industry exposed to consumer purchasing power and high innovation cost In 2008, despite the recession, spending on filmed entertainment declined only 2% and spending on video games increased 22% reaching respectively $38bn and $15.4bn (**). It shows that the consumer flow of money into the animated entertainment industry is considerable but despite healthy revenues, profitability issues remain for some players in the industry. Exhibit 4 below compares stock performance of digital entertainment companies versus the economy in general and technology companies in particular. The average drop over the past year for Electronic Arts, Crest Animation Studios and Rainmaker Entertainment is 57% whereas it is only -21% for S&P 500 and Nasdaq composite. The large amount of investment required offer more engaging entertainment experiences, is putting profitability under pressure. In addition companies are largely exposed to the success of individual titles whilst the cost associated with the production process is fixed. For example Disney Studios will produce 40.0% of its CGI films with 3D features in 2009 and this will be increased to 55.6% in 2010. This will enable Disney to charge consumer a premium of $2 per seat versus a non 3D movie. Exhibit 04 – Stock performance of animation & games companies 140
120
100
S&P 500 Nasdaq Composite
80
Rainmaker Entertainment Inc. 60
Crest Animation Studios Ltd. Electronic Arts Inc.
40
20
Jul-09
Jul-09
Jun-09
Jun-09
May-09
Apr-09
May-09
Apr-09
Apr-09
Mar-09
Mar-09
Feb-09
Jan-09
Feb-09
Jan-09
Dec-08
Dec-08
Nov-08
Oct-08
Nov-08
Oct-08
Oct-08
Sep-08
Sep-08
Aug-08
Jul-08
Aug-08
0
Source: Capital IQ
(**) Source: PricewaterhouseCoopers, Wilkofsky Gruen Associates
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VIRTUAL REALITY
INNOVATIVE SERVICE PROVIDERS REQUIRED Software industry overview for digital content production Digital movie and game producers employs three types of tools, proprietary software, specialized software for a segment of the process (i.e. modeling or rendering) and software packaged from large providers. Proprietary software suite A number of leading publishers and studios have developed their own proprietary software. For example Blue Sky (subsidiary of Fox Entertainment, creator of “Ice Age”) has developed a proprietary software called CGI Studio. The software suite is a programming language and renderer that can manipulate and visualize 3D elements. The core of the technology is a ray tracing engine that can simulate the way light behaves on objects and surfaces in a natural environment. Specialized software Specialized software is dedicated to a particular segment of the production process. It can be a full software solution for modeling, visual effects, rendering, lighting or a plug-in to integrate in a larger software package. Most start-ups are part of this category. Software package This class of software can do the same functions as the proprietary software with more features but less customization as they can address multiples domains. This includes major software provider for content creation, simulation and computer-aided design such as Autodesk (Maya, 3ds max), Adobe (after effect, lifecycle), Dassault System (3DVIA, Catia design). Exhibit 07 – Simplified overview of the 3D animation industry
3D animation universe Publishers
Outsourced
3D animation studios
Proprietary
Animation software
Specialized
Software providers
Multi purpose
Solution & services Source: GP Bullhound
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The steps in computer generated content production A quick summary on how the industry works and is structured will help to understand the positioning and offering of companies that operates in the CGI entertainment value chain. Exhibit 5 shows the various production steps of digital entertainment. Exhibit 05 – Computer generated movies production process Development
Pre‐Production
Production
Post‐Production
Script Writing Storyboarding Design ‐ Modelling Character Rigging Voice Recording Layout Animation Visual Effects Lighting Sound Effects Music Final Delivery
3‐4 Years
Source: Dreamworks Studio, Pipal Research
Modeling The modeling phase consists of the creation of 3D shapes for characters, objects and buildings. It is highly creative work done by artists and “digital sculptors”. In this area, Autodesk provides 3D modeling software called 3ds Max. However in 2008 the company bought Softimage to extend its offering to content creation for digital movies and games. Specialized studios like Sparx have dedicated teams of digital artists in charge of building 3D key frame for animated productions for clients such as Disney and TF1. Rigging This step is where all the possible movement and attitudes of the character are defined in order to create uniformity of the animation across the entire movie. The outcomes of rigging are computer scripts that will be used by the animation as a frame work. Proprietary software packages are quite common in this area but character rigging can also be implemented via modeling software including Maya from Autodesk. Layout The layout department of an animation studio ensures the appearance of the story shot by shot is consistent and establishes a shooting style as well as defining the spatial relationships between objects in a scene. Animation The animation process gathers the information and data from the modeling, rigging and voice recording steps so as to create movements and actions of the 3D objects and characters. This step involves various techniques to create realistic animations. Physic simulation models based on scientific laws are used in order to make movements as realistic as possible. Other techniques include motion capture to digitalize facial movements and gestures. 7 GP Bullhound Ltd.
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VIRTUAL REALITY
The animation segment is a convergent area where a wide range of companies are focusing on the various aspects of animation i.e. global motion, specific movements and real time interaction. The company Natural Motion is focusing on Dynamic Motion Synthesis (DMS) specially targeted for real time interactions employed during video games, movies and simulations. The technology is used by clients such as Electronic Arts or Sony Imageworks for games and Airbus or Northrop Grumman for simulations. The startup Image Metrics is focusing on facial animation where modeling is a complex task to achieve and physics models cannot be utilized. The company has developed a facial motion capture technology that creates 3D models based on the expressions and emotions of real actors. In 2007 Intel bought Havok for $110m a provider of animation tools for games. The company offers an animation software development kit which can be combined with physics and a special effects platform to produce realistic graphical designs and motions. In terms of market size the segment is difficult to measure. According to jonpeddie.com the worldwide 3D modeling and animation market is estimated at $221m today growing at +11% CAGR between 2010 and 2013. Exhibit 06 – Worldwide 3D modelling and animation market size $m 350
329 293
300 262 250
238
237 221
219 200
150
100 2007
2008
2009
2010
2011
2012
2013
Source: www.jonpeddie.com
The potential growth for the animation market is considerable as more and more activities are done on screens. For example the company Animantz employs animation techniques to improve e-learning interfaces and it has worked for clients including Loreal and Asayahi Airlines. Lighting The light is a key element in the perception of volume and perspective in 3D animation. The task of generating realistic lighting conditions especially in real time is quite complex as it impacts all characters and objects in a scene. Companies like Geomerics and Illuminate labs are specifically focusing on providing solutions for dynamic lighting creation and optimization. 8 GP Bullhound Ltd.
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VIRTUAL REALITY
Visual Effect Special effects are built using specific plug-ins to existing 3D modeling and animation software. For example visual effects for object explosion can be simulated using Havok Destruction. Autodesk has several plug-ins for smoke and light simulation (Autodesk Smoke, Autodesk Lustre). Blue Sky uses proprietary software tools to create animated effects in order to highlight actions and transmit emotions. Particular programs have been coded to simulated even tiny details such as the impact of the rain on the character’s fur. Exhibit 07 – ICE Age Character and Visual effects to create immersive entertainment
Actions
Rain
Emotions
Source: Blue Sky Studio
Rendering The rendering process is the creation of the final image at full resolution from the scene’s modeling and animation characteristics. This process requires the most processing power and memory. To decrease the amount of work, various layers can be rendered separately and then assembled into the final movie using compositing software. In 2007 NVIDIA bought Mental Images for $80m, the company sells rendering software that combines physically correct light simulation and high performance images.
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VIRTUAL REALITY
DISRUPTIVE HARDWARE TECHNOLOGIES 3D stereo vision systems One major area of innovation that will enable the entertainment industry to charge higher price and generate better margins is 3D stereoscopic imaging. NVIDIA is already selling its GeForce 3D Stereo Vision system for gaming applications in partnership with Samsung. The technology requires 120Hz LCDs and shutter glasses in order to recreate the illusion of true 3D images. The illusion of depth is created by playing two different images, representing two perspectives of the same object to each eye. Disney’s Digital 3-D (*) process that plays 3D film, uses polarized glasses associated with fast cinema projector at 144 frames per second, six times as fast as a normal movie. Every 1/24 of a second (the projection frame rate for normal 2D movies) the two scene views called "right eye" and "left eye" are each shown 3 times. Due to persistence of vision, the 72 image frames and 72 black frames fed to each eye in a given second will recreate true 3D flicker-free images.
Complete solution from content to viewing IMAX offers a 3D viewing experience with proprietary technology that combines specific projection systems, audio settings, geometry of the facilities and also specific camera and shooting conditions for the content creation. THR Research shows that admission prices for 3D-Imax movies are $5 above standard technologies which accounts for an increase of 33% on the average price of a cinema ticket charge.
Holographic projections Hologram technologies are based on the reproduction of the interference and diffraction of the light coming from an object in order to create a 3D image. This technology doesn’t require the viewer to wear any specific glasses. 3D animated holograms are often projected using a combination of laser beams. The company ViZoo offers Cheoptics360, a free floating display that can produce large 3D animated images viewable on a 360˚ angle.
Blending virtual and real for more immersive entertainment It is now also possible to connect real life physical experiences to movies and games. Ambient features such as back ground color, airflow and vibration can be automatically played and adjusted during the entertainment with pre-recorded effects for movies and real-time actions for video games. Elaborated discrete systems are available, for example the company amBX (spin off from Philips research) provides full “sensory surround” entertainment experiences with its proprietary technology for games, movies and web enhancements.
(*) Source: http://en.wikipedia.org/wiki/Disney_Digital_3-D
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VIRTUAL REALITY
Augmented reality is part of the trend toward immersion and engagement with the viewers. The concept is to link images and real objects with an added layer of interaction. The startup Total Immersion delivers augmented reality solutions where virtual components are dynamically merged into live video. The application range of this type of technology is wide and covers entertainment, publishing, digital marketing and theme parks.
Competition between CPU and GPU to take control of the processing priority for 3D animations and modeling calculations. GPU has primarily been designed to render graphics at higher resolution and higher frame rates without increasing the workload on the main processor. Today their performance enables GPU vendors to position their GPU offering as “coprocessor” within the computer architecture. In addition new operating systems such as Mac OS X10.6 and Windows 7 have a stronger dependency on GPU processing capabilities. For example NVIDIA’s product line called PhysX enables the GPU hardware to do physics calculations that are the core of movement animation in CGI movies and games. The company bought AGEIA Technologies for $30m in 2008, a provider of hardware accelerated physics software that enables realistic 3D motion for PC game. Exhibit 8 shows the growth in revenue from hardware GPU vendors has increased 14% on the period 2005-2007 compared with a 7% decline in CPU revenues. Exhibit 08 – Relative revenue growth between CPUs and GPUs
120% +14%
115% CPU
GPU
110% 105% 100% -7%
95% 90% 85% 80% 2005
2007
Source: Mercury Research
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VIRTUAL REALITY
SELECTED COMPANY PROFILES Animantz was established in 2005. It started with a small team, catering to animation and eLearning services and currently four different business-units, eLearning, 2D Animation, Flash Games and Preproduction.
amBX is a technology licensing business which delivers “sensory
surround�
entertainment
experiences.
amBX
enables content creators to add real world effects using light, color, rumble and air flow, through licensed amBX devices, to the virtual worlds of computers, games, music, movies and TV entertainment.
Geomerics was established in 2005, the company is specialized in graphics software for the games industry. Its product, Enlighten, provides real time the light effects for a particular scene. This introduces film quality lighting and atmosphere into games.
Illuminate Labs develops rendering and baking technology for games developers. Its two products are Beast, a game engine-independent content pipeline tool used for advanced global illumination and dynamic relighting of characters, and Turtle, a product for Autodesk Maya that combines advanced rendering technology with baking functionality. Image Metrics provides superior facial animation solutions to the entertainment industry. Its mission is to create believable facial performances that emotionally connect audiences to digital characters in films, games and other forms of entertainment. The company was founded in the UK in 2000
NaturalMotion Ltd is the creator of Dynamic Motion Synthesis (DMS), a break-through in 3D character animation. Based on Oxford University research, Dynamic Motion Synthesis creates high-quality 3D character animation in real time by combining artificial intelligence, biomechanics, and dynamics simulation. PixelPlay is the leading provider of games, and entertainment services and technologies for Interactive TV and IPTV. PixelPlay's distribution network reaches over 50m digital TV households worldwide creating an unparalleled offering to game brand licensors, pay-TV operators and advertisers.
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VIRTUAL REALITY
Presagis
offers
a
commercial-off-the-shelf
(COTS) modeling, simulation, and embedded display graphics software. Its solutions are used in for games, military and industrial applications. Customers includes including Vivendi Games, Boeing, Lockheed Martin, Airbus, Thales and Northrop Grumman.
Founded in 1995 and based in Paris, France, Sparx is a 3D animation studio. It employs 100 digital artists in Paris, and 120 digital artists and programmers at its fully-owned studio in Ho Chi Min City, Vietnam. The company has earned over 100 credits in feature films, direct-to-video movies, television shows, television commercials and music videos.
The Ballistic Pixel Lab. is a full service Post Production 2D/3D
/
Development
animation,
company
special
effects,
providing video
compositing/editing & game development.
Total Immersion delivers augmented reality solutions for digital marketing, publishing and theme parks. Its technology enables interactive experiences where live video is merged with real objects.
Trinigy is a privately owned company selling game engine technology and support to video game development studios across the globe. Engineered to provide creative and technical freedom, the company´s Vision Engine is currently in use in more than 100 commercial game productions by companies such as Ubisoft, Take 2, Dreamcatcher, NeoWiz, Spellbound, Nitro Games and more.
ViZoo is a 3D holographic vision system provider. Its technology enables free-floating 3D images, the company also assists its clients in producing content for 360 viewing.
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VIRTUAL REALITY
KEY EVENTS AND SECTOR CONFERENCES Develop Awards, Date: annually in July, Location: Hilton Metropole Hotel Brighton,UK, The Develop Awards are the UK's only peer-voted awards for the European development industry. Every July, Develop hosts the biggest awards night on the game development industry calendar with over 400 people attending
Technology and Engineering Award Emmy, Date: annually in January, Location: The Venician, Las Vegas. Launched in 1948, Technology and Engineering Awards Emmy honor development and
innovation
in
broadcast
technology
and
recognize
companies and individuals for breakthroughs in technology.
GDC '09 Europe, Date: August 17 - 19, 2009 , Location: Cologne, Germany. GDC Europe focuses on Business, Game Design, Production, Programming, and Visual Arts.
NAB Show, Date: annually in April, Location: Las Vegas Convention Center, NAB Show is the world’s largest digital media industry event attended by media,
entertainment
and
communications
professionals who share a passion for the next generation of video and audio content across multiple platforms The Academy Awards, Date: March 7th 2010, Location: Kodak Theater , Hollywood, The Academy Award for Visual Effects is an Oscar given to one film each year that shows highest achievement in visual effects. 8th Annual VES Awards, Date: February
2010,
Location:
Angeles, California,
Los
The Visual
Effects Society (VES) is the entertainment industry's only organization representing the full breadth of visual effects practitioners including artists, technologists, model makers, studio leaders, supervisors and producers in all areas of entertainment.
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VIRTUAL REALITY
SECTOR VALUATIONS M&A Activity Â
Deal Size ($m )
EV / Sales
EV / EBITDA
Autodesk, Inc. (NasdaqGS:ADSK)
33.5
na
na
Develops 3D animation tools to digital artists in the games, film, and TV industries
AGEIA Technologies, Inc.
NVIDIA Corporation
29.7
na
na
Develops hardw are-accelerated physics for PC games
31-Dec-07
Colorland Animation Ltd.
China Animal Healthcare Ltd. (SGX:EP4)
na
na
na
Operates as a hand draw n (2D) and computer-generated (3D) animation studio
01-Dec-07
Activision
Vivendi
5,759.8
4.1x
19.2x
30-Nov-07
mental images GmbH & Co. NVIDIA Corporation KG
80.5
na
na
08-Nov-07
GameOn Co Ltd.
NEOWIZ Games Corporation; TStone Corp.
141.4
2.4x
8.9x
08-Nov-07
TT Games Group
Warner Bros. Home Entertainment Group
210.9
1.7x
15.2x
17-Oct-07
Kenjitsu
Oberon Media, Inc.
na
na
na
Interactive digital media asset outsourcing services to the multimedia industry
14-Sep-07
Havok
Intel Corp
110.0
na
na
A provider of interactive softw are and services used by digital media creators in the game and movie industries
02-Mar-07
The Mill
The Carlyle Group
118.3
na
na
Operates as a visual effects company. It offers consultancy and processing services for various data acquisition shoots
24-Oct-06
ATI Technologies Inc.
Advanced Micro Devices Inc.
4,709.7
2.0x
nm
Engages in the design, manufacture, and sale of graphics and multimedia processing products and technologies
26-Jun-06
Pixmantec ApS
Adobe Systems Inc.
na
na
na
Develops digital imaging softw are that provides advanced w orkflow management and processing capabilities for digital camera raw files
31-May-06
Patagonik Film Group, S.A. Telefonica de Contenidos, S.A.U.
na
na
na
Offers a digital studio, characters' designers, 3D animators, and computer artists
16-May-06
Digital Domain
Wyndcrest Holdings, LLC
35.0
na
na
Creates digital imagery for feature films to provide visual special effects and/or animation
05-May-06
Pixar, Inc.
Walt Disney Co. (NYSE:DIS)
7,618.7
24.1x
32.1x
04-Oct-05
Alias Systems Corp.
Autodesk, Inc.
197.0
na
na
Develops, markets, and supports computer graphics softw are products
01-Sep-05
BGT BioGraphic Technologies, Inc.
Presagis Inc.
2.6
na
na
Develops artificial intelligence softw are for game developers, animators, and military simulation
25-Jan-05
Visual Concepts Entertainment, Inc.
Take-Tw o Interactive Softw are Inc.
24.0
na
na
Provides technical and creative services to producers and distributors of television programming, commercials, multimedia, and feature films
28-Jul-04
Criterion Softw are Group Ltd.
Electronic Arts Inc.
67.0
na
na
The company assists in game-specific engineering, performance optimization, pre-production multi-platform toolchain development
18-Jun-01
Altamira Group
LizardTech Inc.
na
na
na
Develops softw are that enables high resolution graphics using advanced imaging technology.
20-Aug-98
Discreet Logic Inc.
Autodesk, Inc.
453.4
3.0x
11.2x
7.1x 3.0x
17.3x 15.2x
Date
Target
Buyers
17-Nov-08
Softimage Co.
04-Feb-08
So urce : GP B ullho und, Capital IQ
Mean Median
Business Description
Develops and publishes entertainment softw are for creating games
Provides rendering and 3D modeling technology to the entertainment, computer-aided design, scientific visualization, and architecture industries Provides online gaming services
Develops and publishes games for young players and their families
Operates as a digital animation studio w hich creates animated feature films
Engaged in digital systems and softw are for the creation of imagery and special effects for film, video, HDTV, broadcast, and Web
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VIRTUAL REALITY
Private Placements Deal Size ($m ) 14.4
Date
Com pany
Investors
09-Jul-09
Emergent Game Technologies Inc.
Adena Ventures; Hopew ell Ventures, L.P.; Jerusalem Venture Partners; Walker Ventures; WorldView Technology Partners, Inc.
18-Feb-09
Vertex Animation Studio FZ- Intel Capital LLC
na
Provides services in virtual reality applications, and 3D multiplatform games
16-Dec-08
Image Metrics, Ltd.
Saffron Hill Ventures, Ltd.
6.5
Provides facial animation solutions to the entertainment industry
17-Nov-08
Softimage Co.
Autodesk, Inc. (NasdaqGS:ADSK)
33.5
Develops 3D animation tools to digital artists in the games, film, and TV industries
27-Jun-08
aniBoom, Ltd.
Draper Fisher Jurvetson; Evergreen Venture Partners; Tamir Fishman Ventures
10.0
Virtual animation studio that creates, produces, and distributes cartoons and animations
05-Jul-07
Geomerics
Trinity Hall, University of Cambridge
03-Jul-07
Emergent Game Technologies Inc.
13-Feb-07
aniBoom, Ltd.
Adena Ventures; Cisco Systems, Inc. (NasdaqGS:CSCO); Copan; Jerusalem Venture Partners; Walker Ventures; WorldView Technology Partners, Inc. Evergreen Venture Partners
15-Aug-06
NaturalMotion Ltd.
04-Jul-06
4.0
12.0
Business Description Offers video game development tools and middlew are for gaming design
Provides graphics radiosity lighting product softw are for the games industry
Offers video game development tools and middlew are for gaming design
4.5
Virtual animation studio that creates, produces, and distributes cartoons and animations
Benchmark Capital; Isis Innovation Limited
na
Develops and markets animation technologies for games and film post production
MoonScoop Group
CDC Entreprises; FP Gestion
5.1
Creation, production and distribution of animated series
01-Jan-06
MoonScoop Group
BNP Paribas Capital
14.2
Creation, production and distribution of animated series
06-Sep-05
CritterPix, Inc.
Unidsclosed
1.4
Animation studio that combines original stories and computer generated entertainment. The company is based in San Rafael, California.
27-Apr-05
Illuminate Labs AB
Industrifonden; Volvo Technology Transfer AB
1.0
Develops rendering, dynamic relighting and baking technology (tool for Maya)
10-Aug-04
Telekinesys Research (Havok)
Trinity Venture Capital
na
Provides interactive softw are and services for digital media creators in the games and movie industries
06-Oct-02
Telekinesys Research (Havok)
ICC Venture Capital; LTG Development Capital Ltd.; Trinity Venture Capital; Enterprise Ireland, Investment Arm; AIB Equity
6.9
Provides interactive softw are and services for digital media creators in the games and movie industries
02-Jul-02
Image Metrics, Ltd.
Saffron Hill Ventures, Ltd.; MC Capital Europe; Close Investments Limited
4.4
Provides facial animation solutions to the entertainment industry
So urce : GP B ullho und, Capital IQ
16 GP Bullhound Ltd.
July 2009
15.8
GP Bullhound Ltd.
1,738.8
1,365.4
Perfect World Co., Ltd.
Capcom Co. Ltd.
Dolby Laboratories Inc.
4.5x
31-Jul-09
(*) P rice / Diluted EP S B efo re Extra
So urce : GP B ullho und, Capital IQ
4.1x 4.5x
6.5x
5.8x
5.9x
1.9x
2.5x
2.0x
Median
401.8
643.1
4,162.1
4,024.8
4,711.1
5,749.6
14,706.3
Mean
481.8
4,981.6
4,706.6
Autodesk, Inc.
477.5
5,752.8
Dassault Systemes SA
DTS Inc.
7,062.4
NVIDIA Corporation
IMAX Corporation
17,020.4
Adobe Systems Inc.
Ttechnology providers
1.8x 1.5x
0.8x
4.1x
1.5x
0.9x
1.6x
Median
1,134.0
3,081.4
3,540.4
42,457.4
Mean
685.8
3,103.8
Marvel Entertainment, Inc.
Lions Gate Entertainment Corp.
3,343.3
31,608.4
Time Warner Inc.
Toho Co. Ltd.
46,687.0
Walt Disney Co.
Movie and Entertainm ent
2.2x
0.3x
0.5x
1.2x
6.9x
0.8x
1.2x
4.9x
1.2x
58,355.0
3.2x 1.0x
Median
324.6
654.0
1,158.7
1,581.3
1,388.6
1,775.7
2,819.5
4,415.8
11,703.4
Mean
452.7
1,606.1
UBI Soft Entertainment SA
763.6
2,556.3
Square Enix Holdings Co., Ltd.
THQ Inc.
3,310.4
Shanda Interactive Entertainment Ltd.
Take-Tw o Interactive Softw are Inc.
6,935.8
14,733.4
Electronic Arts Inc.
Activision Blizzard, Inc.
Gam e publisher
1.4x 0.9x
0.9x
1.6x
0.5x
0.5x
3.3x
Median
2.4
19.3
15.3
122.3
EV/LTM Total Rev
Mean
2.4
13.6
White Shark AB
Crest Animation Studios Ltd.
236.5
2,456.5
($m )
2,732.3
EV
($m )
Market Cap
Rainmaker Entertainment Inc.
Toei Animation Co. Ltd.
DreamWorks Animation SKG Inc.
Digital anim ation
Com pany Nam e
EV/NTM
4.5x
4.0x
5.9x
4.5x
6.0x
2.4x
2.5x
1.9x
5.2x
1.6x
2.9x
0.7x
7.6x
nm
1.5x
1.6x
1.0x
1.8x
0.4x
0.6x
1.3x
5.2x
0.9x
0.9x
3.7x
1.0x
2.4x
2.2x
2.2x
na
na
na
0.6x
3.9x
Total Rev
11.6x
13.3x
21.9x
nm
11.6x
9.1x
11.6x
nm
12.5x
7.9x
7.1x
nm
8.7x
9.5x
3.2x
7.1x
7.9x
9.0x
1.1x
3.8x
5.9x
12.7x
7.5x
8.3x
10.9x
nm
21.6x
10.8x
8.4x
nm
nm
10.8x
3.3x
11.1x
EBITDA
EV/LTM
12.1x
15.5x
21.8x
13.2x
12.1x
12.1x
10.1x
26.8x
12.0x
11.6x
12.2x
19.1x
15.8x
nm
6.5x
7.3x
8.2x
7.2x
8.1x
nm
6.1x
9.9x
2.8x
4.9x
8.6x
9.0x
8.2x
9.0x
9.0x
na
na
na
4.7x
13.3x
EBITDA
EV/NTM
PE*
25.5x
39.6x
nm
nm
19.7x
87.7x
26.9x
nm
24.1x
15.2x
34.4x
nm
15.2x
74.4x
nm
13.6x
18.2x
21.9x
nm
nm
15.9x
20.2x
16.9x
38.3x
18.2x
nm
nm
30.6x
30.6x
nm
nm
nm
45.4x
15.8x
LTM
PE*
24.0x
37.2x
53.0x
nm
22.9x
25.0x
17.5x
82.4x
22.4x
14.2x
19.8x
nm
32.5x
nm
12.9x
14.2x
15.5x
16.7x
nm
nm
12.8x
13.6x
22.7x
15.5x
13.8x
21.8x
17.0x
20.3x
20.3x
na
na
na
16.3x
24.4x
NTM
29.5%
31.7%
29.5%
nm
51.2%
20.6%
21.5%
nm
35.7%
25.7%
28.6%
nm
46.6%
16.4%
28.8%
22.5%
17.7%
25.6%
31.0%
13.7%
20.4%
54.6%
10.2%
15.0%
45.5%
nm
14.7%
16.1%
16.8%
nm
nm
4.7%
16.1%
29.6%
Margin
26.9%
29.2%
26.9%
34.3%
49.1%
19.6%
24.8%
7.1%
42.9%
22.6%
24.2%
3.8%
47.7%
nm
22.9%
22.4%
25.2%
26.6%
5.1%
nm
21.3%
52.2%
30.9%
19.3%
43.0%
11.5%
29.0%
21.1%
21.1%
na
na
na
13.2%
29.0%
Margin
LTM EBITDA NTM EBITDA
12.2%
11.1%
0.9%
9.6%
12.2%
16.9%
11.0%
14.0%
13.1%
5.6%
6.5%
4.5%
5.6%
10.1%
5.2%
7.1%
-6.4%
-4.3%
-11.6%
-2.2%
13.3%
18.7%
-29.8%
-6.4%
-8.6%
-2.1%
-10.2%
13.1%
7.6%
-6.5%
17.0%
13.1%
0.2%
14.3%
62.9%
64.0%
102.0%
89.5%
62.9%
31.7%
31.7%
62.6%
67.9%
4.5%
12.9%
4.5%
43.8%
-0.3%
-4.8%
21.5%
35.6%
44.4%
69.9%
35.6%
10.9%
141.4%
20.3%
-18.5%
70.4%
39.1%
30.7%
43.6%
16.8%
-77.0%
70.3%
48.1%
-1.1%
43.6%
6 Months
-3.9%
-6.9%
-3.9%
17.0%
2.3%
-31.6%
-23.3%
13.0%
-21.6%
-17.2%
-19.4%
-40.5%
14.0%
-15.5%
-37.9%
-17.2%
-36.4%
-22.6%
-55.8%
-58.2%
-35.3%
35.1%
-65.5%
-28.7%
91.9%
-50.3%
-36.4%
-37.4%
-39.0%
-81.9%
-37.4%
-63.0%
-19.1%
6.1%
12 Months
Share perform ance 1 Months
United States
Canada
United States
United States
France
United States
United States
Canada
United States
Japan
United States
United States
United States
United States
Japan
China
France
Japan
China
United States
United States
Sw eden
India
Canada
Japan
United States
Headquarters
VIRTUAL REALITY
Selected Listed Companies
17
July 2009
VIRTUAL REALITY
Analyst Profiles GP Bullhound is a research centric investment bank headquarted in London with offices in San Francisco.
Hugh Campbell – Hugh is a co-founder of GP Bullhound. He previously worked at Goldman Sachs as an equity research analyst and prior to that in corporate finance at Citibank. He graduated from Pembroke College, Oxford University.
Alec Dafferner – Alec is a Partner and Head of GP Bullhound’s San Francisco office. With over ten years of technology investment banking experience, Alec has executed over 40 transactions for emerging growth companies in the U.S. and abroad, raising over $10 billion in capital and advising on over $2.5 billion in mergers and acquisitions. Prior to joining GP Bullhound, Alec was an Executive Director at UBS Investment Bank.
Remy Valette – Prior to GP Bullhound, Remy worked as an M&A analyst at Societe Generale covering a number of industrial sectors. He holds a Masters in Corporate Finance from EM Lyon Business School and also a Master in Applied Physics from Paris VII University.
Disclaimer: Information contained in the document does not constitute an offer to buy or sell or the solicitation of any offer to buy or sell any securities. This document is made available for general information purposes only and is intended for institutional investors who have a high degree of financial sophistication and knowledge. This document and any of the products and information contained herein are not intended for the use of private investors in the UK. Although all reasonable care has been taken to ensure that the information contained in this document is accurate and current, no representation or warranty, express or implied, is made by GP Bullhound Ltd. as to its accuracy, completeness and currency. This report contains forward-looking statements, which involve risks and uncertainties. Actual results may differ significantly from the results described in the forward-looking statements. In particular, but without limiting the preceding sentences, you should be aware that statements of fact or opinion made, may not be up-to-date or may not represent the current opinion (whether public or confidential) of GP Bullhound Ltd. In addition, opinions and estimates are subject to change without notice. This report does not constitute a specific investment recommendation or advice upon which you should rely based upon, or irrespective of, your personal circumstances. Use of this document is not a substitute for obtaining proper investment advice from an authorized investment professional. Potential private investors are therefore urged to consult their own authorized investment professional before entering into any investment agreement. Past performance of securities is not necessarily a guide to future performance and the value of securities may fall as well as rise. In particular, investments in the technology sector can involve a high degree of risk and investors may not get back the full amount invested. GP Bullhound Ltd. is authorised and regulated by the Financial Services Authority in the United Kingdom. GP Bullhound Ltd, 52 Jermyn Street, London, SW1X 6LX http://www.gpbullhound.com, info@gpbullhound.com, +44 20 7101 7560
18 GP Bullhound Ltd.
July 2009