1. Gaming Mergers & Acquisitions Update Jim Perkins Director, Corum Group May 2013

2. 2 Introduction Jim Perkins Digital Media Specialist Corum Group, Ltd. Entertainment software entrepreneur Jim Perkins is directly responsible for publishing some of the industry’s biggest franchises, including Unreal, Duke Nukem, Wolfenstein, Doom, Hunting Unlimited, and Driver. A well-known senior executive with a 22-year track record of publishing such bestselling hits, he founded and grew two highly successful software publishing companies (FormGen and ARUSH) from start- ups to multi-million dollar enterprises. Jim also launched Radar Group, the first Transmedia Incubation Company to monetize entertainment franchises across all media, including film and television. His success and extensive experience in software production, marketing and public relations, packaging, online and retail distribution and software M&A, uniquely qualify him as an expert in building value and realizing wealth. Jim joined Corum Group, the world’s leading software M&A firm, with a specific focus on educating and helping prospective sellers maximize the value of their digital media companies.

3. 3 Agenda Background: Digital Game Trends Spotlight: China, Japan, South Korea Review of Recent M&A Case Study: Asian Notables Conclusions Looking Ahead

4. 4 Game Trends

5. 5 Digital Game Sales Growth Digital Game & Downloadable Content +33% year-over-year in the US and EU Digital content 40% of total game spend in US Asia projected to dominate online and mobile games by 2016 Chinese gamers are younger, 37% under 18 Mobile game spending in China will exceed $1 billion in 2013 Mobile game spending in US @ $2.1 billion in 2012 Source: NPD, iResearch & Digi-Capital

6. 6 Global Video Game Revenue

7. 7 Shift to Tablets Source: Juniper Research Tablet-based In-App gaming purchases to jump from $301 million in 2012 to $3 billion in 2016 Far East/China will generate 3x the In-App revenue on tablets than North America by 2016 Asia is overtaking North America as a key revenue producing market An ongoing shift to mid-core gaming is increasing the importance of tablets “Dual Launch” on Google Play and App Store will become the standard instead of launching App Store followed by Android

8. 8 All About Apps iOS Mobile Gaming Revenue Q4 2012 35% Asia 40% North America Google Play Mobile Gaming Revenue Q4 2012 60% Asia 20% North America Source: App Annie

9. 9 China, Japan, South Korea

10. 10 Chinese Mobile Gaming 425 million new smartphone installs this year Mobile gaming revenue growth 50%+ through 2015 Carrier billing increases will allow monetization Fragmentation Ecosystem: Android 70%+ (counterfeit Android) App Store: > 500 App Stores Content: Action, Puzzle, MMO – no leader Launch Strategies Focus on Android Develop relationships with App Store Operators Launch with a Local Partner to 1)Help localize titles 2)Cut through Chinese bureaucracy Source: ufert.se

11. 11 Japanese Gaming Japanese gamer profiles similar to European & North American players. Older players = higher monetization rate $4.16 billion social gaming market in 2012 ARPPU = @ $50/month Ecosystem = 55% Android, 36% iOS, 9% Other Culture Counts No foreign mobile/social gaming company is really successful in Japan Do not try to sell in Japan unprepared Source: ufert.se

12. 12 South Korean Mobile Gaming 2011: South Korea deregulates review of App Store games 2012: Mobile gaming surges 2012: Kakao Games, mobile gaming network launch, $51.6 million revenue within 3 months 2013: 41% mobile gaming growth forecast 2013: Gamevil revenue forecast at $100 million; its revenue increased 64% in 2012 2017: Market stabilizes at 12-18% year-over-year growth Source: ufert.se

13. 13 Game M&A

14. 14 Top Strategic Acquirers: 2012

15. 15 Game M&A - 2012 Game acquisitions set a new record in 2012 - $3.2B disclosed, estimated $4 billion total transaction value 15% increase from 2011 Number of deals declined by 12% Average transaction size rose 60% to approx. $50 million 7 of top 10 deal buyers were from South Korea, China or Japan Source: 451 Research, Digi-Capital

16. 16 Game M&A Transaction Value - 2012 Source: Digi-Capital

17. 17 Game M&A Transaction Volume - 2012

18. 18 Game M&A History

19. 19 Game Investment - 2012 Game investment transactions were up 9% Average game investment transaction value was down 57% Average size of investment - $5 million More mobile game studios were funded, but the money needed to fund the studios was smaller Kickstarter accounted for 6% of all investments Source: Digi-Capital

20. 20 Game Investment Transaction Value - 2012 Source: Digi-Capital

21. 21 Game Investment Transaction Volume - 2012 Source: Digi-Capital

22. 22 Asian Game M&A Transactions Past 12 Months Aeria Games & Entertainment (Japan) Gamepot - Online & social network games Aspect Gaming (China) Longshot Interactive - Baccarat game for Facebook users in Asia ChangYou.com (China) 7Road - MMORPG game, DDTank Chengdu B-Ray Media Co. (China) Gamegoo Information Tech - Online video games in China

23. 23 Asia Game M&A Transactions Past 12 Months Giant Interactive (China) Backward Heroes - Online marketing and video services Gree (Japan) Pokelabo, Inc. – Japanese mobile video games AppAnt Studios – Android video game, Dino Life Paprika Lab – Facebook games + iOS quiz game GungHo Online Entertainment (Japan) Grasshopper Manufacture – Console and mobile video games Kog Corporation (South Korea) Kill3rCombo – MMORPG games for consumers globally

24. 24 Asian Game M&A Transactions Past 12 Months Mobcast, Inc. (Japan) Entercrews Co. – Web and mobile role-playing games Nexon (Japan) gloops, Inc. – Mobile and social networking games inBLue, Inc. – Mobile and social networking games Sega Corp. (Japan) Relic Entertainment – Canadian PC and console-based games Sony Computer Entertainment (California) Gaikai – Videogame delivery network operator Webzen (South Korea) Gala Networks – Online MMO game, gPotato

25. 25 Case Study – Asian Notables

26. 26 Asian Notables Giant Interactive Group, Inc. was founded in 2004 and listed on the NYSE in 2007. Gree, Inc. is a social gaming for mobile phones pioneer, founded in 2004. NEOWIZ Game Corporation is an internet and online game service company founded in 1997. Nexon Co. Ltd. was founded in 1994 and an early adopter of free-to-play online games.

27. 27 Asian Notables Source: Financial Times

28. 28 Asian Notables Source: Capital IQ & 451 Research 9

29. 29 Asian Notables “M & A Outlook” All companies are trying to increase their mobile presence via: M&A Partnerships Internal Development Nexon’s strong earnings and its 2012 purchases suggest it will continue buying in 2013 Giant announced M&A will be one of its avenues to develop its mobile offerings

30. 30 Conclusions and Looking Forward

31. 31 General Game Sector Tech M&A Outlook 2013 off to a slower start than 2011 & 2012: US tax law changes accelerated some M&A into 2012 Seasonality - larger deals usually land in H2 Less sophisticated buyers tempted by mass denial of how hard to build Frothy social games market got ahead of itself

32. 32 Potential Drivers of a Double Top Platform rotation: tablets, console cycle Software/design innovation: tools, wild cards Legal changes such as equity crowdfunding: -Kickstarter already nearly $50M without equity -Pressurizes market, brings new buyers US Android games market growth -Google Play games services announced -Speaking of which …

33. 33 Arrival in Force of Top-Tier, Sophisticated Buyers Yahoo, Google, etc. Tech-sophisticated, deep expertise at hand Realistic about need to buy Disciplined, established M&A processes Able to factor in costs of hiring and training Deep pockets and long-term outlook Strategically aware and driven

34. 34 Conclusion An incredible industry with Asia uniquely positioned An incredible year of M&A, with more to come Tech, talent and growth drive demand Strategic players arriving Opportunities abound

35. 35 Thank you Jim Perkins jimp@corumgroup.com