Letter from the CEO
Looking back on an extraordinary business year – incidentally, also my first as Group President and CEO – I am struck by how much we have accomplished as a company, as well as by the intensity of the year itself.
It’s no exaggeration to say that 2020 has been a year unlike any other. The arrival of the pandemic in February 2020 rocked society and the world of business in equal measure; while MTG felt the initial impact, we quickly regained our footing through the impressive hard work and dedication of everyone within the group. Our teams have remained focused, confident and resilient and we’ve dared to leave no stone unturned to ensure business continuity. While we certainly continue to be impacted by the pandemic circumstances, we now stand stronger as a group concluding the 2020 financial year than we did coming into it.
Gaming: A milestone year
2020 was a milestone year for our gaming vertical, bringing strong performance in the face of the pandemic, significant M&A activities, and an ambitious new growth journey that involves growing the vertical both organically and through acquisition.
Our gaming companies saw a positive boost from the pandemic circumstances, with lock downs and changed player behaviours leading to increased gaming on a global scale. InnoGames delivered strong performance over the course of the year and progressed at pace with its new games pipeline, while Kongregate launched a well-reviewed September title based on the Teenage Mutant Ninja Turtles IP. Overall, our new games pipe line looks stronger than ever, and we look forward to an intense 2021 during which we plan to see up to seven new titles launched across our gaming vertical.
In December we increased our ownership in InnoGames to 68% for a total consideration of EUR 106 million; as part of this trans action, we deepened our relationship with the InnoGames founders and agreed to form a new jointly-owned company, GamingCo, for MTG’s gaming investments, including InnoGames, Kongregate and future gaming acquisitions.
Shortly after creating the GamingCo, we announced the acquisition of Hutch Games as our first investment through the new company.
Hutch is not only a great addition to our portfolio in its own right, with three hit games and a creative and highly-experienced team, but also introduces the category of mobile racing to our vertical and complements the GamingCo’s already strong position in the mid-core city building/strategy and the idle categories. The transactions resulted in a 77.35% ownership in the new GamingCo.
To secure funding for this renewed growth journey, our Board of Directors resolved in December on a rights issue of class B shares with preferential rights for existing shareholders, enabling all our shareholders to participate and join us on that journey, which we confirmed as over-subscribed on February 12th.
Our offering to M&A gaming targets continue to resonate well. We offer them a long-term home for their companies, people, brands and games – and in turn provide opportunities for them to grow by learning from best-in-class group peers on topics like marketing efficiency, user acquisition, customer insight and relationship methodologies, upsell mechanisms, access to enhanced technology platforms and more. The gathering of some of the best people in the global gaming business working towards a common goal, motivated through the forming of our GamingCo, creates clear group synergies – and in time therethrough shareholder value.
We now move into the 2021 business year emboldened by the progress made in 2020, with a maintained focus on M&A activity and organic growth to deliver on our strategy and create shareholder value. Over the next year, we will be seeking out more high quality gaming businesses that create great games, potentially further diversifying our gaming vertical.
Esports: A challenging but rewarding year
For our esport vertical, 2020 has demanded flexibility and nimbleness in the face of the ever-changing circumstances of the pandemic, particularly given its implications for live events.
In February 2020 we were informed that we would not be able to host live audiences for the 2020 IEM Katowice esport competition in Poland, Europe. It is a testament to the strength and tenacity of the team we have in ESL Gaming that we quickly adapted to this unexpected challenge, and were able to produce a successful event for a virtual audience.
As the year continued, we successfully converted the rest of our esport calendar to be digital-only.
Alongside a successful virtual events programme, the esport vertical maintained its relationships and forged new strategic partnerships with key stakeholders and industry players in 2020. In a major development for the commercialisation of esport, the first quarter saw the signing of the “Louvre Agreement” by the world’s thirteen leading CS:GO teams, representing a long-term commitment to the future of the ESL Pro Tour. Over the course of the year we announced extensions of strategic agreements with the likes of Blizzard Entertainment, PUBG Mobile, Epic Games (Fortnite), Psyonix (Rocket League) and Twitch, while new streaming deals were secured with leading Chinese game streaming platforms Huya and Douyu, increasing the reach of our esports entertainment distribution across the significant Chinese-speaking audience. In September, we announced the combination of ESL and DreamHack to form ESL Gaming. We have been the principal owner of both companies since 2015, and the new combined company marks a significant milestone in the ownership of both brands and creates a solid foundation for further scaling. The combination will accelerate innovation across products and events, increase competitiveness, and result in the widest portfolio for esport available to the market.
DreamHack Sports Games continued to deliver on its strategy to partner with traditional sports leagues to create esport leagues and media products. During the year the company has operated eFootball leagues in Denmark with eSuperligaen, Sweden with eAllsvenskan, the Netherlands with eDivisie and golf’s first esport proposition the European eTour during the business year.
In the business year we saw a decline in revenue in esports, mainly due to Master, Challenger and Open properties being moved to be executed online, and less publisher activities due to the coronavirus pandemic circumstances. With that said, we’re pleased with how we successfully delivered and produced a range of high profile esport events online and in studio environment.
As we look ahead to the operation of our esport vertical in 2021 its evident that visibility remains low. We look forward to hopefully see the re-introduction of liveaudience events in the second half of the year, but we expect the pandemic to continue to have an impact on our business with key stakeholders, such as brand sponsors and publishers.
Responsible entertainment: Our approach to Corporate Responsibility
Following an exciting and challenging year, our Corporate Responsibility strategy, rolled out in 2019, has remained at the core of our business. Our subsidiaries have further integrated the CR strategy into their new company structures and made changes across their everyday business. As we continue to change the future of entertainment, our vision to offer responsible gaming and esport entertainment remains the same: we believe that responsible entertainment is the best form of entertainment, for all involved.
As CR gains importance in gaming and esport, we want to proactively turn risks into opportunities, and play a driving role in building an industry that is sustainable now and in the future. In 2021 we will refine our CR strategy further, and review our processes to ensure we continue to not only meet the expectations of our partners, suppliers and peers, but also those of our end users: the players playing our games and the fans entertained by our esport content.
New for this year is the publishing of our CR report integrated with our Annual Report, enabling a more integrated approach for readers. I’d also like to highlight our inclusion in SAM ESG Sustainability Yearbook 2021 – which is recognition for our efforts, but certainly nothing that makes us rest on our laurels.
It is safe to say that 2020 was not the one any of us expected. Nevertheless, we enter into the 2021 business year driven by our commitment to an ambitious growth journey across both our gaming and esport verticals, and encouraged by the flexibility and optimism demonstrated by our teams and group companies in 2020.
Entering 2021 visiblity remains low, despite the hopeful progress with vaccines rolled out across markets and we expect the pandemic to impact our business also in 2021.
With the continued hard work from our teams, support from our partners and loyalty from our end users in both gaming and esport – gamers and esports fans – motivates us to continue to excel, whatever the challenges we will face.
President & Chief Executive Officer