GameWith / 6552 COVERAGE INITIATED ON: 2019.09.27 LAST UPDATE: 2021.07.14 Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg. Research Coverage Report by Shared Research Inc. GameWith / 6552 RCoverage LAST UPDATE: 2021.07.14 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp INDEX How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the business section later in the report. Executive summary ----------------------------------------------------------------------------------------------------------------------------------- 3 Key financial data ------------------------------------------------------------------------------------------------------------------------------------- 5 Recent updates ---------------------------------------------------------------------------------------------------------------------------------------- 6 Highlights ------------------------------------------------------------------------------------------------------------------------------------------------------------ 6 Trends and outlook ----------------------------------------------------------------------------------------------------------------------------------- 7 Quarterly trends and results ----------------------------------------------------------------------------------------------------------------------------------- 7 Business ------------------------------------------------------------------------------------------------------------------------------------------------ 15 Business model --------------------------------------------------------------------------------------------------------------------------------------------------- 15 Cost structure ---------------------------------------------------------------------------------------------------------------------------------------------------- 25 Market and value chain---------------------------------------------------------------------------------------------------------------------------- 27 Competition (Japan) ------------------------------------------------------------------------------------------------------------------------------------------- 33 Strengths and weaknesses ------------------------------------------------------------------------------------------------------------------------------------ 35 Historical results and financial statements -------------------------------------------------------------------------------------------------- 37 Income statement ----------------------------------------------------------------------------------------------------------------------------------------------- 37 Balance sheet ----------------------------------------------------------------------------------------------------------------------------------------------------- 38 Cash flow statement -------------------------------------------------------------------------------------------------------------------------------------------- 39 Historical performance ---------------------------------------------------------------------------------------------------------------------------------------- 40 Other information ---------------------------------------------------------------------------------------------------------------------------------- 46 History -------------------------------------------------------------------------------------------------------------------------------------------------------------- 46 News and topics ------------------------------------------------------------------------------------------------------------------------------------------------- 46 Corporate governance and top management --------------------------------------------------------------------------------------------------------- 47 Dividend policy -------------------------------------------------------------------------------------------------------------------------------------------------- 49 Major shareholders (as of November 2020) ------------------------------------------------------------------------------------------------------------ 50 Employees --------------------------------------------------------------------------------------------------------------------------------------------------------- 50 Profile ---------------------------------------------------------------------------------------------------------------------------------------------------------------- 51 02/52 GameWith / 6552 RCoverage LAST UPDATE: 2021.07.14 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp Executive summary Business overview ◤ Business areas and revenue per business area: GameWith, Inc. is a specialist media company that provides information on games. The company operates “GameWith,” Japan’s leading website for game app information and gaming tips (company estimated market share of nearly 40%), and earns ad revenue from selling ad spaces. The Media segment is the company’s only reporting segment. Founded in June 2013 by President Takuya Imaizumi who was then fresh out of university, the company listed on TSE Mothers in June 2017 and moved to TSE First Section in August 2019. In FY05/20, revenue was JPY2.9bn (-8.2% YoY) and operating profit JPY408mn (-49.5% YoY). ◤ The company breaks down its revenue by content categories (business areas): Game Guide accounted for 62.9% of total revenue in FY05/20 (-14.1% YoY), Game Review 23.3% (+10.9% YoY), Video Streaming 10.9% (+16.7% YoY), and Other 2.9% (-45.5% YoY). By offering such content, the company helps build player communities and prolongs the life span of the games, which in turn brings in more revenue from related ads. Strengthening content for the top six megahit smartphone games (apps) proved successful for GameWith. Meanwhile, as viewers have started to drift away from the top titles, the company is keen to develop Game Review and Video Streaming into the next mainstay following Game Guide. ◤ Game Guide: In this business, the company operates the core “GameWith” website featuring game app information and gaming tips (domestic version), as well as English and Chinese (overseas) versions of “GameWith” and @WIKI, a wiki rental service specializing in game tips. Revenue in this business consists of income from ad space sales via ad network and fees for posting contracted game guide articles and videos (tie-up ads). The income from ad space sales can be calculated by multiplying revenue per page by the number of page views. ◤ Game Review: Revenue for Game Review is not simply a function of revenue per page view times page view count. Rather, the company contracts directly with the advertiser for tie-up ads and gets a fixed monthly amount per ad space. GameWith’s strategy is to make Game Review, which provides opportunities for consumers to start playing games, a second source of earnings following Game Guide. The company said it wants to be the first brand that comes to mind when users look for a new game to play, and aims to transition from being “GameWith,” the game guide site, to “GameWith,” the game media site. ◤ Video Streaming: The company streams video content it creates over video platforms such as YouTube (the main platform for gameplay videos in Japan). Revenue in Video Streaming comes mainly from ads displayed on video platforms. Views of esports videos are trending strongly. ◤ Cost structure: Excluding advertising and one-time expenses, personnel expenses comprise about 70% of costs, rent about 10%, and server use roughly 4%. These are effectively fixed costs and the combined total for personnel, rent, and servers was roughly JPY2.0bn in FY05/20. The company spent virtually nothing on advertising through FY05/20 and planned to invest JPY863mn on promotion in FY05/21. When announcing Q3 FY05/21 results, however, the company stated that it had revised its promotional strategy and decided to reduce its planned spending on advertising. ◤ Company strategy: GameWith sees its mission as building a world with a more enjoyable game experience. As of FY05/20, Game Guide was its main business, but the company has ambitions of becoming a global game infrastructure. It thus intends to branch out beyond the media business and get involved in all businesses that will lead to greater game enjoyment. Until FY05/18, the company worked to generate revenue and become profitable in the domestic media business. From FY05/19, it adopted a three-pronged strategy. The first element of this strategy was to focus on the Game Review business to build a second source of earnings in addition to Game Guide; the second was to step up its overseas development, primarily in the English-speaking world; and the third was to expand into a variety of game-related areas outside its existing business. ◤ Strengthening Game Review business: The company said it wants to be the first brand that comes to mind when users look for a new game to play, and aims to transition