Time Warner led a USD40m funding round for Turbine, a company that operates popular massively multiplayer online (MMO) games. This recent deal, which you can read here, follows a series of strategic investments led by Time Warner within the gaming industry. It is worth taking a closer look at the media mogul’s investment strategy in the gaming sphere to discover how Time Warner is successfully generating strategic value through minority stake acquisitions.
Firstly, the company doesn’t want to commit itself at a very early stage. Its strategy is to acquire influence over potential partners rather than to take stakes in potentially highly profitable businesses. As a result, Time Warner typically invests in second round (Trion Network, Turbine), third round (Gaia Online) or fourth round (Glu Mobile) funding.
Secondly, Time Warner spreads its investments across a wide range of companies. While the group has heavily invested in the MMO sphere with Turbine, Trion Networks and Gaia Online, it has also secured stakes in several other areas such as in-game advertising with Double Fusion, digital game distribution with Exent Technologies, and mobile gaming with Glu Mobile.
This string of investments is generating strategic value within the group’s core businesses:
·Providing new distribution channels. Gaia Online, by allowing the company to reach the kids demographic, is an interesting new distribution space for Warner Bros’ films and TV series. Time Warner has already tested this channel by providing pay-per-view movies inside the virtual world.
·Leveraging its games portal capabilities. Exent’s platform powers Turner Broadcasting’s games-on-demand service GameTap, thus providing a new content stream to its consumers.
·Developing cross-platform games. This wave of investments allows the company to expand its game unit’s reach on multiple platforms – on the mobile side with Glu Mobile, a top-tier mobile game developer and publisher, and on the online side with both MMO developers Turbine and Trion Networks. While Turbine has extensive experience in creating successful, compelling MMO games such as ‘Lord of the Rings’, Trion Networks owns a powerful server-based architecture that can achieve a massive scalability for MMO games.
·Exploring new revenue streams. By investing in Double Fusion, Time Warner gets a unique opportunity to experiment with in-game advertising, both as publisher and advertiser.
In conclusion, by taking minority control in potential partners, Time Warner ensures a long-term alliance with promising startups, while successfully compensating the risk behind VC investment.