Given the close demographical match between their two audiences, it’s no surprise the relationship between the video games industry and World Wrestling Entertainment (NYSE:WWE) goes way back to the years when the WWE was known as the WWF.
Back then, games such as WWF WrestleMania and (post-name-change) WWE Smackdown powered the profits of one-time-stock market darlings such as Acclaim Entertainment and THQ.
Those companies are long gone now, of course, but officially licensed WWE games can still make good money as Take-Two’s (NASDAQ:TTWO) annual console WWE 2K series demonstrates.
But it’s on mobile devices that WWE games have been enjoying a recent resurgence.
Releases over the past couple of years include Warner Bros.’ WWE Immortals, Scopely’s WWE: Champions and Take-Two’s WWE SuperCard.
In that context, the news Glu Mobile (NASDAQ:GLUU) has signed a “multi-year agreement” with WWE to develop “a mobile game featuring WWE Superstars, logos and marks” that will be released in 2018 makes complete sense.
Yet not all WWE games have been successful, and to-date, the WWE mobile games haven’t generated the high levels of financial success of those past console releases.
So, it’s worth taking a look in detail at how those games have performed to gauge what the possible upside could be for Glu.
Playing the card
As the name suggests, Take-Two’s WWE SuperCard (released in August 2014) is a card battling game in which players collect and battle using the full range of WWE characters. Indeed, thousands of different cards are available with players spending in-game and real-world currency to open card packs, which offer random levels of rewards.
In some respects, it’s an odd-looking game as the wrestlers’ cards awkwardly enter the ring and ‘fight’ each other, but the underlying collection mechanic is well-understood both in terms of player retention and monetization.
Take-Two hasn’t broken out any official revenue numbers, but it has pointed to WWE SuperCard’s strong financial performance on a number of occasions.
It’s been a top 50 grossing game on the UK and German Google Play stores, and globally been downloaded more than 12 million times.
In particular, as the game has better synced its content updates with WWE’s event cadence, it’s seen strong performance peaks in terms of top grossing chart placement.
For example, the annual WrestleMania event has provided good uplift during March and April.
As can also be seen, WWE SuperCard has performed better in the first half of 2017 than it did in either 2016 or 2015. This is not yet a game in decline.
Another game with an interesting approach to bringing WWE action to mobile devices is Scopely’s WWE Champions, which was released during January 2017.
Officially titled WWE Champions: New RPG Puzzle Game, it’s a game that combines match-3 gameplay mechanics with role-playing elements. In this way, you win wrestling bouts by matching gems, and then earning the rewards required to unlock new characters and level up your existing collection.
Again, it’s clear than the collection element of the game is the key element in terms of keeping players engaged and encouraging them to spend money.
A privately-owned company, which has raised over $150 million in VC funding at a current valuation of $540 million, Scopely’s most successful games are The Walking Dead: Road to Survival and Yahtzee With Buddies.
WWE Champions has joined that list, being a top 100 top grossing game on the US App Store and on Google Play. Again it’s performed better in the UK than the US, although compared to WWE SuperCard, Germany lags.
Released in January 2015, Warner Bros.’ WWE Immortals not only uses a fantasy setting but is also a more traditional beat-’em up game, and for these reasons, has been the least successful of the three.
Although it launched into the top 100 top grossing US iPhone charts, WWE Immortals didn’t demonstrate the retention or monetization smarts to maintain its position.
The result has been a steady collapse, with the game now operating in the range 400 to 1,000.
Internationally, the picture isn’t any different either with WWE Immortals outside the top 500 top grossing Google Play store charts in the UK and Germany.
Strengths and weaknesses
Of course, given its experience in free-to-play mobile game – it already operates its successful MLB Tap Sports Baseball game – Glu Mobile won’t be taking a traditional approach to its untitled WWE game, nor likely to be competing in terms of making a card-battler or match-3.
Management-focused approach or lightweight rhythm-tap game are potential options.
Yet, while the success of WWE SuperCard and WWE Championship is a positive in terms of demonstrating multiple WWE games can be financially successful in terms of generating c. $50 million (with perhaps a $100 million ceiling) in terms of annual revenue, they will also be strong competitors.
Few WWE fans will play all three games regularly, and as well as providing competition in terms of marketing spend, Glu will also be competing in terms of making the most of the annual cycle of events that a WWE licence provides and the wider narrative arcs of the individual wrestlers with which fans associate.
In this context, it’s also worth noting Glu has placed itself in a situation in which the strongest reason for licensing an IP – brand association and hence cheaper marketing – will be turned on its head. And, this isn’t to forget the simple fact that, successful or not, licensed games cost money.
There’s no information about how much a WWE game license costs, but its financial statements say the WWE generates around $50 million annually from all IP licensing.
Of course, Glu’s history with celebrity games means it should be very aware the potential drag royalties can have on overall profitability.
Despite being its biggest ever game in terms of lifetime revenue (approaching $200 million), Kim Kardashian: Hollywood has been something of a curse.
For one thing, as the graph above shows, not only wasn’t it a very profitable game but its success encouraged Glu to sign multiple other celebrity deals that came with high royalty requirements and which failed to generate much – if any – revenue.
Nevertheless, gaining the WWE licence would seem to demonstrate that Glu – under new CEO Nick Earl – is thinking positively about its future.
And, given the foundation currently being provided by top 30 US hit Design Home in terms of underlying financials and share price, that may be as significant for investor confidence as the likelihood of generating high level of revenues from a future WWE mobile game in whatever weird and wonderful form it’s likely to take.
To-date, two of the three big WWE licensed mobile games have been financially successful in the order of $50 million of annual revenue, with Take-Two’s WWE SuperCard, in particular, demonstrating the long-term potential of the WWE brand, especially around real-world events such as the annual WrestleMania.
Yet, given the level of competition already in this market, Glu will need to carefully consider how its new game can differentiate itself in terms of gameplay and the metagame mechanics that enable long-term player retention and monetization.
Assuming this is the case, though, the game could fit into Glu’s portfolio alongside licensed sports titles such as MLB Tap Sport Baseball and provide steady, if not spectacular, results.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.