How Scopely hit a $400 million run rate with mobile games like ‘Star Trek: Fleet Command’

VentureBeat reporter Dean Takahashi spoke with Javier Ferreira, president and chief operating officer of Scopely, the mobile gaming company, about how scoring two hits boosted the company’s revenue by 80%.
Los Angeles-based Scopely said since the last year it has become profitable thanks to two games and a new online feature.
The company’s Star Trek: Fleet Command, a riff featuring some of the newer actors from the films, saw over 100 million battles in its first 10 days.

Scopely isn’t the most well-known mobile game company. But it scored a couple of hits with Looney Tunes: World of Mayhem and Star Trek: Fleet Command in 2018, and that gave it an 80 percent revenue jump last year. The company is now on a $400 million run rate, based on its revenues in its most recent month.

Star Trek: Fleet Command saw more than 100 million battles played in its first 10 days, with more than 90 percent of players coming back five days a week. (Yesterday, Scopely announced musician Steve Aoki will be a playable character in the game.) And more than 1 million played Looney Tunes: World of Mayhem in a day and more than five million played the game in less than a month.

That’s been good for the company’s No. 2, Javier Ferreira, president and chief operating officer of Scopely. For the past five years, he has helped run the company’s operations and strategy. The Los Angeles-based Scopely has more than 260 employees, and it works with another 10 external developers where Scopely has some kind of ownership or partnership deal.

Those external studios give Scopely the flexibility to work with developers that specialize in the kind of games that license owners need. Those studios, as well as Scopely’s internal teams, make the games, and Scopely adds its secret sauce to get those games noticed. To date, Scopely’s games have generated more than a dozen No. 1 hits. The games include titles like WWE Champions, The Walking Dead: Road to Survival, Yahtzee with Buddies, and Wheel of Fortune: Free Play.

I recently talked with Ferreira about running this business. Here’s an edited transcript of our interview.

Javier Ferreira: I’ve been at Scopely close to five years now. I’m the president and COO. I oversee the whole games business here. We’ve come a long way in the last five years. Prior to Scopely, I was at Disney Interactive, working with people like Chris Heatherly. I was there for close to three years, running games publishing. Before that, I was at EA Mobile, based in London, running their mobile games business in Europe. I joined EA through the acquisition of a company called Jamdat, in the pre-iPhone mobile games era. I’ve been working on mobile games for a few years now, obviously. It’s been a great ride. I’ve had a lot of fun.

GamesBeat: I’ve watched Scopely grow over the years. You’re at a $400 million run rate now?

Ferreira: Yeah, that’s correct. We ended 2018 on a very strong trajectory, with well over a $400 million run rate when you look at our December performance. That was driven by two fundamental drivers. One is continued growth in our existing portfolio. We had a great 2018 where we able to grow all of our live franchises. We launched two games in two weeks — one in the RPG space, Looney Tunes, and one in the strategy genre, Star Trek, which was the first time we’d gone into that genre. Both of those launches were extremely successful.

GamesBeat: Is The Walking Dead still the biggest game for you?

Ferreira: No. Our biggest games now are the Dice franchise and Star Trek. On the Dice franchise, ad revenues represent a significant portion of that business.

GamesBeat: How many people do you have? I know you have a different kind of model, with partial ownership of developers.

Ferreira: Correctly. Right now, we’re at about 260 people internally. Then, we’re working with another 10 studios spread all over the world. We have presences on every continent, other than Antarctica. I think we have another 400 people working on those games across that studio ecosystem.

GamesBeat: The internal people, does that include some wholly owned developers?

Ferreira: Yes, it does. There are a bunch of studios that are wholly owned. Our strategy has focused on working with studios that we think are best for the games and experiences we’re trying to build. In some cases, we own those studios. In other cases, we decide to partner with studios we think are ideal for particular games.

GamesBeat: So, if somebody is good at puzzle games and a franchise owner comes to you with a puzzle pitch, you have a partner to use for that.

Ferreira: The way it works, we look at the market. We look at what we think are exciting opportunities, both on the business and the creative sides of things. We’re practiced in establishing the right partnerships with studios, whether they’re wholly owned or partnerships or investments. Generally, we have strategic relationships with our studios. It’s usually more about us being proactive about the games we want to build and the studios we want to partner with, rather than any studio pitching us for a game.

GamesBeat: What is Scopely’s core value? Helping these games take off?

Ferreira: The way I think about it, we’re building one of the best mobile game publishing platforms. I think of that platform as an end-to-end platform. On the one hand, we do a lot of work on identifying great games that we want to make and that we think will be successful in the marketplace. We’re focused on licensing triple-A IP that we think will give us an advantage in the marketplace. We’re identifying studios that we think are ideal to execute against that opportunity, so we’re not constrained by games we have made in the past or by our existing capabilities. We can have a footprint across the whole ecosystem, the whole business, and go after genres we’re excited about.

We work very closely on building those games with our studio partners. We have strong product teams internally working on creative, game design, product management, and development. It’s a very close partnership that we establish with our studios. We’re very strong in taking these games to market, maximizing the audience reach. We’re building and investing a significant amount of R&D dollars into our publishing platform. That allows us to operate these games at scale, over very long periods of time.

We build and evolve these experiences. In the Dice franchise, for example, 2018 was the biggest year of the franchise, seven years after launch. It’s a testament to the durability of our revenues and the platform that we’re building. I think of us as an end-to-end publishing platform that touches product strategy, product development, go to market, and live operations.

GamesBeat: Did you make a calculated expansion from casual into hardcore games?

Ferreira: One of the strengths of the publishing platform is that it’s usually genre-agnostic. We’ve built in capabilities that allow us to go after different types of games. The company was originally built on the back of casual games, to a point. In 2016, we started making more inroads into the mid-core space through the RPGs that we built, Walking Dead being one. The second one on the RPG side of things was WWE Champions, which has reached more than $100 million in revenue.

Star Trek was our first entry into the strategy category, which could rightfully be labeled as a bit more core than our prior experiences. We’re happy with how the game is performing. We’re seeing strong retention, strong engagement with the product. Over 90 percent of players play the game more than five days a week, which is a pretty exceptional KPI. The revenue trajectory is very exciting. We’re bullish on what this game can do over the next few months.

GamesBeat: How would you compare or contrast to a company like Jam City?

Ferreira: I wouldn’t want to go too far into what Jam City is doing. We’re very focused on this idea of a publishing platform that allows us to go after the space in a holistic manner. We build our competitive advantage around how we make and operate our games.

GamesBeat: It seems like they own more of their studios and people. As you get bigger, do you run into complexity problems with your different partnerships?

Scopely

Ferreira: I’m not sure there’s necessarily a trade-off between ownership and complexity. It depends on a number of different things. I’d say that our studio ecosystem allows us to be very versatile. It allows us to be one of the few companies right now that, over the last couple of years, has launched successful games in the casual, RPG, and strategy spaces. I think you’ll see that very few companies have done that, including Jam City in that case.

We believe our studio setup is a strong competitive advantage. It allows us to work with the creative talent that we want to work with, rather than just the creative talent that we own. At the same time, we’re building capabilities and studios that are building and operating very successful games. We don’t see our studio setup as a disadvantage. One of the things we’re seeing in the space is that publishing gets better with scale. I’m not sure that product development does. We like the fact that we can work with smaller teams, very focused on a particular product and product outcome. That’s an advantage.

GamesBeat: Another similarity is that you’re both in Los Angeles and both working closely with Hollywood.

Ferreira: We’ve had a long trajectory working with IP. We look at IP from the perspective of audiences. We’re excited about partnering with IP that have a strong fan base, an evergreen fan base. We’ve demonstrated over the last few years that as far as partnerships for IP holders, we’re one of the best companies at building strong audience ecosystems for those audiences and monetizing those effectively. Hollywood is one part of the equation, but we’re working across the whole IP spectrum. We have a lot of very strong partnerships.

GamesBeat: As far as IP deals go, are IP deals now very different from what you might have done five years ago, when it comes to Hollywood partners?

Ferreira: As the understanding of the space has evolved, IP deals have evolved for both licensors and licensees. We’ve all become smarter about how to structure deals for optimal outcomes. Ultimately, in this business, if you’re successful, you can operate and monetize your games for many years. The question with all of our IP partners is, how do we make the business as large as possible over a five- or 10-year horizon? That’s what drives the terms.

In the past, other considerations have been at the forefront of the conversation. But today, all our deals have been structured so that together, we can maximize the long-term revenue of whatever business we’re in.

GamesBeat: Beyond your $400 million run rate, are there any other interesting numbers that you’re sharing right now?

Ferreira: We have 80 percent revenue growth from January 2018 to December 2018. That can help you contextualize the $400 million number. We had a lot of growth within 2018. Over the last four years, we’ve exhibited very strong growth. Looney Tunes, our other big launch in December, had more than a million downloads on its first day. To date, it’s our biggest RPG from an audience perspective. We’re very happy about what we’re doing there. The revenues of that product in its first month were larger than Walking Dead’s first month. We’re bullish on the long-term potential of that business.

GamesBeat: Zynga had a Looney Tunes endless runner that didn’t do so well. It seems like if you make the right choice for the kind of game, that’s a big difference.

Ferreira: That’s right. We believe that the IP is very strong, evergreen. It has a huge fan base on a worldwide basis. Characters are the core of the IP, and characters are the core of the RPG genre. It’s showing strong KPIs. We’re very happy with the trajectory of the game.

GamesBeat: I’m curious what kind of trends you see in mobile gaming. It was interesting to see the strong negative reaction that Blizzard got over Diablo going to mobile and other anti-monetization trends we seem to see from hardcore gamers. Do these things show up on your radar?

Ferreira: The Blizzard announcement you mentioned, I think, validated that mobile games have gone from being a smaller category in the gaming world to the dominant platform. At the same time, the overall gaming category has grown significantly in the last several years. We’re living in a world of mobile first, which is very different from where we were a few years ago. That’s the first trend I see.

The second trend I see, if you look at free-to-play as a business model, that has gone from being the dominant business model in the Asian countries — China, Korea, Japan — to increasingly being the dominant business model not just in mobile but also in PC and browser. We’ll see significant inroads for free-to-play in the console platforms going forward. To me, those are the biggest trends I’ve seen. We think of free-to-play as a business model that allows people to invest as much as they want in their gaming experiences. If executed well, it can deliver a lot of satisfaction and benefit to players, who can play for free if they want to. That’s something we work on a lot.

GamesBeat: It seems like there’s still a contrast between whether free-to-play monetization is more accepted in places like China. Pay-to-win designs are more accepted there but not so much in the West.

Ferreira: Different geographies and different populations have different tastes or preferences. If you’re building a successful game in the West, you have to design your free-to-play experience in a way that caters to Western audiences. Successful games are built on a very long-term view of things. They’re great businesses 12 months in, but they’re even better business three or four or five years in. Taking the long-term view is important.

The business is built on the back of a strong, attentive audience that will invest time and money in your game. You’re right that there are differences, but if you want to have a successful franchise, the path is to make sure you’re designing the right experience for your audiences so that, in aggregate, they’re happy about how they’re playing and spending in the game.

GamesBeat: I notice that some other companies are in a cycle where they expand and contract, expand and contract. How do you take care to avoid that?

Ferreira: For the last five years, we’ve grown tremendously, every year, from $50 million a year to a more than $400 million run rate. We’re careful and disciplined in how we go about achieving that growth. On the one hand, we’re very focused on growing our existing games and making sure those games are increasing their user base, top line, and profitability. At the same time, we use our slate of future games as additional engines of growth.

When those two things come together in the way they’ve been coming together for us in the last couple of years, you have a sustainable, predictable, and rational approach to growth. I think you’ll see us on that trajectory for the next couple of years. We have an exciting slate of products launching in 2019. We’re confident that we’re going to stay on that trajectory. We’re cautious and thoughtful about how we’re investing. Our curve looks strong, and we expect it to stay strong in 2019 and beyond.

GamesBeat: How many games do you think you should launch in a year?

Ferreira: We only want to launch games that we think have exceptional KPIs, from a retention and an LTV perspective. That’s what drives our launch criteria. We are not going to set on launching any particular number of games. We’re always working to make sure we’re KPI-ready before we go to market. We’re building a very unique and exciting slate of products. As they’re ready in 2019, we expect to take them to market. But we’re not set on any particular number. As I said, it’s about launching great LTV curves that sustain long-term businesses.

GamesBeat: It sounds like you guys aren’t as extreme about some things as Supercell or Blizzard, where they’ll kill a dozen projects and launch four or five.

Ferreira: We’ve killed some games. We’ve gotten pretty extreme as far as iterating until we find the KPIs that we’re excited about. We have some games where it’s taken us longer to get those KPIs. In those cases, we believed in the core product idea and the core product team. We’re willing to iterate for long periods of time until we get those KPIs. The question is, do we believe in our path to those KPIs? If so, we’ll be patient and find the path to get there. Perhaps it’s a different strategy from killing a lot of games, but we’re looking for similar outcomes.

GamesBeat: Are you saying you’re profitable now?

Ferreira: For 2018, we generated profitability from our live games. We were profitable for most of the year. We did spend a lot of money launching Star Trek and Looney Tunes. That was a worthwhile investment. That’s how 2018 looks from a profitability perspective.

GamesBeat: Are you doing any kind of fundraising right now, or are you done with that?

Ferreira: No, no. We’re not in any fundraising cycle right now.

GamesBeat: Have you signaled anything that’s coming in 2019?

Ferreira: We’ve not yet announced any of the titles we’ll be launching in 2019. As I said, I think we have a number of products that we expect to launch this year across different genres. It’s going to be an exciting year for us in terms of product launches.

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Source: Business Insider