Vegas Games Inc. is a mobile gaming portal company that will provide a platform and enable third party game vendors to introduce their games to new consumers. In addition Vegas games wants to grab a market share of the online gambling and lottery market by offering applications which allows users to play these games on their mobile handsets. The target customer for Vegas Games Inc. includes avid mobile game users and all existing mobile users who would like to play mobile games by selecting one of the games hosted on the application according to their preference, taste and gaming skills. As part of the growth plan Vegas Games wishes to move into the international arena after establishing itself in the local US markets.
The market for mobile gaming is fast growing and Vegas Games Inc. is entering this Industry with its initial focus on the USA. Over the next few years the company expects lower profits as the company makes inroads in this competitive market.
The company is being founded with the primary goal and objective of providing a gaming platform which could be used by various game vendors to promote and market their games to mobile users by hosting their games on VG's application portal and also to provide the mobile gamers with the dual platform of playing games and having social networking via game playing. With the increasing numbers of users playing mobile games, VG Inc. sees the opportunity to capitalize on the mobile gaming market. Since, Vegas Games Inc. is a startup company, initially it intends to concentrate on the national level and after getting recognition it could move and expand to the international markets.
Products and Services
Services provided by Vegas Games Inc. are quite critical for the mobile game vendors because it will provide the opportunity of reaching every segment of mobile user through a single channel. For Vegas Games Inc. mobile users and game vendors are potential customers. Therefore, the product will cater to the needs of both segments of customers. Mobile users would find platform provided by Vegas Games as one stop shop to play and buy various kind of mobile games compatible with their mobile, depending on their interest and preference. On the other hand, mobile game vendors would find the platform as a strong media to spread the news about their new or existing game to the mobile users. Since, users will be provided with option to view and play various games hosted by different vendors, it is highly possible that while playing one game user may like to try his hands on some other games and eventually become a potential customer.
Consumes token by buying lottery tickets
Can add other users in the friend list, chat with other users while playing, can see users profileThe diagram explains the Business Model for Vegas Games Inc.
A mobile user can download the application into his mobile and register for free. As soon he becomes a registered user, the user is awarded with 1000 tokens so that he can start playing various games by the use of tokens. A user can make and maintain his profile, can chat with other players while playing the game and can add other players in his friend list.
When a user chooses to play multiplayer game, he can wait for the other players to join the game or he can start the game with the computers without waiting for the other players. A player can quit the game at any time without getting back the tokens he paid to play the game and he would be replaced by a computer to keep the game going. To keep the game going at least one player (non-computer) should be playing the game. When a user wins a game he would be awarded with a fixed amount of tokens. If he loses then he would be free to play the same game by paying tokens or can switch to other game.
A user can upgrade to a premium member by paying one time subscription fee. By becoming a premium member he can avail following offerings:
Double jackpot: Premium user will get chance to earn more tokens as compared to the user without premium membership. They can also buy more lottery tickets to increase their winning chances.
Download games for less: Premium user can download the game in less as compared to the user without premium membership.
Chance to play more premium games: Premium members would be able to play more variety of games.
No Ad interruptions: When a user chooses to play a game, he needs to wait for 15 seconds in order to start the game. This waiting time is not applicable on premium members.
User can buy lottery tickets by paying tokens. This will consume user's tokens and user would go back to play games to earn more tokens. This feature is not the heart of the application because this will target only that segment of customer who are not very much interested to play games but in playing lottery. Therefore, they would be left with two options either they buy tokens by paying money or they can play games to earn tokens. Either of the options chosen by such customers would be in favor of our business model. User needs to pay different amount of tokens to buy daily, weekly and monthly lottery tickets. Over the period, the prize money in different category would be increased. The prize money for lottery tickets would be as following:
Daily lottery tickets: $10
Weekly lottery tickets: $ 30
Monthly lottery tickets: $ 100
If user runs out of tokens he can buy tokens by paying money and can continue buying lottery tickets.
User can download single player games which involves different levels. Each download involves transaction fee from the respective mobile game vendors. In addition, there would be a subscription fee associated with each game hosted through our application.
Business Strategy
Customer Value Proposition:
Since we will be hosting wide range of games from number of vendors, our application would serve as one point source for the customers to choose a wide range of games.
The customers would also enjoy the thrill of winning more and more tokens which gives them a chance to buy a lotto ticket for winning lucrative prizes.
Since the vendors would be using our application as a platform to reach the users he in turn becomes a customer for our company. The customer value for them here is that he has a broader range of target market for their products. Since we will be hosting games of different genre, mobile users from different age groups would be the customers for our application.
Customer gets a chance to interact with other gamers and discuss their favorite games.
Revenue Model
Vegas Games Inc.
Registered User
Premium User
One time subscription fee
Tokens
Buy tokens by paying money
Game vendors
Yearly subscription fee
Advertisement
Transaction fee
Vegas Games incorporates the following revenue model:
Advertising: We have several vendors giving advertisements of their games embedded in our application. Advertising will be shown is such a way that it does not annoys user in any manner, for example a little banner scrolling on the bottom most or top most portion of the game. The advertising will be charged in various ways depending on the advertiser, frequency of his advertises, time and type of the advertisement. They are as given below:
CPM (Cost per Mile): Usually reflects the price of 1000 banner impressions in dollar currency. Payment depends on the number of impressions solely. For example, a banner is being shown 200,000 times at CPM of $0.5, means that the payment by the advertiser to the publisher would be 200,000 * 0.5 / 1000 = $100
CPS (Cost per sale): In this model the advertiser will pay a fee that lead to the transaction and also a transaction fee depending on the transaction amount. . For example, a banner is being shown 200,000 times, and being clicked 1000 times. 10 clicks converted to a lead where the advertiser pays 5$ per lead. The total advertising cost would be 10*5 = 50$ plus the transaction fee. Transaction fee will be optional.
CPC (Cost per click): In this model the advertiser pays for each click made on a banner impression. Payment depends on the number of clicks solely. For example, a banner is being shown 200,000 times, and being clicked 1000 times at a cost of $0.08 per click. The Click through rate - CTR in this case is 1000/200,000 = 0.5%. The cost to the advertiser would be $0.08 * 1000 = $80.
Subscription- Based: Third party vendors do pay us subscription fee for hosting their games on our application. The method of paying this fee can be 6months or yearly based depending on the vendors choice. Rate varies $300 to $500 per year.
Also subscription fee is charged to the premium users. Premium users will be given exclusive features like access to the extra games, no advertising, token benefit, download for less etc. there fee will lie $10 to $15 per month.
Transaction-based: Third party vendors are hosting their application with a motive of the recognition and sales for their games, hence we will have mostly the demo version of their games, if user like it he will purchase the games. Based on that purchase made we will charge the transaction fee to the vendor.
Token buyers: There is one interesting feature of our application, i.e. the token system. Tokens are necessary to play the games. Also through tokens one can buy lottery ticket and become eligible to win some real cash. So some addicted users can purchase tokens for games or for incentives. The price of a 10 tokens is around $0.5. Also for lottery tickets daily, weekly or monthly basis one requires to pay 100 tokens which he wins through playing games or buying them if he or she wants to.
Target Market
The target market for Vegas Games Mobile Inc. would be all mobile users and avid gamers who play computer or video games. It has been found that 68% of American households play computer games. Since, these gamers already have the flavor of playing games online or on their PC, they could be the potential customer for mobile gaming.
The figure above shows the distribution among various genres of the mobile games. Sports, Action and Family entertainment games constitute most part of the mobile gaming genre. Therefore, having these games on our mobile application would definitely grab attention from various segments of customers.
Industry Analysis
Although it is still in its nascent stage the mobile gaming industry is already a billion dollar industry. Worldwide mobile gaming revenues were around 4.5 billion in 2008. Mobile gaming is a fast growing industry. The market is expected to have a compound annual growth rate of 10.2% between 2007 and 2011. Global revenues are expected to reach around $6.3 billion by 2011. Over the years mobile gaming has evolved to become a standalone value added service.
The Asia-pacific region is one of the largest mobile gaming markets. This market is expected to grow from 2.3 billion in 2008 to about 3.4 billion by 2011. Western Europe and North America are also expected to show a steady growth during the same period. Mobile gaming revenues in US are expected to double over the next five years. The mobile gaming development industry is highly fragmented due to wide variety of mobile operating systems. As operators shift their focus on other services such as mobile broad band and mobile social networking alternative routes to consumers are becoming increasingly popular, generating opportunity for smaller mobile games companies. The market share for the top four major players namely EA mobile, Gameloft, Glu and THQ Wireless has been increasing steadily from 11 percent in 2004 to 22 percent in 2007. The mobile industry does seem to have a very strong position in the foreseeable future.
Market Analysis
The gaming and Software market are consists of console games PC and Mac games. The console games category includes, Nintendo GameCube, Play station, and Xbox. This also includes the software that is used in the wireless or portable handheld devices like Nintendo DS, personal digital assistants (PDA's), Play station Portable (PSP), and Game boy gaming console.
The United States games software market generated total revenues of $12.5 billion in 2008, representing a compound annual growth rate (CAGR) of 13% for the period spanning 2004-2005.
But the performance of the market is expected to decelerate, with an anticipated CAGR of 1.7% for the five year period of 2008-2013, which is expected to drive the market to a value of $13.6 billion by the end of 2013.
The United States games software market accounts for 34% of the global sales by market value.
Financial statements
Assumptions:
Business is to be commenced by 1/1/2011 with $300,000 Initial capital. The projected cost of sales is $200K and the other expenditure such as computers, software, salaries, operating expenses would come up to $100K. The required capital is assumed to be acquired through 50% Debt Financing and 50% Equity Financing.
Start-up Costs and Operating Guidelines:
Fixed asset costs limited to acquisition of computers, printers and related application software. There is monthly lease payment of $4,000 per month for the office. Business provides owners and staff with commuting allowance.
Variable Expenses:
Typical Sales, General Operating and Administrative expenses budgeted as anticipated.
No provision made for taxes. Taxes will accrue to individual owner.
Financial Summary
2011
2012
2013
Total Sales
$263,703.00
$355,999.00
$619,702.00
Cost of Sales
$195,335.00
$263,703.00
$435,021.00
Gross Profit
$68,367.00
$92,296.00
$184,680.00
Sales & Revenue:
The projected sales for Vegas Games Inc. in the year 2011 are $195,335. With the aggressive marketing strategy the sales for the year 2012 and 2013 are estimated as $263,703 & $435,021 respectively. The sales revenue is generated from the subscription fee, transaction fee, and advertising and from the tokens that we sell to the customers. 25% of the sales are from subscription fee, 25% from transaction fee, 30% attributes to advertising and the remaining 20% is from token sales.
Expenses:
In a software industry, the major expenses are salaries for the employees, research & development costs and other general expenses. The salary of the employees for the year 2011 is $42,500, for the year 2012 is 43,350 and for the year 2013 is 85,850. There is a steady increase in the salaries. The minimum staff of 5 is required to maintain in order to complete projects on time and with great quality.
For 2011 the expense for Research & Development is $15K, for 2012 it would increase to $30K because the plan is to bring out more innovative and target customer specific gambing applications and increase the market share.
We also support lottery on a daily, weekly and monthly basis. The daily lottery tickets are worth $10, weekly lottery tickets worth $30 and monthly lottery tickets worth $100. We incur $6,410.00 on lottery expense. This expense is part of the Operating expenses on the Income sheet.
Income Statement
PERIOD ENDING
31-Dec-11
31-Dec-12
31-Dec-13
Total Sales
$263,703.06
$355,999.13
$619,702.19
Cost of Sales
$195,335.60
$263,703.06
$435,021.66
Gross Profit
$68,367.46
$92,296.07
$184,680.53
Operating Expenses
$12,000.00
$12,600.00
$24,600.00
G&A Expense
$3,500.00
$4,500.00
$5,000.00
R&D Expense
$15,000.00
$30,000.00
$25,000.00
Salary and remunerations
$42,500.00
$43,350.00
$85,850.00
Non Recurring
$3,000.00
$2,800.00
$2,500.00
Total Operating Expenses
$76,000.00
$93,250.00
$142,950.00
Operating Income or Loss
-$7,632.54
-$953.93
$41,730.53
Other Income/Expenses
-$6,500.00
-$8,500.00
-$5,000.00
EBIT
-$14,132.54
-$9,453.93
$36,730.53
Interest Expense
$500.00
$500.00
$500.00
Income Before Tax
-$14,632.54
-$9,953.93
$36,230.53
Income Tax Expense
-$4,389.76
-$2,986.18
$10,869.16
Other Items
Net Income
-$4,389.76
-$2,986.18
$10,869.16Economic Feasibility
To evaluate whether the venture is economically feasible or not we have made cost-benefit analysis. Cost- Benefit analysis includes four types of cost and benefits, Development costs, operational costs, tangible benefits and intangible benefits.
Operational Cost
Soft ware upgrades
Software licensing fees
Hardware repairs
Hardware upgrades
Operational team salaries
Communication charges
User training
Marketing
Development costs
Development team Salaries
Consultant fees
Development Training
Hardware & Software
Vendor Installation
Office space and equipment
Data conversion cost
Intangible Benefits
Increased market share
Increased brand recognition
Better vendor relations
Better advertiser relations
Increased Games
Improved application features
Tangible Benefits
Increased advertisers
Increased game vendors
Increased users
Reduction in staff
Reduction in IT costs
Better supplier prices
Hence with the help of Financials projected above in the document for three years and assuming the benefits:
Return of investment (ROI) over 3 years comes to about 14.3%.
Sales needed for breakeven is about 250,000 paid subscribers which could be achieved within the next 3 years. Hence this conservative approach shows that this application has a good chance of adding to the bottom line Vegas Games Inc.
