Challenges Engine Media Debuts On Nasdaq Amid Platform Opportunities

Engine Media Debuts On Nasdaq Amid Platform Opportunities, Challenges

June 17, 2021 at 04:51PM

Another day, another online platform debut on the public markets.

At this writing, Engine Media Holdings is trading down about 4.5 percent on the tech-heavy Nasdaq exchange. The company, based in Canada, has been a fixture on the Toronto Exchange.

Beyond the vagaries of stock price swings, drilling down into the details contained in filings with the Securities and Exchange Commission (SEC), we get a sense of market and focus — and how gaming platforms can lead to the creation, and reinforcement, of virtual ecosystems.

At a high level, Engine operates as a “multi-platform” company that is tied to a range of activities, enabling verticals such as advertising, eSports (where online gamers play against one another), news streaming and gaming, along with data analytics for its clients. The company offers a roster of its clients in the filing — a list that includes bring and media brands such as CNN, Fox and Newsweek, and gaming firms such as EA, Activision and Twitch.

As a result, the company said in its filing, it has “connectivity into hundreds of millions of homes around the world through content, distribution, and technology.”

Combination Of Revenue Streams

In terms of the top line, Engine said it generates revenue through a combination of direct-to-consumer and subscription fees, streaming technology and data software-as-a-service based offerings.

The latest quarterly report details the market opportunity: Video gaming is one of the largest and fastest-growing markets in the entertainment sector, according to the firm, with about 2.6 billion gamers globally.

Year over year, the bulk of the revenues (as expressed in USD) came from advertising, at $6 million (71 percent of the $8.4 million total). Platform revenue soared from $120,300 a year ago to $6 million; the Games Development sector sale revenues increase by more than 61 percent in the latest quarter to $688,400.

Yet as with many quickly growing companies, red ink is apparent. The operating expenses of $35.4 million led to a total net loss from operations of $27.1 million.

With growth, of course, comes risk. The company said in its filing that Eden Games – the studio that focuses on racing games — is “partially reliant” on the free-to-play business model where “monetization is through in-app purchases. The risks of that business model include the dependence on a relatively small number of consumers for a significant portion of revenues and profits from any given game, including the current title, Gear.Club.” In addition, the company disclosed that “if we fail to offer monetization features that appeal to our consumers; these consumers do not continue to play our free-to-play games or purchase virtual items at the same rate; our platform providers make it more difficult or expensive for players to purchase our virtual currency; or we cannot encourage significant additional consumers to purchase virtual items in our free-to-play games, our business may be negatively impacted.”