Was $1 Billion Invested in 35 Virtual Worlds In The Past Year? Not Quite
A report from Virtual Worlds Management, which tracks the virtual worlds industry, says over $1 billion was invested in 35 virtual worlds over the last 12 months. Most of this figure is Disney’s (NYSE: DIS) purchase of Club Penguin, which the group is calling a $700 million deal, although $350 million is contingent on performance and has yet to be paid out. The other huge deal on the list is Intel’s (NSDQ: INTC) $110 million purchase of Havok, which is not a virtual world, but rather makes graphics technology that can be used by virtual worlds, although not exclusively. It counts Second Life as a customer.
That leaves $197 million in venture investments and small acquisitions spread around 33 companies, some of whom are only loosely related to virtual worlds. Although the scope of activity isn’t quite as big as the group makes it out to be, the industry has clearly attracted interest from a wide range of major media and venture capital firms. The full list, with size amounts, is in the release.
Update: In the comments, Chris Sherman of Virtual Worlds Management correctly notes that the original release says 35 virtual worlds companies, as opposed to 35 virtual worlds. However, the underlying point, that the $1 billion number is a bit of a stretch, remains.
Actually if you read more closely we say that $1 Billion was invested in 35 Virtual Worlds "companies" in the past year not in virtual worlds themselves. That includes a range of enabling technology companies. Havok is most certainly a virtual world tech company but they don't make virtual worlds themselves.
Of the $197 million in investment that is actually investment, not acquisitions. And while some of those numbers include smaller amounts there are other amounts that I would consider quite large – $10 million to $30 million as investment rounds for startups – I would not put that on the small end.
Chris,
Thanks for your clarification. You're right that the press release said "virtual worlds companies" rather than virtual worlds – my error. Still, to get to the $1 billion headline number, you have to make payout assumptions about the Club Penguin deal, while calling some investments virtual worlds deals, when they're only partly related to that industry.
To your first point, since Disney committed to $700 million and since we have no knowledge of the metrics on calulating the second $350 million the entire $700 was included. To your second point, yes some of those other companies may be partly related to the industry but nevertheless they are considered to be extremely important enabling companies to the industry, therefore they were included.
As we have laid out all the companies referenced in our analysis I certainly invite you to review the data and analyze it as you see fit. Without a doubt serious money is being put into this industry and we certainly expect more dollars continue to be committed.