Frontier Developments plc (5FD.F) Earnings Call Transcript & Summary

Okay. Well, it's 9:31, so I think we'll get started. Welcome to the interim financial results. If you -- as I mentioned just now, if you can stay on mute, please, until we get to the questions section. John and I will go through a few slides, and then we'll move to questions. So without further ado, Johnny, I'll pass to you.

Thanks, Alex. Good morning, everyone. We're going to [ reproduce ] slides, so there's going to be plenty of time for questions. And then the interactivity of those questions is going to be really good when we get to discuss some of the topics that we'll be going through now. So let's start with H1 FY '24 financials. We had a good back-catalogue performance, in particular with our CMS portfolio. I'll talk about that a little bit later on because I think it's going to be a recurring theme. We do need to acknowledge that revenue for our new games were lower than expected. And again, I'll talk a little bit about that later on. We have an adjusted EBITDA loss, which is a measure of our cash profitability, of GBP 4.9 million. This was due to a lower level of total revenue and an increase in operating costs, although this was partially offset by a higher gross profit margin. Our noncash amortization and impairment charges resulted in an operating loss before restructuring of GBP 30.8 million. And our cash balance at the end of 30th November was GBP 17.1 million. As of the end of December 31st, this has increased to GBP 19.9 million. Moving on to operations and strategy. In Q4, we confirmed we have pivoted our strategy to focus on the reliability, the CMS genre. Again, hope that we will talk a lot more about that later on, I think it's exceedingly important. We have committed to 3 CMS games across the financial years of '25, '26 and '27. And to support this strategy, we announced an organizational review in October. This process is on track, including the planned 20% reduction in our annual operating costs. Regarding our current trading and outlook, holiday trading was consistent with revised expectations. To reiterate, this was helped by our back-catalogue, especially our CMS games. We have 2 PC games coming to consoles in the next few months, so they will be part of this financial year, together with the continued nurturing of our back-catalogue. F1 Manager '24 and our own IP CMS game are on schedule for release in FY '25. And finally, our financial guidance for FY '24 is reconfirmed. Alex, if you want to move to the next slide, please. Yes. Just checking on that. Yes. Good. So talking a little bit more about the back-catalogue to give a bit more detail into the good performance. Overall, those titles contributed GBP 34.4 million, which is about 72% of our total revenue. As mentioned, our CMS titles were particularly strong. They contributed over half of our total H1 revenue, and that's equivalent to a sustained rate of 81%. Jurassic World 2 and Planet Zoo were our strongest performers. Again, I'll put a bit more commentary on this. This is a testament to how we fundamentally understand the CMS market. We are proven genre leaders in that area. And it's pleasing to see the long tail of our player engagement. As you know, for people who have been following Frontier, this has been maintained by investing in our [ nurture ] approach. So if I talk a little bit about PDLC, so, so far, in this financial year, we launched [ 3 ] packs to Planet Zoo and 2 packs for Jurassic World Evolution 2. And a little bit later, and I'll tell you that we do have some more planned. And PDLCs account for 29% of our total revenue. And then just as a reminder, [ nurturing ] is not just about releasing PDLCs, it's about releasing downloadable content, games which have user-generated content, channel management and subscription deals. Moving on to the new games. So as I said earlier, revenue contribution from our new games was lower than expected. Revenue from the Formula 1 Manager franchise reduced by 34% from H1 FY '23 to H1 FY '24. Again, to give a little bit more insight into that, unit sales were actually even lower. However, we managed to secure a major Game Pass deal, which contributed mostly to revenue, and also brought more players to the franchise. Talking about Realms of Ruin, the game, it was disappointing. The game failed to gain [ attraction ] with the audience, we anticipated. I'd like to take a little opportunity just to acknowledge the huge amount of passion and [ effort ] that our team put into that game. But all that being said, while the performance of our new games were disappointing, but looking at the proven success of our CMS back-catalogue, I think this really reinforces our decision to pivot to the CMS strategy. Again, hopefully, I'll be able to take some questions on that a little bit later on. Alex, back to you, please.

Thanks, Johnny. Okay. So Johnny has talked through revenue, I'm going to talk through the income statement. We'll go through the adjusted income statement first, and then we'll chat through the IFRS 1. And then we'll talk about cash. So on the adjusted income statement, this is using the adjusted EBITDA measure that we talk about, which is like a cash profitability measure. So in the first half, Johnny's talked about revenue already; overall, we're pretty pleased with the outcome, given the challenges we have with the new launches. Gross profit margin percentage increased substantially up to 69%. Now we benefit there from the subscription deals that we had. So we had F1 Manager '23 going into Microsoft's Game Pass, and we also had a renewal on Jurassic World Evolution 2. So they're very helpful because there's a strong profitability from the accounting for those. We also had a stronger mix to owned IP games because of the challenges we had with those 2 new launches, so don't expect a similar level of gross margin percentage in the second half. I think it will normalize back in the second half towards the sort of mid- to low 60%, maybe 63%, something like that. Then going through the cost base, again, this is the sort of cash cost base. On a cash basis, R&D was pretty similar, overall. So we had an increase in people-related costs. If we compare half 1 to half 1, we have more people in our development organization, plus and pay rises. Now countering that, we had a much lower level of spend for foundry, foundry investment, given the closure there. And we had a reduction in outsourced. So we did see a little bit of the impact from the cost reductions from the organizational review in the first half, most of those will be coming through in the second half and be ready for the financial year 2025. Sales and marketing, quite an increase over the comparative period. We launched 2 games, of course. We had Realms of Ruin, which was a major investment for us in terms of development and also marketing; and we have the F1 game, in comparison to the half 1 of the preceding financial year, where we just had the F1 game. So that's the reason for sales and marketing being so high in the first half. So expect that to be lower in the second half through a lower number of new content releases and obviously, the cost reductions. G&A very similar, actually, to the comparative period. So on a cash basis, total OpEx was, as you see, about GBP 38 million. So on an annual basis, we're talking sort of [ GBP 76 million ]. And through the org review, the target there is to get that cash OpEx down to sort of GBP 60 million, maybe a little bit lower than GBP 60 million, and we'll see the benefit of that starting to come through in the second half of this financial year. Moving then on to the income statement on an IFRS basis, so this takes into account the capitalization of development costs as we create game assets and the amortization of those and in the case of the first half of this year, the impairment. So capitalization, they're at 59%. That's unusually low for us. Normally, we're higher than that. We're expensing all of the dev costs that we have for F1, so that's F1 Manager 2023 as we develop that and also F1 Manager 2024, which I think Johnny will touch on a bit later. So because we're expensing those costs, we have a lower level of capitalization in the first half. I think in the second half, we'll probably have a slightly higher rate, but I don't think it will change substantially into half 2. Then on amortization as an impairment, there's a couple of factors there. The first one is the change in amortization profile that we talked about in the full-year financial results as we set out in the annual report. So when we now launch a game, we now have a bigger charge in the launch month for the amortization. And over the first sort of 12 months, there's a steeper rate of charge. And then it declines. So because we launched 2 games, first of all, we have a bigger amortization charge for F1 and for Realms of Ruin going into the first half in the comparative period. And then on top of that, we have the impairment charge for Realms of Ruin, which after that amortization was still GBP [ 17 ] million, so very substantial charge for Realms of Ruin. So into half 2, I'm expecting the amortization charge will be probably GBP 10 million to GBP 11 million for half 2. That's obviously a significant change from the first half there. So sales and marketing are affected by sort of any noncash measures on noncash items. G&A, we've got the share charges within there as well and some [ ForEx ]. So overall, when you take into account the impairments and the high level of amortization, it does result in a very substantial accounting loss in that first half of just over GBP 30 million. Moving on to cash flow now. This is usual cash bridge. So we started the half year at the end of May there with GBP 28 million. We finished with just over GBP 17 million. As Johnny mentioned at the end of December, we'd actually increase that back up to GBP 20 million from the Game Pass money being received. So in that first half period, you can see there the GBP 4.9 million of adjusted EBITDA loss. That's effectively a sort of cash loss. A couple of items to highlight there. The first is the working capital movement, so it's a pretty substantial one. Receivables accounts for about 6 of that, and payables is kind of around 3 or 4, so the remainder of that. So receivables is mainly related to the subscription deals. I mentioned earlier, Microsoft Game Pass deals for both F1 and Jurassic. And on payables, we've seen a reduction in the payables balance, partly relating to the cost reductions but also the elimination of foundry costs as well. So that's the reason we've seen that working capital change. And then the tax money coming in, so that's the GBP 3.9 million of VGTR claims that we made for financial year 2022. We're just in the process now of filing claims for financial year 2023, which will mean that we are expecting to receive VGTR money for that year before the end of this accounting year, before the end of this financial year. That's the target. So talking a bit more about the organizational review. We announced this in October. So this was in response to our update on strategy, our CMS-focused strategy. We've obviously seen challenges with the foundry strategy to go into self-publisher, into third-party publishing and some of the other projects that we've seen outside of CMS. And so we felt we needed to do this organizational review, which would be cost reductions but also a number of elements outside of cost reductions. And this would mean that we could more efficiently deliver on our plan, get the company back into profit, and create that sustainable foundation for the future. So with cost reductions being a major element of the review and people costs being such a big proportion of our total costs, unfortunately, of course, redundancies are featured here and the restructuring of roles there has been undertaken in 2 phases. Phase 1 is now complete, and that was largely roles outside of the development organization, so publishing and many other teams across operations and within admin. And then Phase 2, which we're in the midst of at the moment, which will complete during February, is predominantly focused on the development organization. So that's been very challenging for the organization to go through that and not something that we wanted to do. But that combined with the hiring freeze that we've had since the end of October, means that we will be reducing our overall people cost pretty substantially as part of those cost reductions. But as I mentioned, it's not just about cost reductions. We are updating our processes, our structure. We have got some leadership programs as well, which were all designed to support the change in strategy and getting us better -- back on a good footing for the future. Johnny, I'll pass back to you.

Thank you. So on this slide, I've run through our upcoming releases in two sections. So the first is like remaining content and platforms for financial year '24. This is quite interesting because it just illustrates some of the revenue-generating releases that we have coming, which you may or may not know. So I'll talk about the first 2 ones together, which is Planet Zoo PDLC and Jurassic World Evolution 2 PDLC. So we have more planned for this financial year. I think it's just really encouraging to see that there is a continued strong player demand for these packs. Every release has met with just great community sentiment, and each one provides a good, predictable return on investment. And also, again, just for this recurring theme to say that it really does reinforce that we understand the CMS market. We know how to work in that genre. Very excited to see [ Chaos Gate ] coming to console. And we announced this yesterday, and it's going to be launched on the 20th of February. It's a proven PC game, with players really excited by it. And I think just bringing it to new platforms fits very well. If you look through various other turn-based strategy games, they do translate to console and been very successful. And moving on to next thing, a very cryptic PC game coming to console. I think it's really important to always broaden our addressable audience. And I'd probably like to call out how successful Planet Coaster was when we brought that to consoles, so a traditional PC game coming to consoles. And when you look at the cumulative cash [ curves ], you can see how financially successful it's been. And for this game, which again I'm not going to announce, we are looking forward to see players reactions. I think they're going to really, really appreciate that we've managed to bring this game to consoles. Moving on to the new game releases. So we've got Formula 1 Manager 2024 coming out. This is the third installment of the franchise and is leveraging upon all the work that we've done in the previous games. It's really quite nice for the development team to really add features on such a solid base. As part of this process and working with our publishing department, we're really embracing community feedback and we look forward to the features -- look forward to the reactions to the new features that we're going to be putting in. And then I move on to the [ Super Cryptic ], our own IP CMS game. So this game is progressing well. It's in full development, and it's on schedule for release and financial year 2025. At Frontier, we have really high hopes for this one, but I can't say too much yet. So again, in the coming months, we'll be talking about that a lot. I'm particularly excited because this is the first major installment of our CMS strategy pivot, so it's a very important game for Frontier. And I'm very pleased that when I look next door, the game is coming on very, very nicely indeed. Alex, I think that is -- you are the wrap-up.

Yes. Thanks, Johnny. So current trading outlook. So one thing we haven't really talked about is holiday trading. Of course, by that mean -- we mean, Thanksgiving, Black Friday and Christmas. So as a theme here, the CMS portfolio did nicely over Christmas. We're pleased with the performance there. Unfortunately, we didn't really see a big pickup with Realms -- with Realms of Ruin, and F1 was also a little bit weak, so we say in lower sales from some other games. But predominantly, it's the new games. So again, we're pleased with the CMS performance. That's done well over Christmas and into the first week of January. And hence, we're able to reconfirm that financial guidance. We've got the revenue range of GBP 80 million to GBP 95 million. And if you look back at the commentary we provided in the business update in November, we still believe that we could get to that loss of sort of GBP 9 million, but it remains achievable towards the top end of that guidance. So we do think about narrowing that guidance. I think realistically, the top of that guidance is only likely to be achieved with everything sort of going in the right direction and maybe a subscription deal here and there. But we'll provide further updates as we go through. And as Johnny mentioned, those 2 PC games to come into console, we're excited about those, but we just need to be cautious about getting too excited and buffing up numbers on that basis. So with that, I think we will pass over to questions and looking forward to turning a chat-through in the next few minutes. So if you want to put your hand up or do the thumbs-up thing, Patrick?

Sorry, Yes, thanks very much for the presentation. Just a couple of ones from me. So I want to focus first on the CMS category and the -- in terms of the releases that are to come in '25, '26, and '27, sort of similarity of the titles are [ nice ], the potential for any cannibalization and kind of whether when you release '26's version over '25, could that have any impact of moving players across the new CMS title? And the second question was just a sort of a financials question on cash. Assuming kind of you could have kind of get towards the lower end of the range, Alex, on the revenue side, where do you see cash kind of coming in? And if you assume that you get that tax benefit that you've talked about in terms of the VGTR? And just lastly, kind of looking at 2020 -- looking at the remainder of this year, looking at kind of what's coming out in the market, how confident are you kind of on the sort of back-catalogue continuing to perform as expected? I mean, basically, are you concerned around some of the bigger releases in the first half of the year in the [ America ]? That's it for me.

Alex, can I take 1 and 3? And if you don't mind, you can do tax?

Sure.

So that's a really good question, the first one about cannibalization. 3 CMS games on the spin, what does that mean for our players? I think, Alex, it might be worth just bringing up slide, well, I think it is because -- to answer these questions, is this quite nice to look back about our releases, a lot of CMS games -- sorry, Alex, it's a few [ slides ] up there.

That one?

Yes, that, absolutely. So if I look, there are 4 CMS games there in 5 years. And you look at the revenue that we've generated and obviously, you're very familiar with the cumulative cash, if there is cannibalization, which I believe there is, I also think it's [ cross-pollinization ] and brand awareness, I really will settle for those numbers. So this is how I'm answering this challenge internally as well. I'd also point out, sequels, so people have said, if we were to do sequels, not confirming anything, does the second sequel ever do well? And what time do you need between them? And so I would point out using the data here, Jurassic World Evolution 1, Jurassic World Evolution 2, 3 years apart, and the games sold comparably very similar. Again, obviously, it doesn't look like it here because GBP [ 98 ] million for Jurassic World Evolution 2, but that's still selling now and selling very well. So I guess, perhaps if we went on to the cumulative cash chart, Alex, it would just really show and illustrate with past data, yes, those 2 purple lines, how a sequel can do well, if that sequel is engineered correctly. You really are listening to the players. You are putting in new features, which they want. You are making sure it still has that sort of core resonance with the audience. And I do think on CMS, we have that experience to do that. We've been managing the life cycle of CMS games for such a long time and we have so much data that -- although that is -- it's the question we constantly ask ourselves, we are very confident that we have the answer.

Just one other one on that. I just -- sorry, so like a variety of the game is expected to be -- is there expected to be a lot of variety? And can you get a lot of synergies from the -- like the development of the 3 -- or team -- multiple teams working on one or more of the titles?

Yes. Absolutely. So the second point, that's exactly what we're planning into this organizational review. This is why we can do those optimizations and reduce our capacity because we are relying on the synergies between each one of these games. In terms of how -- going back on the first part, how differently we are -- I really -- just the difference [ cause an effect ] more than that. Again, the spread, I believe, will be similar to the spread in terms of audience crossover in those previous titles that you've seen 4 out of 5 years. So suffice to say, we have a confidence that this cannibalized question is although absolutely fundamental, we're very comfortable with it.

Johnny, do you want to deal with the question about back-catalogue?

Fixture congestion, yes. So are we confident with back-catalogue? Yes, we are. Again, Christmas was really good, and Christmas was very congested. Lots and lots of sort of AAA titles in there, taking all the [ options ] out in the room. What we do find is with our back-catalogue, there is a sort of price sensitivity part of the market. And that's why we believe that did very well. If I was to take even a further step back, probably answering more, is that when I look at Realms of Ruin and I look at the price that we charge for that and I look at Baldur's Gate and I look at Hogwarts and I look at Starfield, I think that's a very difficult space to operate in. I think what I like about our CMS games or what I like about our back-catalogue or what I like about [ Hellgate ] as well, it's the pricing is the next tier below, and I think finding those niches is where Frontier traditionally has been very good at, and that's where we'll move into in the future. So I do think we need to be very cognizant of the macro -- very cognizant of people having that much money in the pocket, but also celebrate the big games. If we launch at the correct price and our PDLCs at a great price, it's still great value for money. And we believe we still have that engaged audience because of our [ mows and dows ] and our success over Christmas in those areas.

Okay. I'll just pick up Patrick's other question, was about cash. There's been a bit of concern about our cash position at GBP 20 million at the end of December. We're probably not as worried as most people. That's before we collect up the money for Christmas. So that comes in during January and February. I think if you do take the sort of bottom end of the scenario and think, well, the revenue is going to be weak and we struggle to achieve the cost reductions, I appreciate a lot of the analyst projections are towards the bottom, then cash does get a little bit squeaky towards the end of the summer and people have sort of low numbers. We're actually not as worried as most people out there. But clearly, it makes sense to be doing some stuff in the background. So we are having some conversations, and we are -- we've got a couple of options that we're looking at just to make sure that there aren't any concerns. And of course, with the audit coming up at the end of May, what we don't want to do is have difficult conversations with the auditors about sign-off. So that's the main reason to be talking to some of these potential partners. Jasmine?

I hope you can hear me. I've got a couple of questions. You kind of touched on the Christmas period [Audio Gap] already relatively pleased, but I was wondering if you could elaborate a little bit more on maybe some of the consumer trends you're seeing. I think this time last year, we were talking quite a lot around higher price sensitivity, and we've seen quite a lot of discounting coming into Christmas. Just wondering, how those trends have developed? I saw that some of your newer titles in the portfolio that released and potentially not done quite as well as you expected, have been quite heavily discounted kind of through November to January. Any kind of more broader overarching themes you're seeing would be really helpful. So it was quite a few parts of that one. And the second part or second question I wanted to ask as well is around the comments on outsourced development in your statement. So I think you talked about lower spend on outsourced development. Is that a function of maybe the titles that are in development? Is it a function of the cost reduction program? Or is that a more broader strategy shift? That would be helpful as well.

Maybe start with Christmas. And Johnny, feel free to jump in as well. But if we start with the existing portfolio, particularly the games [Audio Gap] where we have active PDLC, strategy really hasn't changed that much. It's -- if you look at the timing of the PDLCs, often, it's just for a price discount. If we can have our own price discount, that then leans into a Steam sale, for example, that works really well. You've seen us do that with Planet Zoo and Jurassic over the last 12 months. So the strategy hasn't changed yet, and the kind of results aren't so different either. You might remember that we had a really good Easter. We had a great sort of Steam Publisher Sale back in Easter. Another number of opportunities during the summer and then sort of Thanksgiving, Christmas period, again, Jurassic and Zoo were sort of star performers. And we talk about the CMS portfolio, put them in particular, did very well. Worth noting there that the sustained rate on the CMS games are 81%. There's obviously some games that don't have PDLCs, Planet Coaster, Jurassic World Evolution 1 and RollerCoaster Tycoon 3. So actually, the sustained rates for Jurassic World Evolution 2 and Planet Zoo are doing very well. So not much change in strategy. We're not really seeing a big change in any -- in the type of engagement with players. Over time, the PDLC percentage does increase. We're still attracting lots of new players. But at Christmas, I think Planet Zoo was something like 35% base game, 65% PDLC, so it just shows the strength of that model. Jurassic World Evolution 2 is obviously not been out quite as long, and that's more in the sort of 50-50 bracket between base game and PDLC. So that's the sort of first theme, I suppose, is existing portfolio, particularly on those CMSs, where we've got PDLC, strategy is very similar and the outcome is very similar. You then asked about some of the new games, and I think that's where we struggled and probably we struggled for a variety of reasons. But certainly, competition during the year was difficult. And for a full-priced, premium-priced video game, even with some pretty big discounts, it's quite hard to get your game noticed. It's pretty noisy at Christmas. So we did go big with some of those discounts, and it didn't really yield particularly big results for us. So that's definitely been a challenge. When we look ahead to the CMS-focused strategy that we have, of course, we know those audiences, we know how to reach those audiences, so we feel very good about that. I think always with the new genres that we've sought to enter, you've got the development challenge, but you've also got the publishing challenge. You're trying to reach a different audience that you don't really normally engage with. So Johnny, do you want to chip in with anything else on that one?

Yes, just some maybe -- [ other ] things. I do think the games industry is definitely reeling from the macro and people have with that spend. I do think from Frontier strategic point of view, we shouldn't be competing with AAA. We can't compete with those budgets. Even when you look at AAA, it's very hard for some of these really large publishers to launch a new brand. So they're going back and looking at their previous brands. I'm sure you're going to see more sort of sequels, remakes and sort of [ something ] like that. So that brand awareness is there. I do think that we need to pitch our games the next tier down. And I also think we need to really rely on where we are market leaders, where we really understand the players, where we have a reputation of producing those games. And all those things are going to mean that out of those 12,000 or 13,000, 14,000 games launched on Steam, we're going to be above the [ fire pit ] because we have actually played -- we are really maximizing the niches that we've exploit -- biological -- sorry, we're really maximizing those areas which we have done in the past. So it's a tough time for the industry. But because Christmas was good, I think it's going to be on the up. I just think that people that are going to be successful are ones that are really going to stick to what they know best. And I don't think there's going to be as much diversification within companies, they are going to sort of stick to [ their ] thing. They're going to do what they do well. And I think the players are going to respond to that.

And thanks, Johnny. The second question there was about outsourced development. Now you're right there, we got a couple of themes there. Some of it is cost reduction, but also it's the nature of the game. So F1 and also Realms of Ruin tend to have a bigger proportion for outsourced with a focus now on the CMS games, and that's a substantial reduction. Outsourced is still going to be important for us, so particularly good for being able to flex and having short-term demand. It's particularly good for where we have developed a certain sort of pathway. We have to give the example of [ Jurassic ] and Planet Zoo. If we've done a certain number of sort of [ mammal ] types or dino types, then we can start to use outsourced to be able to flex up and get up and up more quickly. So that's the reason that that's reducing them. James?

A couple of questions from me. On the -- for the CMS focus, obviously, you've touched on why from a revenue and cash perspective and sort of knowledge-basis why you're focusing on those ones. But I guess, given each of the games have a similar mechanic underlying that, is it fair to assume that the development of the next game, the incremental next game is incrementally less expensive than, say, obviously going down to genre, where we see the cash curves be substantially deeper? So going that way as well as having better curves, could we -- could your capital intensity reduce over the medium term, hence, maybe the scope of doing more games could increase as time goes on, given that the sort of the incremental cost is possibly a bit less as time goes on? Second question, just around the marketing strategy of the CMS game that's coming. When you launched Planet Zoo, were you able to leverage the Planet brand, the other sort of Coaster players at that time? Or was it a completely separate sort of Planet Zoo sort of marketing strategy? And then hence, when we're looking about the next title, obviously, it's a sequel, it's easier to understand how that might work. But if it's not one, is there something in the existing Planet brand that you might be able to leverage? Just in terms of how that strategy might go would be interesting.

Okay. I want to ask the first -- I'll do the first one, Johnny, and you can do the second one, if you may?

On the first one, you're going to say that we can do things cheaper, and I'm going to say that we're going to do things better. So just be wary to jump in.

Better and cheaper, maybe. So worth rewinding to just a few years ago, maybe 2 or 3 years ago, we were talking about getting to 3 games a year, probably a CMS game, an F1 game and maybe another game, it could be an RTS game. And your question is quite right, James, to support 3 very different games per year does take more capital. You don't get efficiencies between those projects necessarily. And some of those genres are quite expensive to maintain and enter in the first place. We saw that with RTS, and we saw that with F1 as well. So there's sort of an entry tax just to get the first game out, and then you can get some efficiencies after that. So certainly, when we look back and think, we were trying to get to 3 games a year. And now, what we're talking about is having an F1 game a year and then go for the CMS games as the focus for the company. It does mean fewer people overall, but it does also mean pretty significant efficiency. And I'll just flash up the cash chart here. Just as a reminder, I think we referred to that just now. If you look at the CMS portfolio, the kind of -- to get to launch, we're talking -- I think Planet Coaster was maybe sort of 6 or 7. And maybe Jurassic World Evolution [ 2 ], including marketing, was maybe 12 or something like that to get to launch. That's the size of investment for those games. And of course, it's been very expensive to get into F1 and into Realms of Ruin. So we are going to see some pretty significant efficiency, I think, in terms of what we do in the future. But as Johnny said, it's also about doing things better as well as doing things cheaper. Johnny, do you want to talk about the CMS publishing strategy?

Yes. Yes. It's quite interesting to do, maybe a little bit of a history. That's -- remember when we were [ ideating ] on Planet Zoo or an animal -- about a game about zoos when we're working up, should we call it A Planet Game or should we call it something else? We were a little bit worried at the time that maybe people were expecting it to be an expansion to Planet Coaster. And we took this real step back by thinking that previously, there used to be something called Tycoon games. And Tycoon games, especially when you're looking in the early days, we had Transport Tycoon, RollerCoaster Tycoon, Zoo Tycoon, it was such a really recognized brand, even though it was done by different companies, people knew exactly what was up, what it was on the [ 10 ]. And then we saw that as we move forward and because we believed so much in Plant Coaster, we thought that this brand awareness would be a real [ letup ] in marketing, and it improved. So obviously, marketing there is a bit of a divergence, you have a core where you're talking about investors of the Planet Game. But then also you are focusing on people who like zoo animals, people who like all sort of the coasters and whatever our next game is going to be. So I think it's really important in this Planet brand. I think it's synonymous with quality, the best CMS games around, synonymous with Frontier. So I just think it's a very well-established brand, and I think it's high value, and our publishing department really leverages that.

Sorry, I did have one final question actually just on the Chaos Gate look there. So you referenced how Planet Coaster did when it was released into -- onto console. You've got that line chart. But when you first launched -- or when [ Chaos Gate ] was first launched, it was -- obviously, it's a smaller one. It was within the publishing side, if I remember correctly, within that part. Now that you've sort of got more control over it, is there a scope for it being a better -- when it comes, it is actually a sort of a better bump from than what close to you might have seen, relatively?

I'd say, what the -- moving on to console is you're leveraging all the work that's been done -- the game was -- yes, you need -- there were some [ tweaks in various ] control mechanism for the game, fundamentally because it is a turn-based strategy game, will work on console. So the calculation is there as the amount we've invested to move it to console, the quality of the actual game as well because players really, really did engage with it and then what it's going to sell. So we are expecting the bump on it because -- in terms of our return on investment because that investment to move it there is quite reasonable.

Okay. William?

Just a couple from me. Can you sort of provide a little bit more detail on sort of how F1 Manager 2023 has been received on Game Pass? And then secondly, following up on that, what are you seeing in terms of subscription deals? Obviously, you managed to secure a couple. But in terms of those values that are you expecting, are they in line with your expectations? Is it a bit more challenging? That would be great.

Maybe start with the second question on the subscription deals. So a key point there is we shouldn't ever rely on these deals. They should be icing on the top and additional bonuses. And we're very pleased with the deals that we got for F1 and Jurassic, particularly F1. The value for that deal versus the underlying performance of the game was strong. We're pleased with the outcome there. People have been engaging with it on Game Pass. But if you compare the active sort of player base through Game Pass on that game versus Jurassic, for example, it is lower. And then we called out in the statement there that broadly, F1 Manager 2023, in the first half, the performance is about 1/3 down from the previous year, but of course, that includes Game Pass. So the underlying sales performance is quite a bit lower than that. So there are deals around. As we talked about in the past, I think both Microsoft and PlayStation and Epic and others, they want to plan more further ahead, so they're looking to make sure that they talk to us regularly and see the portfolio and have opportunities to engage and [ cover ] up to. There's less opportunity for sort of short-term deals. Having said that, I think the F1 deal came about fairly quickly because I think someone else probably had a game that was penciled in the Game Pass that pushed out, and so we sort of jumped in there and were able to achieve that deal. So there will always be an opportunity for some short-term benefit here and there. But generally, it's looking longer term and planning these things out. And as ever, it's doing some [ tricky ] calculations on our part to see whether these deals make sense. And clearly with F1, it made a lot of sense to go for a Game Pass deal. So I don't know whether that quite answered your question, William. But I think overall, there is still money about -- for deals. It's maybe not harder to get, but you just got to be more organized, I think, and engage earlier. And of course, given Johnny and David's relationships in the industry, we think we're well placed there.

Yes. Maybe I can just add a little bit more on the Game Pass metrics. I don't want to give too many details. I think Alex was pretty correct. Again, we did see a big uptick. But proportionately, compared to like Jurassic, it wasn't as much. But it was nice to see that it wasn't just the [ now ] increased as well. And the way I look at it is that more players now are familiar with the brands when we bring else -- at Formula 1 Manager '24, there's now another group that we can sort of slowly go at. So I would say, it was a success. Obviously, the revenue event was pretty good as well. But yes, it was -- yes, it was okay. It was okay. I just don't want to give too many secrets away from Microsoft. I'll just try and quantify. It was -- we were happy, but it wasn't as big as a Jurassic World Evolution 1 or 2.

And maybe if I could just squeeze another one that's sort of related to James' question, but maybe -- I think you've talked about Planet Coaster when it was ported to console, delivering GBP 15 million of incremental revenue to the top line. So what -- in terms of profitability, is that sort of -- has there been a change in sort of your ability to support things easier and for lower cost essentially, so that the impact on the bottom line could be greater?

I think it's always desirable to try and do the console work while you're doing the PC work. And that's why doing a simultaneous launch for Jurassic has made so much sense. So there's always extra work to go back and do it later. I think the challenge is sometimes the strengths of the platform you're porting to in terms of which consoles. I think when we look at Chaos Gate, porting that to the older-generation consoles has been a bit of a challenge, but the team has done a super job there. So it is helpful having a proper established base of Gen 9 consoles, now PlayStation 5 and Xbox -- the latest Xbox generation. And I think that will help us in the future. John, I don't know whether you want to chip in there with anything?

I mean, I think just it's a subsequent point to what William raised, but I think it's very, very important, is, as we move forward and that the player base with -- for Gen 9 really increases and there are a few people buying Gen 8, I think that really allows us with some of our games, which are very, very sophisticated both from a graphical point of view but also underlying sort of technology behind the scenes, the simulation aspects of it; is really allowing us to bring some of these games to console that we wouldn't have been able to do in the past. [ We'll be signing ] more because people will be triangulating as what it may or may not be. But I think that's a really, really interesting point because PC games are, normally, quite resource-hungry and [ definitely ] Gen 9 consoles are beast, but Gen 8 weren't quite there. So yes, as we move forward, I think it's more on an even playing field for developing for next-gen consoles -- Gen 9 consoles and PC.

Okay. Let's go to Casper.

There is two quick questions for me. Most of them might have been answered already. Just on sort of understanding your audience, I mean, clearly, the group understands CMS audience very well. But are there any areas for improvement in terms of maybe additional data capture just to really optimize monetization of that group? Or do you think current processes are pretty robust already? And then number two is just on pricing dynamics for the wider market. I mean, obviously, there's a lot of news flow about depressed returns environment, need for higher pricing. What's capping that at the moment, in your view? Is it sort of continued pressure on consumer wallets and pricing sensitivity? Or you think there's something else that's going on?

If I do the first one, Alex, you could do the second one?

Sure.

So the first one being absolutely -- it's a really, really important point. The reason why we're doing this pivot to CMS is not just because we know how to make them, we know how to sell them, we know our audience. And those 3 games that we're doing, for me, is giving us [ reading ] time, probably the correct -- but a time to get ourselves back into profit while we really understand how we understand the audience as we move forward. This organizational review, it's not just about cost cutting, as Alex said, it's fundamentally looking at functions with the business and how can we improve the development, so all the things that James was referring to, about how can we get more synergy in that. There's also -- it's no coincidence of -- Phase 1 was publishing. It's really looking at publishing and saying, "How can we not make the same mistakes as at F1 and Realms of Ruin in terms of just not fully understanding that audience, not getting that market size, right, not mapping the features that players expect into the game?" Although the implementation was good, the execution was good, was it exactly the right game for the market? Do we understand it like we do at CMS? But on this organization review, the first part of it is, I think the team we have now is -- it's not a vacuum there, I think they're really stepping up to the plate. The right people are in place, they're really understanding, they're going to be using external market research as well to justify what we think this audience size is and what the audience preference is. And then as we move forward, we are then looking at augmenting our team with more expertise and strategic expertise in that area. As I said, it was disappointing, Realms of Ruin, especially because the amount of passion that went into it. But it really drove home that we didn't understand the audiences as much as we believe we did. And so what you do as a business, the best thing to do is to take it on a chin and you put that function back into the company. So I think it's a really -- point, I think it was our -- at least [ hear ] when I look at it. And as I said, people are stepping up to the plate right now. And this organizational review is determined to get us to some better place in that area.

Thanks, Johnny. So maybe move to the pricing question. I think in some ways that the pricing is similar, right, because we understand the pricing for CMS games, we've got that strong history with the Planet games and with the Jurassic games, we know how to price them. And we talked about it before you sort of almost go as high as you do, make sure you've got a deluxe product, support it with PDLC and get ready to be ticking down in the discounts over time. And it works really, really well, and we'll continue to do that. There's always a bit of challenge in setting that first price and working out what the SKUs look like and do you have an ultimate or a deluxe edition or a classic edition or whatever and what's in there. And so looking at some of these other new games that we've launched, F1 and Realms of Ruin, that's where we probably didn't understand the price point as well. We did plenty of research to see what other games have done. With Realms in particular, we feel that it's a very big, interesting, involved game, lots of game modes, and the creative elements are very, very strong. But we didn't do a good-enough job selling those things. So when we have premium prices we did for that game, we saw quite a lot of comments as -- I think some of you would have seen by reviewing Steam reviews and things that people weren't happy with the price, and some of that is us just not doing a good-enough job in selling the size and the scope of that game. Clearly, we need to learn from that. With F1, I think pricing was probably a bit less of an issue. We saw good engagement with the first game. But clearly, we need to keep an eye on that and make sure that we are getting it right. I think as ever, there are games that can go for a premium price to big IPs, as we've seen with Baldur's Gate and Hogwarts and others, that can manage to achieve that. And then outside of that, people are very price-conscious and will be looking for deals. And that's where sometimes, I think, we get almost caught in the middle. We're not quite at the high level, and we're not quite at the sort of discount level. So it's something we need to keep an eye on. But again, we're bleeding on about CMS quite a lot. But we know CMSs, we know how to launch those games, we know how to price those, and the team knows how to deliver on those, so we're feeling good about that. Olly?

Just a quick one for me. So building on an earlier question, it's just given the lead times on the subscription deals and sort of the disappointing independent F1 '23 sales, would you consider or are you looking to get F1 '24 on a subscription deal, say, prelaunch and that way, you kind of know the end return from the entire budget and you can sort of plan the development of the game based on that and return it, kind of derisks the whole thing? Is that something you're considering potentially for that stream or other games?

Yes. There's sometimes those kind of opportunities. If we look back at Planet Coaster coming to console, we did a launch Game Pass deal there. We've talked with other players, particularly Epic, for example, about Day 1 sort of launch exclusive and things like that. Actually for Elite Dangerous, we had console come to -- whether sort of Xbox exclusive and then it came to PlayStation later. So there are those opportunities. I think realistically for F1 Manager, given its challenging points in terms of the daily active users and the monthly active users, I think that's going to be a bit of an uphill discussion with Microsoft or others. But yes, of course, we're always interested in those things. And frankly, we've turned down some pretty big money over the last 5 years for some of those launch titles. We had some good chats about Jurassic World Evolution 2, for instance. But there are deals to be done. I think generally, we probably prefer -- unless the money was really substantial, we'd probably prefer to launch and then come out later on those deals, but let's see. There might be opportunities in the future. Katie?

Question about some of the CMS launches and the profile. Is it right to assume that these will take the place of just kind of a single console or PC launch? Or could it be multi-platform?

It could be multi-platform, yes. We've not said -- clearly, if you look back, Planet Coaster, Planet Zoo, will be PC only, and then Planet Coaster ended up coming to console. Both the Jurassic games for multi-platform and actually Jurassic -- the first Jurassic game came to Switch. So yes, we don't really want to say anything about the IP CMS game. What we're saying is, it's an IP CMS game and it's coming in FY '25.

Just a couple of more, if that's okay. Have you got any stats on crossover players on the CMS Planet games? So in terms of Planet Coaster and Planet Zoo, do you know how many players play both?

I think we've got a decent amount of data. Sometimes it's quite hard to get because of GDPR and being able to capture individual users' data. But anecdotally, I'll answer, and then Johnny can answer properly. You see a number of the key creators in both those games, who have learned the skills in Planet Coaster, the piece-by-piece building, and they go on to make pretty amazing stuff in Zoo. I think generally, the kind of underlying player base has not necessarily got so much of a crossover between the two. I think they are quite distinct audiences. But I'm going to shut up because Johnny knows an awful lot, more than I do about Zoo games and Tycoon games.

Well, I did, but you've been listening to it, so I think that's exactly right. The crossovers aren't as much as you would think, but it is disproportionately skewed by the [ evangelizers ], these master creators, the people you see on YouTube, who are raising they like both games. And so it is quite interesting that that's -- I don't want to really release any data, but it's not as much as one would think. Again, that's when I really, really was pleased that Patrick raised that question about cannibalization because I wanted to sort of show that the sales are still good when you have those gains in that very sort of relatively small window. But also, it goes to the other point about brand awareness. I think there's good brand awareness, even though people might not necessarily buy the game. So again, I just think it's a really good thing, and we don't feel threatened by any of this cross-play, I think it's to be encouraged. Not as big as one would think.

And then finally, the Switch platform has been a console that users typically found it more difficult to transport your games on to because of the complexity. Do you think or have you heard rumors or you got any information on the specs of perhaps the new iteration of Switch that could open that as more of a plausible platform for your future games?

The only information I have is been a bit of a fan boy of Nintendo, is reading what's on the same sort of publications that you are reading. The the issue we've had with -- you're absolutely right with Switch, is that the power [ bound ] is not there and our games are -- although we did manage to do a very good job of bringing Jurassic World Evolution 2 sort of complete to it. So I'm looking forward to the future. I'm also looking forward to -- their effort will be concentrating on its CPU and its GPU. It's going to be what peripheral they put with it, if they're going to put one in. They really forward thinking. Every single time, they really do sort of do the unexpected. So on the personal note, I hope that we can do some more -- some work with Nintendo. But speculation when we get it wrong. So until [ they ] come and speak to us, which they haven't yet, or we get some concrete announcements, just looking forward to it.

I'm just looking down the list to see if there's any more questions. I can't see any hands up. And -- anymore? Well, I think we're pretty much at time anyway. So thanks very much for joining the call. Thanks for your engagement with the Q&A. If anyone wants to engage and have some chats outside and follow up with questions, then just drop me a note, happy to do that. We're moving on to the Investor Roadshow, which is next few days, which is going to be virtual, but we'll have time to engage. So do just let us know. And thank you for your time.

Yes, absolutely. Take care, everyone.