Trion World Goes From Zero to $100M in Nine Months

According to the recently released Global Online Gaming Report 2012 by researcher yStats.com, global online gaming revenue is projected to grow by more than 10% annually from 2010 through 2016. A report by DFC Intelligence pegs the online gaming market to be worth $18 billion worldwide. Online gaming publisher Trion Worlds Inc. is counting on this trend as they gear up for an IPO.

Trion Worlds’ Financials
Trion Worlds was founded in 2006 by gaming industry veterans Lars Buttler and Jon Van Caneghem. Initially called Trion World Networks the company was founded with the intention to revolutionize the way games were created, played and distributed. Trion is based in Redwood City, California and has development centers in San Diego, California and Austin, Texas.

Trion Worlds is best known for its massively multiplayer online role-playing game (MMORPG) game, Rift. Rift is set in a world that is being torn apart by powerful rifts from other planes. Within four months of its release, the game had sold more than one million copies. Rift remains successful as Trion Worlds keeps improving the game by analyzing lesser used content and improving it to attract more players. Because the game is hosted on its own server cloud, Trion Worlds can also make real-time changes to the game. To add to the social experience, rift players can also chat with other players, tweet their performances and take pictures or videos to post on YouTube and other social networking sites.

Unlike other game companies, Trion Worlds earns money through monthly subscriptions to their games. At Rift’s launch, Trion Worlds was charging players a fee of $50 for the game and an additional subscription fee of $15 a month. Since then, prices have been slashed, and the game is now available for as little as $9.99 for a download with an annual subscription of $8.25 a month. A monthly contract is more expensive at $14.99 a month.

While Trion has successfully managed to develop a subscription-based revenue model, the company is also attempting to capture the virtual goods market. The recently launched game End of Nations, which is an MMO real-time strategy (MMORTS) game, is a free-to-play game that relies on virtual goods sales for revenues.

Trion does not disclose its financial performance, but the management claims that the company is profitable. Last year, Rift helped Trion earn more than $100 million in revenues. In fact, from a zero revenue base, the company shot to more than $100 million in revenue within nine months of launching the game.

To date, Trion Worlds has raised more than $185 million in venture funding from Rustic Canyon, Act II Capital, Time Warner, Peacock Equity, DCM and Trinity Ventures. The latest round of funding early this year, worth $85 million,  came from the Ontario Teachers Pension Plan and Bertelsmann Digital Media Investments.

Trion Worlds’ Expansion Into Asia
Trion Worlds continues to build strategic relationships, and in a first-of-its-kind tie up, it is working with television’s Syfy channel  to develop a science fiction franchise called DEFIANCE. The shooter game will launch simultaneously as a television program on Syfy Channel and as an MMO game from Trion for both gaming consoles and PCs. The game is expected to be released by the summer of 2013. Trion develops games with very high production values, and it is extremely expensive to copy what it does. The capital intensive nature of Trion Worlds’ business makes it defensive at the face of the me-too phenomenon in the lower end of the market.

In addition, the company is working on a platform called project Red Door that will help it to diversify. Red Door will be a publishing platform for online game developers and a storefront from which to sell games to consumers. Trion will charge non-console game developers a fee for use of its software and tools and will also be able to sell these games through its consumer-facing storefront. Trion’s management believes that Red Door will be a “huge revenue opportunity.”

Trion Worlds’ International Expansion
For online gaming, Asia Pacific is a high-growth market. In a study released by Pearl Research, China’s online game revenues, which include MMORPG, casual, social, and Web games, grew 32% last year. Web games in the country are projected to earn more than $1 billion in 2013, compared with $800 million reported in 2011.

Another study by researcher Ovum projects that the digital games market in Asia Pacific will grow at a CAGR of 18% to $30.3 billion by 2016, with the most significant growth coming from the MMO sector.

Trion is getting ready to capture these growing markets. Recently, it joined with Chinese Internet company Shanda Games to release Rift in China in late 2012.  The deal is expected to be one of the biggest licensing deals in China ever. Through the agreement, Shanda will have the exclusive license of Rift localized in Mandarin. To tackle the Southeast Asian markets, it entered into another exclusive agreement with Asiasoft, a leading online game operator in the region, to release Rift in Indonesia, the Philippines, Singapore, Malaysia, Vietnam and Thailand. It also teamed up with CJ E&M Games to bring Rift to Korea.

These ambitious projects have clearly been helping Trion World to move forward with IPO plans, most likely with a 2013 target. By then, the revenue level will likely go well above $250 million, especially with the Christmas season of 2012 yet to come.

I like the fact that Trion is not a freemium company. Thus, it can focus on its paying subscribers and deliver real value to consumers who are willing to pay for what they use. The company shows immense promise as a next generation gaming powerhouse with a far more compelling and defensible business case than Zynga, for instance.