UK’s Gameplay.com IPO Shoots for 31 Million Pounds

The UK’s Gameplay.com, an online computer game portal, hopes to raise 31 million pounds ($51 million US$) today, by selling 23 million shares in an initial public offering on London’s Alternative Investment Market.

The IPO comes only five years after Dylan Wilk, the 25-year-old founder of Gameplay.com, started the company using a 2,500 pound ($4,100 US$) grant from an entrepreneurial trust headed by Prince Charles — after first being turned down by many major banks.

Since then, the London-based company’s customer base has swelled to about 300,000, reporting earnings of 182,000 pounds ($303,000 US$) on revenue of 7 million pounds ($11.6 million US$) in 1998. Three years ago, the company acquired Wireplay, an online games company with 100,000 customers owned by British Telecommunications Plc. in exchange for 10 percent of Gameplay’s stock.

Fastest-growing e-commerce sector

According to market researcher Datamonitor Plc., online games are projected to be the fastest-growing niche of e-commerce in Europe — estimated to skyrocket to $700 million by 2003. In addition, Jupiter Communications says it expects online sales of software — including games — to snag 28.9 percent of all e-commerce transactions, easily beating out book sales by more than 10 percent.

Additional revenue streams

According to Gameplay’s prospectus, the company also expects to generate revenue by plugging into Europe’s 34 million digital TV subscribers, which is estimated account for 32 percent of all worldwide installations.

“Gameplay.com will be designed to be received on Internet-enabled set-top boxes, such as those incorporating WebTV-enabling technology,” the prospectus adds.

The portal will also derive revenue from selling advertising, pay-per-play and affiliate program commissions.

Conquering Europe isn’t a given

Gameplay.com plans to use the money it raises in its IPO to expand its presence throughout Europe. The company hopes to tap into an online game market that is estimated to grow from 500,000 users last year, to more than 5 million users by 2002, according to Datamonitor. Even so, analysts point out it isn’t easy making money with games online, since many users want to use them for free. In addition, Gameplay.com will face stiff competition from America Online and Microsoft.

However, one thing the company has in its favor is the fact that Gameplay.com is backed by British Telecommunications, which will provide its network. It’s also signed agreements with Future Network Plc. for the sales of games to its customers and supplying additional content for its portal.

Also important to Gameplay’s long-term success is its partnership with Open Interactive Ltd., which plans to develop and market Gameplay.com as an interactive digital TV channel. Open Interactive partners also include British Telecommunications, British Sky Broadcasting Plc., Matsushita Electric Industrial Co. and HSBC Holdings Plc.