SOURCE: CMG Holdings, Inc

November 06, 2015 09:45 ET

CMG Holdings Group Announces the Spinout of Our Subsidiary, Good Gaming

CHICAGO, IL--(Marketwired - Nov 6, 2015) - CMG Holdings Group, Inc. (OTCQB: CMGO) today announces that we continue to move towards our vision of the future� a streamlined holding company creating and enhancing shareholder value.

Specifically, the Company has signed an agreement to spinout its majority owned subsidiary, Good Gaming, Inc., into a publicly traded entity currently operating as "HDS International Corp. (HDSI/OTC)". The transaction is designed to allow Good Gaming to achieve its potential as a standalone, pure play cash tournament gaming platform, targeting the 200MM+ eSports players and participants worldwide. These gamers represent the mass market of amateurs yearning to compete for cash and prizes, both individually and as team members, against other contestants with a goal of honing their skills, elevating their play to professional leagues, and profiting from the insatiable demand to participate in this high growth, emerging paradigm of eSports.

Management believes the establishment of Good Gaming as its own public entity better positions the business to raise substantial capital, reignite growth, and achieve a significant enterprise value based on recent transactions executed in the gaming vertical by fantasy sports platforms, such as Fan Duel and Draft Kings, which have commanded prices in excess of 1 Billion Dollars. Under the transaction, as a first step, CMG has signed a strategic expansion agreement, whereby current management of HDSI has assigned its block of Series B Preferred shares to CMG, giving the Company control and responsibility for the entity. All assets of HDSI's SirenGPS business, including intellectual property, software code, trademarks and customer lists, will be removed from HDSI, resulting in the elimination of $6.5 million of seller notes, several billion diluted shares upon potential conversion of those notes and current assets and liabilities associated with the SirenGPS business.

A new management team and Board will be formulated and implemented over the next 10 business days, which will manage HDSI. Paul Rauner, current CEO and Director of HDSI, will resign his position after a brief transition period, with SirenGPS and its employees retaining a small equity ownership in the public entity. As a second step, after this transition period, HDSI will complete an asset purchase of the Good Gaming platform, intellectual property, software code, and other Company assets. Additionally, CMG intends to cancel the proposed 130 reverse split previously petitioned in HDSI's form 14c, and will amend that petition for a new name and ticker change following the completion of the APA later this month.

The Global Industry Problem
While the competitive gaming phenomenon has been well established in Asia, it has now gained a tremendous economic boost by establishing a foothold in the West. By 2013, professional gamers were earning and competing for multimillion dollar prizes and filling stadiums with spectators that traditional sporting events typically dominated. By 2014, professional eSports had eclipsed events like the MLB World Series, the NCAA championship, and NBA game 7 viewership totals. The speed with which professional eSports has been growing is rapid, but leaves a void for the millions of gamers that fall between the professional level and the casual gamer. An Analogy: imagine having the Super bowl, Stanley Cup or World Series with no correlating collegiate or high school level athletics programs. There is one major difference in this analogy though: the number of potential gamers is over 100 times larger than all the eligible players in traditional sports due to the nature of the Internet and its worldwide connectivity and access. The addressable market is immense, to the tune of billions of dollars of potential annual spend.

The Good Gaming Solution
Good Gaming is a multigame, multiconsole platform that hosts amateur and semiprofessional tournaments around the world. Good Gaming provides access to the same kind of fun and challenges that professional eSports players enjoy, but at the amateur gamer level. In addition, by building the infrastructure from the ground up for the "Middle Class" of gaming, Good Gaming's platform will be an additional revenue stream for game publishers, advertisers, and third party vendors that are anticipated to drive billions of dollars of economic activity in the future.

Good Gaming's technology is designed with the goal of serving serious gamers who do not have the means or capabilities to compete at a professional level but desire to achieve this status. It is designed to scale as demand increases and open new avenues of competition and interaction for the competitive gaming community. The technology has the unique ability to create a first ever cross platform, multigame economic structure for gamers to barter and trade their time and skills. The technology is also designed to address forthcoming changes that have not made their way from Asia to North America yet.

After hosting tournaments last winter with Activision Blizzard's "Hearthstone: Heroes of Warcraft," Good Gaming has established a foothold in the market with one of the world's largest publishers. Having been featured on Activision Blizzard's game launcher (which had never been done before), the tournaments generated 300,000 hits, 27,000 submissions of user credentials and credit card information, and 1,250+ entries based on USA demand alone, surpassing an internal goal of 1,000 participants. Management believes this is an overwhelming confirmation that serious gamers who do not have the means or ability to compete in eSports at a professional level have the desire to compete at an amateur level. As evidenced by this tournament, amateur gamers are willing to pay for that experience and have shown great enthusiasm for the concepts and products we are building. With sufficient time and resources, Good Gaming can become the dominant provider for the 200MM+ competitive gamers worldwide.

The Market Opportunity
Research company Newzoo expects the size of the eSports market to more than double from $194MM in 2014 to $465MM in 2017. Today, about a third of that revenue comes from advertisers. Most of the remaining revenue comes from direct investments from game publishers, which recoup hosting expenses through game sales. Newzoo estimates that as the eSports market matures, companies will buy more ads, while more networks like Amazon's Twitch will pay for broadcast rights. This could cause the revenue mix of the eSports industry to shift closer to traditional sports, which generated 57% of its revenue from sponsorships and media rights last year.

Still, the growth of the industry should not solely be measured in advertising potential or media rights revenue. That is because the events and their streams are potent forms of advertising that are tough to quantify. Between 2012-2014, the number of eSports viewers worldwide surged from 58MM to 89MM, an annual growth rate of 21%. A total of 205MM people either watched an eSport stream or actively participated last year.

For publishers, these events generate much more publicity per dollar than traditional ads since they convince more spectators to buy or continue playing the featured games. For Activision Blizzard, hosting eSports events can boost the longevity of aging core franchises like Call of Duty, which still generates a large percentage of the publisher's revenue, over a decade after the game's first release.

To put the skyrocketing of eSports viewership into perspective, a recent League of Legends Season 3 World Championship garnered 32MM viewers, surpassing both the BCS National Championship and Game 7 of the NBA Finals by approximately 7MM viewers, with more than double the viewership of Major League Baseball's World Series. Further, last week's professional League of Legends tournament generated 33MM viewers, far more than the NFL's telecast from London's Wembley Stadium, which generated approximately 15MM viewers.

By 2018 eSports is expected to eclipse all viewership records establishing its dominance worldwide over all forms of traditional sports, including football, baseball, soccer, tennis, and hockey. Similarly, it is projected that by 2018 eSports will surpass the movie and music industry in revenue.

  • eSports viewers watch events over 19x a month with a session length of 2.2 hours which is 63% higher than traditional media channels.
  • eSports is a key marketing vehicle and revenue driver for online game publishers. Companies like Activision, Riot Games, Wargaming, Valve and Ubisoft are all placing bets on competitive gaming in 2015 and beyond.
  • eSports has been popular in Asia, particularly in Korea, for the last 10 years. Due to the increased popularity of eSports in the West, growth is now accelerating both in terms of audience (CAGR +20%) and revenues (CAGR +29%).

Management Commentary

Said Glenn Laken, CEO of CMG Holdings:

Since inception we have invested thousands of man hours and hundreds of thousands of dollars into the refinement and development of Good Gaming. Based on last year's initial success and recent conversations we have had with alliance partners in the publishing world, we believe the time for Good Gaming to stand alone is now. Good Gaming successfully ran the largest eSports tournament of its kind last winter. After exceeding our internal goals by a large margin on the first major worldwide tournament, Good Gaming reviewed the significant feedback it received from the gaming community before creating the next generation of the Good Gaming Platform. For Good Gaming, launches of cash tournaments for major titles is expected to create a substantial business, generating recurring subscription revenues, transactional revenues for events, advertising revenues, ecommerce revenues, and other revenue streams in the communications and social networking markets that can be monetized quickly. Altogether, these opportunities will create a highly differentiated, unique ecosystem and a focal point for activity for eSports players around the world. We are currently in discussions with institutional and high net worth investors to capitalize this business, and will not close the transaction until adequate funding commitments have been secured. We intend to launch an initial series of tournaments with our partners within 45-60 days, just in time for the holidays, which should generate dramatic interest and activity in our business. Looking ahead, we intend to fully automate the platform to enable largescale tournaments of 10,000-100,000 participants, sign additional publishers, bring the business into the mobile world, and develop B2B modules that will allow businesses and institutions to launch their own tournaments for competition at the local, regional and/or national level. Think of local bars hosting eSports competitions with other establishments, no different than today's system for competition for billiards or darts. Imagine intercollegiate competitions, both within conferences, between conferences, and for national titles. I envision a future where March Madness can be followed by April Madness, allowing amateur gamers to experience the thrill of competition just as collegiate athletes compete in the real world. The NFL can be followed by the EFL -- "Electronic Football League", the NBA by the "EBA", etc. The permutations are simply endless, and we are ready to deliver on that vision today. The future is bright for Good Gaming and CMG, and simply put, I have never been more excited about the opportunities facing our family of companies and our loyal employees. With regard to our plans to cancel the HDSI proposed reverse split, we believe it is in the best interests of our new shareholders at HDSI. I do not think HDSI shareholders should be punished for their loyalty to the former HDSI business, while promises made to HDSI by counterparties did not materialize. Upon the successful launch of Good Gaming 2.0, hosting several major tournaments and achievement of positive cash flow, we may revisit this issue in order to uplist the stock to a major exchange. Once the Good Gaming spinout transaction has been closed, we intend to host an investor conference call and roadshow in order to further deliver our message and outline our plans to our constituents and shareholders.

About CMG Holdings Group, Inc. CMG Holdings Group, Inc. is a holding company aimed at creating shareholder value by investing in special situations businesses. The Company is headquartered in Chicago, IL and intends to build significant scope and scale through a series of mergers and acquisitions. Safe Harbor Statement: CMGO cautions that statements made in press releases constitute forward-looking statements, and make no guarantees of future performances and actual results/developments may differ materially from projections in forward-looking statements. Forward-looking statements are based on estimates and opinions of management at the time statements are made.

Contact Information

  • Contact:
    Investor Relations
    CMG Holdings Group, Inc.
    (773) 698-6047