[UPDATE] BAFTA-winning Sumo’s revenues are up 40.7% – Targets “our ability to find good acquisitions” as key route to further growth

Sumo Group’s annual results were released in April and the company is in very good shape indeed, with revenues up by 40.7 per cent and profits up 17.1 per cent.

Big results are currently expected for gaming companies of course, given the current climate. Although Sumo Group CEO Carl Cavers notes that Sumo is “one step removed from both the commercial risk but also the commercial opportunity” that the pandemic presented businesses. That said, the business has grown, organically and through acquisitions, and its order book is stacked for the future Cavers tells us.

“We announced last September that, at that point, we had 85 per cent of our revenue secured for that year, so basically needing 15 per cent, which is normal.” But this year it’s six months ahead on hitting that same figure. “We’re already at 85 per cent this year, we’re at 60 per cent for 2022 and we’re at 35 per cent for 2023… so you know we’re in a phenomenally good position.”

Part of that pipeline strength is thanks to the pandemic. Cavers admits he was at first worried about securing business for the future without the usual round of events and in person meetings, but that the opposite proved to be true.

“It was one of our deep concerns initially, although we’ve got a lot of revenue already, years ahead. But because we’ve got such strong partnerships with our clients already… they just doubled down on the relationships they already had, so that helped tremendously.”

HAVE DEV KIT, CAN TRAVEL

Another potential issue was whether clients would allow sensitive data, and hardware such as dev kits, to be moved to remote working environments.

“If you’d have asked me before the pandemic, could we work from home? It would have been a no, mainly because our clients wouldn’t let us. We’ve now proved, over the last 12 months, that we can maintain security and integrity around IP. So hopefully, that experience will feed into a solution going forward.”

Sumo Group was already making acquisitions before the recent pandemic-driven spree, with US-based Pipeworks and Leamington-based Lab42 being the most recent. And it plans to continue to expand in this respect, despite a highly competitive environment.

“Our ability to find good acquisitions,” is the single point Cavers highlights when considering future growth. “We’ve grown the business with headcount, so while we came to market with 489 people, we’re now just over 1,000 people.”

“One challenge there is that when you find a good acquisition target, they’re already busy, it doesn’t actually solve our pipeline!” He notes that the best developers always have plenty of work booked ahead, so acquiring great talent is a long term solution rather than a quick fix.

“In terms of acquisitions for us though, we want to remain quite disciplined in what we do, we absolutely believe that being part of something larger is better. That’s partly because most of the projects we work on now need teams of over 200 people at peak and as a small studio, even a smaller studio with 150 people, can’t really fulfil a large game anymore and that’s what people of that size studio want to work on, so being part of something larger gives them that opportunity.

“We’re trying to buy businesses that aren’t in competitive processes so we’re relying on our network and where we’ve been approached by people that recognise that opportunity. We absolutely invest in management teams rather than buying businesses, we want people that are ideally going to stay with the business going forward and help it grow with the synergies we’ve got across the rest of our group.”

And those synergies create great content, and the strong results are simply an indication of that, he feels.

“They’re great, and we’re really pleased. But ultimately, the results are a reflection of something we’ve always said, we just keep running a good business. And by that I mean making great games. Keeping everybody happy at Sumo and having that right culture, the numbers only happened because of that.”

ENTERING SECRET MODE

While we started by discussing how Sumo is one-step removed from the market, plans to create more IP and bring that IP to market for itself are progressing – with the recently launched Secret Mode publishing arm. And it plans to operate beyond just games made behind Sumo’s own doors.

The new venture is led by James Schall, director of publishing, who is best known for his time leading digital distribution at Sega. Along with head of marketing Derek Seklecki, who worked on localisation at Nintendo and marketing at Sega.

“We’ve decided to be a bit more formalised about our own self publishing efforts,” Cavers explains. “Rather than just looking at things we do ourselves, like Snake Pass or Dear Esther, it’s having James and Derrick lead a publishing team that can then make very clear decisions based on their own mandate.

He explains that makes for better decisions, “rather than being a developer that’s wearing both poacher and gamekeeper hats at the same time.

“It’s always a difficult balance – you always love your own baby!” But Cavers explains that game developers can then be biased when gauging something’s true commercial potential. “When you’ve got a separate publishing division you’ve then obviously got that discipline in place.”

And that newfound discipline will be clearly visible in Sumo’s reporting in future. “We’re going to run it as a separate operating division, so once it starts making money, it will start to report on its own basis,” Cavers notes.

ACQUIRING THE RIGHTS

So how does that fit with the acquisitions strategy? Will Sumo be buying up IP? After all, the prices of IP-holding developers such as Codemasters are now eye-watering.

“Ideally not a large price tag of IP, but with Pipeworks, for example, we acquired them and we got Prominence Poker with that. The game has got quite a good following and audience,” approaching 5,000 very positive reviews on Steam for starters, “so that’s something that Secret Mode are already helping with, and will probably take responsibility for, which is great.

“Obviously the Chinese Room had Dear Esther, that was almost dead from a sales point of view when we acquired them but we’ve been able to help drive that. So having a bit of IP is absolutely a selling point to us, partly because it gives us a way of monetising going forward.

“But more importantly because we don’t provide capacities to our clients, we do pretty much all turnkey, full video game development, so we need creative people that have proven that they can make great games. That’s what we’re doubling down on, and without that there’s no way we’d have delivered something like Sackboy.

And that seems a fitting note to end on, Sumo’s recent double BAFTA win for Sackboy: A Big Adventure. With the studio carrying on its work on the IP from Little Big Planet 3.

“[The BAFTAs] are absolutely everything to us. To our businesses, our people, the creative environment and culture that we have. Being recognised in that way is tremendously important,” Cavers concludes proudly.