THE

ALMOST
FAILED
MERGER
 METAVERSE
“Metaverse may be an $8 trillion opportunity” – Goldman Sachs

The metaverse is a digital reality that combines aspects of social media, online
gaming, AR, VR, and cryptocurrencies in order to allow users to interact virtually. In
its current nascent stage, the metaverse is still evolving

Three segments in the meta economy that particularly stand out are -

A) Media and Entertainment:

During the Covid-19, in-person media and entertainment, everything from attending
movie theatres to concert halls and sports stadiums, came to a grinding halt. As a
result, several artists such as Imagine Dragons and Ariana Grande held their first VR
concerts. These experiences opened the doors to VR entertainment and expanded
access beyond physical factors, such as location or venue capacity. Now, many of the
world’s biggest media and entertainment companies, including Disney, are looking
for ways to engage their fans and audiences with metaverse experiences and events.

B) Digital Real Estate:

Metaverse real estate are parcels of land in virtual worlds. The majority of metaverse
real estate is owned by the Big Four - Decentraland, Sandbox, Somnium Space, and
Cryptovoxels. These platforms own a total of 268,645 parcels, which are among the
highest-priced ones on the market. With the positive outlook on metaverse growth,
companies have been heavily investing in virtual land properties. Big shot banks like
HSBC and JP Morgan Chase surprised everyone by acquiring virtual land in
Metaverse via Sandbox and Decentraland respectively. Samsung is even opening its
first store in the metaverse modeled after its flagship New York City store. As an
applied Extension of Metaverse, many real estate companies have adopted 3D
reconstruction to take their potential buyers on a virtual property tour. Barbados
became the first country to develop its own embassy within the metaverse, having
bought a plot in Decentraland. It is evident how fast this niche is increasingly gaining
popularity and adoption throughout the world.
“C) Gaming:
The gaming industry has increased by half a billion players in the past three years,
totaling 2.7 billion people globally. Before the advent of blockchain-powered games,
players were much into multiplayer games. However, blockchain has significantly
changed the face of online games. Several metaverse concepts such as 3D avatars
and world-building can already be found in early immersive games like SimCity,
Minecraft, and Roblox. Blockchain - It helps develop decentralized Metaverse projects.
Benefits include digital proof of ownership, transfer of value, digital collectability, and
interoperability NFTs and Cryptocurrencies - Features like tokenization of gaming
items and the facility to trade them to earn virtual money and transfer value in the
metaverse AR and VR – They create an immersive and exciting 3D experience and are
the key technologies powering Metaverse development. AR morphs the real world
and creates a virtual world using visual elements and characters. With Internet of
things (IoT), Metaverse can collect, obtain, and utilize data from the physical world. It
connects the virtual world to many real-world devices so that objects in the Metaverse
can switch how they function based on changing weather or atmosphere.
 RULES
This document consists of one case study followed by a question.
Teams will be judged based on innovation, originality, creativity,
presentation, competency, and feasibility of solutions.
The solution must be made in presentation format (Word Documents
are not allowed).
The solution must be a maximum of 10 pages (exclusive of title and
conclusion page).
Teams must send their solution to mic.cbs@sscbs.du.ac.in by 11:59 PM,
23rd November 2022. Late submissions will not be accepted.
The solution document and the subject of the mail must be in the
following format: “SSCBS_MIC_Team Name_Case-inoRoyale”
The body of the mail, as well as the presentation, must include the team
name, the names of all the team members, and their contact details
(phone numbers and email addresses).
All solutions must be mailed in PPT Format.
The decision of the organizers shall be final and binding on all
participants.
This case may not be transmitted, photocopied, digitized, or otherwise
reproduced in any form or by any means without the permission of the
organizers.
An excel file along with the PPT can also be submitted for the
quantitative analysis done.
In case of any queries, kindly contact -
Arohi Jain: +91 8448783619
Purab Jain: +91 8360155414
 CASE
TAKE TWO

Headquartered in New York City, Take-Two Interactive Software, Inc. is a

leading developer, publisher, and marketer of interactive entertainment
for consumers around the globe. The Company develops and publishes
products principally through Rockstar Games, 2K, Private Division, and
Zynga. The products are currently designed for console gaming systems,
PC, and Mobiles and are delivered through physical retail, online
platforms, and cloud streaming services. The dominant age group for
Take Two Interactive falls under the 18-34 category with 40% consumer
share. This tends to act as a plus point due to the income spending
propensity of the age group. Take Two’s major source of revenue has
proved to be console based platform accounting 72% of its total revenue
or 2.5 billion dollars in 2022, PC and mobile gaming account for 16% and
12% with revenue generation of 600 million and 400 million respectively.
Take-Two Interactive's fiscal year 2022, 63.5% of its revenue came from
full game spending, while 36.5% came from recurrent consumer
spending. This shows that while Take-Two Interactive does generate a
significant amount of revenue from its recurrent consumer spending, the
business is still largely dependent on full game sales.
 CASE
EA SPORTS

Electronic Arts Inc. (EA) is an American video game company

headquartered in Redwood City, California. Founded in May 1982 by Apple
employee Trip Hawkins, the company was a pioneer of the early home
computer game industry. EA published numerous games and some
productivity software for personal computers. The company shifted
toward internal game studios, often through acquisitions, such as
Distinctive Software becoming EA Canada in 1991. EA platform wise is also
dominated by consoles with a share of 63% of its revenue generated,
while the other two platforms PC and mobile having a share of 22% and
15% of its total revenue. The demographics of EA sports consumers show
that the maximum users are within the brackets of age 11-24 for a share of
34%. This is a positive indicator as it shows greater numbers in the high
spending consumer base. A significant amount of EA’s total revenue
comes from its live services. These games are products that are always
online with frequent updates and in-game purchases. EA’s share for full
game downloads is lower compared to other players in the market. Along
with these two, it also earns revenue through the sale of packaged goods.
 RECENT MERGER

The two competitors decided that coming together and

forming a joint venture would be profitable to both the
companies. So, a merger took place between Take Two
and EA Sports a few months back and everyone believed
that the merger would make them unbeatable and help
them reach the top of the video game industry.

SHORTFALLS IN THE MERGER

The merger of the two companies took place smoothly,

however, it did not turn out to be a successful one. The
synergies of the two firms did not match and it was
predicted, later on that the merger would turn out to be a
big disaster.
 FINANCIALS BEFORE THE MERGER
1. Profit and Loss Account

Revenue 3373
Cost of Goods Sold (COGS) 1535
Gross Profit 1838

Expenses
Sales and Marketing 445
General and Administrative 391
R&D 317
Depreciation and Amortization 56
Total Operating Expenses 1209

Operating profit(/Loss) 629

Interest and other 9
Gain(loss) on long term investment 40
Earnings Before Tax 677
Provision(/benefit) from tax 89
Net Earnings 588
 FINANCIALS AFTER THE MERGER
1. Profit and Loss Account

Revenue 4540
Cost of Goods Sold (COGS) 2362
Gross Profit 2178

Expenses
Sales and Marketing 663
General and Administrative 528
R&D 421
Depreciation and Amortization 81
Total Operating Expenses 1698

Operating profit(/Loss) 480

Interest and other 31
Gain(loss) on long term investment 10
Earnings Before Tax 521
Provision(/benefit) from tax 122
Net Earnings 398

2. Intrinsic and Terminal Value Forecasted

(Outstanding Shares 137.58 Mn)
 PRIVATE EQUITY FIRM INVESTMENT

As mentioned above, the merger of the two firms did not

quite go well. However, a private equity firm named XYZ Ltd.
showed interest in them as a merged entity. The firm
believed that the merged venture could perform very well
and prove this merger to be successful if provided with the
right resources. So, XYZ decided to invest an amount of
$456.98 Million as a long-term debt spread across 5 years
at an interest rate of 4.76% compounded annually. (The
current Market Cost of Debt is 3.69% and XYZ Ltd. is charging
a 1.07% Risk Premium considering the cyclical nature of the
gaming industry).
 PROBLEM STATEMENT

You are a consulting firm and the company has hired you to
help them make the best of this investment. You are
supposed to provide the merged entity with suitable
strategies where they can use this money to turn this merger
into a successful one. Some of the strategies include product
diversification, expansion, not exhaustive to these.

Prepare a PowerPoint presentation in not more than 10

slides (excluding cover, index and appendix) by undertaking
a qualitative and quantitative analysis with appropriate
financials.

Note: : You may also submit an excel for the quantitative

analysis portion, if required. Also, please state all the
assumptions that you have mad