Background and Challenge
An entertainment company that develops children’s content “to make science fun” approached L.E.K. Consulting to help grow its business and promote its website, gaming, and television show properties. In addition to an existing television program, the company also recently completed a virtual world videogame that incorporated the television show’s characters and storylines. The entertainment company asked for L.E.K.’s guidance with two specific issues:
- Creating a convincing investor presentation that clearly demonstrated the potential value and unique competitive position of the company’s virtual world
- Developing recommendations for improving the company’s videogame design and strategy to attract more users and achieve higher levels of subscription conversion and monetization
Approach and Recommendations
To assist with the first issue, the L.E.K. team undertook a comprehensive review of the virtual world videogame market and the company’s assets. Through industry growth forecasts, comparable franchise analysis, and examination of the company’s existing customer base, the L.E.K. team built a discounted cash flow valuation of the client’s assets for potential investors. To successfully secure additional financing, the L.E.K. team provided the company with an investor-ready presentation which included a valuation assessment, as well as an analysis of how the client’s product was differentiated from its competitors.
For the second issue, L.E.K. identified industry best practices for virtual world videogame design and compared these practices to the company’s current product and strategy. The team focused on five areas:
- Developing entertaining game play
- Driving conversion of free players to paid subscribers
- Maximizing referrals from invested users
- Retaining users
- Attracting new users
The L.E.K. team developed actionable recommendations to modify videogame features to improve game play and grow the subscriber base.
The company attracted significant financing and is growing fast. After implementing L.E.K.’s videogame recommendations, the company’s user community increased substantially thanks to a 20% compound weekly increase in site activity.