VC-Backed Game Maker Trion Worlds Ponders IPO

(Reuters) – Little-known online games company Trion Worlds, after raising more than $100 million in venture capital since 2006, is looking at becoming the newest debutante at the digital media IPO ball.

Not unlike larger and better-known games company Zynga, which filed for an IPO of up to $1 billion in July, Trion is considering an initial public offering as an option.

“As we build scale and become more profitable, [an IPO] is clearly on our horizon at some point,” Chief Executive Lars Buttler (pictured) said in an interview with Reuters, declining to provide details on a time frame.

“We’ve had a lot of bankers coming to us recently,” Buttler said. “We keep all of our options open at this point. We definitely have enough substance and enough skill to be a public company at the right time.”

However, Buttler was quick to note that Trion, which scored a hit with its first game, “Rift,” has not yet hired investment bankers.

He added that challenging market conditions have made it difficult for companies to go public at the moment.

Billy Pidgeon, an analyst for M2 Research who has followed Trion since 2009, said the company will need more hits in the coming months to prove it would be able to make it as a publicly traded company.

“They have to prove their platform can succeed, and their next two games have to do well,” Pidgeon said.

Unlike Zynga, Trion designs games with advanced graphics that can cost tens of millions to make, which is viewed as risky by investors.

“If you have a game in that level and it doesn’t do well, you stand to lose a lot of money. The stakes are much higher with failure,” Pidgeon said.

While Trion may not be a household name, its backers are include two of the best-known companies in media: Time Warner Inc. and Comcast Corp. It has raised a total of $109.5 million in venture capital over four rounds, according to Thomson Reuters (publisher of peHUB). Silicon Valley venture firms DCM and Trinity Ventures co-led Trion’s $7 million Series A in March 2006. The company raised its largest round, a $70.05 million Series C round, in August 2008 from DCM, Trinity, Time Warner Investments, Comcast Ventures, Rustic Canyon Partners, Bertelsmann Capital and hedge fund Act II Capital, Thomson Reuters reports.

Trion, founded in January 2006, is growing fast. The company doubled its staff to 500 people this year and Buttler said that hiring pace will continue. Trion is based in Redwood City, near San Francisco, and has offices in San Diego and in Austin, Texas. It is also looking at opening studios in Montreal or Vancouver.

Trion has differentiated itself from its competitors by betting big on the idea that the future of video games is in sophisticated online universes teeming with thousands of players, and not on video game consoles like PlayStation or Xbox.

So far, the wager has paid off.

“Rift,” the fantasy-themed game that Trion released in March, sold 1 million copies in just four months. Buttler called the game, which costs $50 plus an additional $15 per month, an instant hit.

“‘Rift’ is vastly profitable. It is profitable every single week and every single month,” Buttler said without giving specific numbers.

While the sale of console games has faltered, online games have become one the fastest growing areas of the video game industry. Research firm DFC Intelligence estimates it is a $18 billion global market.

So-called massive multiplayer games such as “Rift” allow thousands of people to play simultaneously over the Internet. The game has won several industry awards, drawing comparisons to Activision Blizzard Inc.’s “World of Warcraft,” a massive multiplayer game with more than 12 million players and $1 billion in annual revenue.

For Trion, however, games are just the start. Buttler said the company is working on a technology platform code-named “Red Door” that will run online games made by developers at other companies.

The platform, in which Trion has invested tens of millions of dollars, would provide the software and other tools to companies looking to make games not based on consoles. Trion would make money by charging developers to use the technology.

“It’s a software platform and it evolves and gets better all the time. It’s a huge revenue opportunity,” said Buttler, a former Electronic Arts Inc. executive.

Trion is also working on a new shooter game called “Defiance” that would be released to coincide with a television show of the same name on the Syfy Channel. The cross-platform tie-in would feature events in the TV show affecting the game and vice versa, which Buttler said has never happened before.

The release date for the game and show is still unknown.

Syfy Channel is part of NBCUniversal, which is now controlled by Comcast.

By Liana B. Baker, Reuters

(Editing by Peter Lauria and Gerald E. McCormick, Reuters. Additional reporting and editing by Lawrence Aragon, peHUB.)

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