Backstageplay Inc Offers An Intriguing, Early-Stage Opportunity For Investors

Benjamin A. Smith
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While the cannabis and crypto continue to accrue the majority of early-stage growth cycle investment flows (rightfully so), there’s another industry attempting to nudge its way into the conversation. The hyper-emerging realm of social gaming is slowly gaining traction as investors recognize the unique and valid business case it represents.

To those unfamiliar with the concept, social gaming provides a network so that fans and principles—most commonly entertainers, celebrities and artists—can connect together in one venue. Fans sign up to a platform, where they plays games competitively online and compete with other fans for the right to win prizes—direct from the celebrity—on branded celebrity portals. Some payoffs for gaming “leaders” might include front row tickets at an upcoming concert, after party or backstage passes, or signed apparel; in other words, individualized prizes with more sentiment value geared towards the adoring fan.

Games have a very gentle learning curve, an easy to understand interface, live social network, free to play and employ micro-transactions. Unlike social media (i.e. Facebook and Twitter) where devotees receive feedback in a static manner, social gaming provides an all-encompassing venue featuring such activities as live Q&A’s, video messaging, and chat rooms traditional social media is not necessarily equipped to handle.

Thus, the social gaming concept is catching on with vendors and artists for reasons of mutual interest.

For the artist, it provides both another subscriber revenue stream (generally a 50/50 revenue share with vendors, at $4.99/month with residuals) and more robust venue in which to engage its fan base. Artists can better monetize their social media presence while better gauging fan commitment through the use interactive software of advanced portal metrics built on the customer’s back end. It also provides a more complete branding tool to engage audiences in ways not available on mainstream social media.

For the vendor, setting up a customized portal is a white label affair. Turnaround times are quick, and the technology allows for exact specification of client needs. With literally thousands of potential clients to target in a mutually beneficial endeavor, there are no shortage of potential suitors waiting in the pipeline. Margins can be exceptionally robust, as most of the CAPEX costs are upfront (technology development), while OPEX costs remain temperate even during expansion.

Ultimately, the social gaming survivors should enjoy very friendly free cash flow generation profiles—if it indeed becomes a ‘thing’.

Backstageplay Is The Industry At Present

At this stage, you may be wondering who exactly are these social gaming leaders? It’s a great question, because there aren’t may investment-specific names around. To our knowledge, Backstageplay Inc (CVE:BP) (FRA:DOZB) is the only company explicitly focused on this niche industry.

The company was born over two-and-a-half years ago by changing its name and securing rights to certain software and intellectual property. It thencommenced operations as an Internet entertainment and marketing company. Through internal vision and good old fashioned trial & error, the company has blossomed into the social gaming entity it is today. Right now, that’s mainly a company with a dearth of revenues and very high aspirations. But some encouraging developments are happening under the hood which portend this vision playing out favorably in the quarters ahead.

On August 14th, Backstageplay announced that it has finalized a commercial license agreement with Los Angeles-based Artist management firm Young Boss Entertainment, who will launch a social gaming platform on behalf of reggaeton star Jory Boy. Jory Boy has over 1 million followers on Instagram (335,000 Twitter followers), where he will focus the promotion of his new album Otra Liga 2 and his games room with Backstageplay.

On August 23, Backstageplay announced a strategic partnership with Wayne Thompson of Burlington, Ontario. The winner of four Juno Awards and purveyor of more than a dozen gold/platinum records worldwide has agreed to assist Backstageplay with client-base access, strategic advisory services, and the promotion of the company’s gamification platform within entertainment circles. Beyond the standalone revenue Thompson’s presence will provide, there’s a good bet this partnership may open the door to further music industry collaborations ahead.

And on August 27th, Backstageplay announced a strategic consulting and finder’s arrangement with internationally renowned music and entertainment executive Michael Rosenblatt. Mr. Rosenblatt is credited for discovering acts such as The B52’s, and was credited for bringing Madonna to her first record label. In addition, Michael worked with Platinum artists Depeche Mode, Erasure and The Pretenders. Mr. Rosenblatt’s Rolodex is much more expansive when considering his work at MCA Records, which is beyond the scope of the article.

In terms of revenue, Backstageplay has fomented their own revenue model equation. The company believes it can convert around seven percent of an artist’s fan base (a.k.a. the “hardcore” fan) into a $4.99 monthly user subscription—plus an additional $50 yearly spend. So an artist with a half million users and half a million subscribers on YouTube, converting 7 percent, with that $50 spend per year, translates into about $350,000 per month.

With smaller artists like Jory Boy, the company figures it can generate $4 million revenues (or thereabouts). Much larger artists—ones that attracts 10 million-plus fan followings—may ultimately be worth $6.5 million per month in aggregate monthly revenue assuming a similar fee schedule.

Of course, the company’s business model remains unproven in this hyper-infancy stage. But if those revenues forecasts are anywhere close to legitimate—and if Backstageplay does indeed emerge as an industry leader—their $5 million non-diluted market cap won’t be around forever.

Final Thoughts

If recent news flow is any indication, Backstageplay may be just be beginning to hit critical mass among the music industry it’s looking to onboard. If social gaming does become a “thing”—which certainly seems plausible considering it makes sense for fans, artists and vendors in the social media era—the company could be sitting in quite valuable first-in position. As CEO Scott White recently put it, “No one really is looking at the gamification, social gaming aspect of that engagement”, to which Backstageplay has intricately focus their business model to service.

Midas Letter will continue to track Backstageplay—and the social gaming industry in general—for further signs of mainstream adoption going forward.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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