Is TransGaming a takeout target? Cantech Letter talks to CEO Vikas Gupta

A 2013 to forget has turned into a January to remember for Toronto’s TransGaming (TSXV:TNG). But can the company keep the momentum going? Its CEO says yes.

Earlier this month, TransGaming announced it had partnered with Samsung to bring the company’s GameTree TV platform to Samsung smart televisions. A partnership with the world’s largest consumer electronics company, combined with a recently revitalized market for tech in Canada meant a surprise win for long suffering shareholders; the sleepy stock more than doubled in a single day; January 7th. Since then, TransGaming has become one of the most heavily traded juniors in North America.

In downtown Vancouver Monday, TransGaming CEO Vikas Gupta said the activity is a punctuation mark that ends more than a year of uncertainty and doubt.

“Fourteen months ago we saw the perfect storm,” says Gupta. “We had a major institutional investor that aggressively sold the stock, and another that faced redemptions. This is turn caused retail panic.”

Then came the analyst downgrades. Some didn’t like the perceived delays in the rollout of GameTreeTV, a cloud-based, on demand gaming system that works for games much the way Netflix does for movies. But Gupta says TransGaming was caught up in an environment in which large cable operators were facing down huge capital expenditures in a macro environment that remained tough.

“The build cost of a next-generation set top box is about $200,” says Gupta. “If you have a customer base of five million, you’re looking at a billion dollar capital expenditure.” Instead, ISPs such as France’s Free chose to roll out the boxes more gradually, targeting new customers only. This resulted in an audience for Game Tree TV that amounted to a large beta test.

“Our own belief in what we are doing has never changed. It may have wavered,” he says with a half grin, “but it never changed.”

Gupta says the situation wasn’t ideal, but the company has learned a lot from the experience. He says TransGaming’s decision to move to a flat rate for the service was key. Now, charging five euros per user each month, Free is profitable. Gupta notes that the service is proving sticky; the average game play session of users in France is now sixty-five minutes.

A more important development has been the been the build out of its potential footprint, making the company less dependent on the success of any single ISP. Prior to the Samsung deal, TransGaming had inked partnerships with Roku, Dish Network and Philips. They followed it up earlier this month, signing a deal with Toshiba.

“These deals not only demonstrate our ability to engage some of the bigger companies on the planet,” says Gupta, “they are a validation of our technology.”

So where does GameTreeTV fit up in a world in which the PlayStation 4 is selling 75,000 units a day, and Candy Crush is bringing in upwards of $850,000 a day?

GameTreeTV is also a much more social experience than that of a cell phone or tablet oriented game. My daughters are six and nine. It’s a tug of war to with the iPad. When we put Game Tree TV on, it’s a full family experience, it’s interactive.

Gupta says the company isn’t targeting the hardcore gamer at all. “We have developed a service that is easily accessible, easy to use and is priced right,” he says. “GameTreeTV is also a much more social experience than that of a cell phone or tablet oriented game. My daughters are six and nine. It’s a tug of war with the iPad. When we put Game Tree TV on, it’s a full family experience, it’s interactive.”

Gupta says GameTree TV also works because it is always adapting and changing. An important advantage has been the ability to customize experiences for particular user bases and seasons.

“Dish Networks, we discovered, has the kind of demographic that likes to hunt. We launched a game called Hunting Trails that has become very popular, and became even more popular when we added leaderboards and prizes.” Gamers can now win prizes ranging from a Wal-Mart gift card to elk, buffalo, or deer meat to a taxidermied and mounted deer’s head. Seasonal offerings are always on the menu; GameTreeTV will soon add Valentine’s Day content to a lineup that includes TETRIS, World Poker Tour, and Hasbro titles such as Scrabble, Risk, and Monopoly.

So what does TransGaming do for a follow up?

“We are firmly in execution mode,” says Gupta. “We are focused on getting more distribution deals and converting consumers.”

Does this mean a long road of gradual wins and measured victories? Gupta says not necessarily.

“I believe that before we become a big big company we will be taken out,” he says. Gupta explained his reasoning.

“Our technology platform has very nicely converged with the emergence of new devices and new technology standards in the marketplace today. When you look at all these new devices, they are utilizing technologies that are an ideal fit and fully compatible with the platform we have developed, and that helps migrate content. Our platform is disruptive given that we are converging with the new standards of all emerging devices and platforms.”

Gupta says no negotiations are currently underway, but over the past twelve to eighteen TransGaming has had strong interest from a number of a numbers of large, global corporations.

Is TransGaming a classic case of “whatever doesn’t kill you makes you stronger?” Gupta says that while there is still a lot of work to be done, the company is now in a better position than it has ever been. “Our own belief in what we are doing has never changed. It may have wavered,” he says with a half grin,” “but it never changed.”

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