William LONGIN

Why are video games “free”?

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Why are video games “free”?

William LONGIN Kilien DUPAYRAT

In this article, William LONGIN (Sorbonne School of Economics, Master in Money Banking Finance Insurance, 2024-2026) and Kilien DUPAYRAT (IESEG School of Management, Grande Ecole Program, Entrepreneurship, 2022-2027) discusses “free” video game business models and uses the case studies of League of Legends, Candy Crush, and Axie Infinity as an illustration.

Introduction

There is “no such thing as a free lunch” but somehow the early 21th century has been marked by the emergence of games that don’t need to be purchased to be played.

The video game market matters! It is the biggest entertainment related industry in the world. According to Access Creative College (2022) “the game industry is worth almost double the film and music industry, combined”. In 2022, the global market size of the video game industry was estimated at 217 billion USD and expected to grow at a compound annual growth rate (CAGR) of 13% between 2023 and 2030 according to Grand View Research (2022).

Since its inception in the late 20th century, the video game industry has rapidly evolved from arcade games to immersive experiences across devices. The industry keeps growing and is driven by changing consumer preferences and new technologies. At its disposal is an array of strategies to be profitable. The ways of playing and technologies also evolved with it, from the basic arcade games where you needed to insert a coin to play, to the most advanced business models like blockchain games where the content is made of NFTs. Companies in today’s revenue models master the balance between paying and non-paying players as well as understanding the latest trends.

In this article, we will look at why so many video game companies make their games free and how these new revenue models are the most popular. As a reminder, the revenue model is part of the business model and focuses on how the company makes money by monetizing its products.

Free-to-play (F2P) revenue model

The free-to-play (F2P) revenue model offers free download video games. Their method to generate revenue is through in-game purchases of virtual items for cosmetic, boosting or convenience purposes. The bought items don’t influence the gameplay but can appeal to a desire to design and customize (costumes, colors, etc.) The free-to-play revenue model initially wasn’t popular with investors and companies due to the dominance of traditional premium models, where games were purchased to download. The lack of upfront cost has allowed these sorts of games to reach a larger audience. The F2P model has proven to be highly effective, contributing significantly to the popularization of video games in general. In 2020, Free to play games accounted for “78% of the digital games market revenue” (Davidovici-Nora, 2013).

League of Legends case study

The spread of F2P revenue models came with the rise of online games such as “League of Legends,” free to download but with costly in-game items. The in-game currency is called “Riot Points, RP’s” and can be traded for cosmetic items (skins, wards, emotes) and other non-essential enhancements (event passes, rune pages). Purchases don’t give a gameplay advantage to paying players vs nonpaying players. Therefore, by eliminating barriers to entry to play the game significantly increased its reach. Consider here under the process map of typical experience for a player of “League of Legends” and where transactions take place.

Figure 1 below presents the flow chart “from download to purchase” for the case of League of Legends.

Figure 1. Flow chart from download to purchase: the case of League of Legends.
Flow chart from download to purchase: the case of League of Legends
Source: the authors.

In the flow chart above we can see that once players encounter the in-game store, they are introduced to a wide array of purchasable cosmetics like champion skins and emotes, which have no impact on gameplay but significantly enhance personalization. This creates a cycle of desire: players aspire to own these cosmetics, leading to the purchase of Riot Points (RP) using real money. The emotional satisfaction gained from these purchases’ fuels continued engagement, bringing players back to the game and reinforcing the loop.

Freemium revenue model

The freemium revenue model offers free-to-download video games like F2P games but it doesn’t offer access to the entire game. The differences between both business models are subtle. The gaming experience is incomplete (store purchases include game extensions at a premium). Thus, the name “freemium” is a combination of “free”, the core gaming experience is free and “premium” as the game extensions are purchasable at a premium. In this revenue model there is also possibility to purchase cosmetic items, boosters and convenience improvers.

Candy Crush case study

Candy Crush is an example using the freemium model because it is free to download and begin playing but encourages players to pay for certain enhancements or additional content to improve or expedite their gameplay experience. While the core mechanics—matching candies, progressing through levels, and competing with friends—are accessible at no initial cost, the game limits play sessions through mechanisms like lives (which refill slowly over time) and imposes difficulty spikes on certain levels. Players looking to bypass these limitations, access extra levels more quickly, or gain advantageous power-ups and boosters can purchase them through in-app transactions. These premium offerings are not strictly necessary to play the game, but they greatly enhance or complete the experience, making Candy Crush a clear example of the “freemium” model: the main game is free, yet the most streamlined, convenient, or extended version of play comes at a premium.

Figure 2 below presents the flow chart “from download to purchase” for the case of Candy Crush.

Figure 2. Flow chart from download to purchase: the case of Candy Crush Saga.
Flow chart from download to purchase: the case of Candy Crush
Source: the authors.

The flow chart above illustrates how the freemium revenue model typically unfolds for a game like Candy Crush Saga. Initially, players are enticed by the free download and ease of access. After installing, they enter a tutorial or trial phase where resources such as lives are abundant, allowing them to experience the game’s mechanics without frustration. As players progress, the difficulty gradually increases, eventually reaching levels at which winning without purchasing boosts or extra lives becomes challenging. This leads to a point of dissatisfaction or frustration, where the game’s free option feels less enjoyable or even stalled. In response, many players opt to make micro-purchases—buying boosters, additional moves, or unlocking new levels—to overcome obstacles and continue playing seamlessly. This cycle repeats, encouraging ongoing engagement and revenue generation through periodic spending.

Play-to-earn (P2E) revenue model

Revenue Model

The blockchain revenue model is known as the play-to-earn (P2E). These games use blockchain technology to create decentralized gaming ecosystems where players can earn real-world value through in-game activities. Although counterintuitive, this business model brings value to players and to the video game creators at the same time. This model represents a significant shift from traditional gaming paradigms by integrating financial incentives directly into gameplay.

Axie Infinity case study

The game Axie Infinity is a blockchain game and is an example of a P2E game. The game studio charges a rate between transactions in the game economy. “Sky Mavis charges a 4.25% fee to players when they trade Axies on its marketplace.” according to wikipedia.

Figure 3 below presents the flow chart “from download to purchase” for the case of Axie Infinity.

Figure 3. Flow chart from download to purchase: the case of Axie Infinity.
Flow chart from download to purchase: the case of Axie Infinity
Source: the authors.

The flow chart above illustrates the play-to-earn (P2E) revenue model, using Axie Infinity as an example. The process begins with a free download, allowing players to access the game without an initial purchase. Once immersed in gameplay, players engage in activities—such as battles, breeding, or quests—that reward them with in-game currency. What sets P2E apart is that these virtual assets have real-world value, often tied to cryptocurrencies like Ethereum. Players can trade, sell, or convert their earned in-game currency and items into real money, effectively monetizing their skill, time, and investment in the game. Every transaction, from buying and selling digital creatures (Axies) to acquiring special items, passes through a decentralized marketplace, with a percentage of each trade returning to the game developers. This cycle creates an ecosystem where both players and creators benefit financially, as gameplay activities drive the value of the in-game economy and sustain the platform’s growth.

Conclusion

In conclusion, the “Free-to-Play”, “Freemium”, and “Play-to-Earn” revenue models have revolutionized the way video games generate revenue, each presenting distinct strategies to engage and monetize players while having their games freely downloadable to players. These revenue models are also used in different sectors such as dating applications, social media and music streaming companies.

From a data analysis perspective, both models provide a wealth of information on user preferences and behaviors, allowing for increased personalization and optimization of gaming experiences. However, this also raises ethical questions, particularly concerning the management of gaming addiction and impulsive spending, especially among young or vulnerable players. In terms of performance, statistics often show that the Free-to-Play model can reach a broader user base, while the Freemium model can generate higher revenue per active user due to the need to unlock content, and Play-to-Earn models gain revenue when the gamer user base is active and growing. Each business model has its merits and drawbacks, and the choice of model largely depends on the type of game and the target audience.

Why Should I Be Interested in This Post?

You should be interested in this post because it gives insights on the revenue models companies in the video game industry have adopted. There a section on “blockchain” video games that are very recent and could hold a prevalent space in the years to come. Indeed, by mixing real currency and in-game currency and creating a virtual economy it can become even more addictive and meaningful for players. In the light of the new technologies developed in the augmented reality and virtual reality spaces these types of video games could be the future.

Related Posts on the SimTrade Blog

▶ Raphaël ROERO DE CORTANZE Gamestop: how a group of nostalgic nerds overturned a short-selling strategy

Useful resources

Grand View Research Video Game Market Size, Share & Trends Report Video Game Market Size, Share & Trends Analysis Report By Device (Console, Mobile, Computer), By Type (Online, Offline), By Region (Asia Pacific, North America, Europe), And Segment Forecasts, 2023 – 2030?

Access Creative College How much is the gaming industry worth?

Techquickie (YouTube channel) Blockchain Games Are Here – What You Should Know

Wikipedia Axie Infinity

About the authors

The article was written in December 2024 by William LONGIN (Sorbonne School of Economics, Master in Money Banking Finance Insurance, 2024-2026) and Kilien DUPAYRAT (IESEG School of Management, Grande Ecole Program, Entrepreneurship, 2022-2027).

Netflix 'Billions' Analysis of characters through CFA Code and Standards

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Netflix ‘Billions’ Analysis of characters through CFA Code of Ethics and Standards of Professional Conduct

William LONGIN

In this article, William LONGIN (EDHEC Business School, Global BBA 2020-2024) analyzes the show “Billions” through the lens of the Code of Ethics and Standards of Professional Conduct developed by the CFA Institute. I wrote this post while I prepared for the Level 1 of the CFA exam.

Overview of ‘Billions’ and ethics

The Netflix show “Billions,” set in New York City, portrays the intense story between three individuals: Bobby Axelrod, CEO of hedge fund ‘Axe Capital’, Chuck Rhoades, a tenacious US Attorney, and Wendy Rhoades, the wife of Chuck Rhoades and a talented performance coach working at Axe Capital. Bobby Axelrod and Chuck Rhoades fight for their honor and survival throughout the series with sometimes questionnable actions. Wendy Rhoades often plays the role of a middle person to find compromise and communication between Bobby Axelrod and Chuck Rhoades. The main characters insatiable greed has led them to indulge in misconduct, disregarding the ethical rules that govern investment and legal professionals in the real world.

Billions
Source: Showtime / Netflix.

CFA Institute’s Code of Ethics and Standards of Professional Conduct

The CFA Institute’s Code of Ethics and Professional Standards defines a comprehensive canvas for ethical and professional behavior. It states that it is for “investment professionals globally, regardless of job function, cultural differences, or local laws and regulations.” The Code places a strong emphasis on honesty to ensure that investment professionals operate in clients’ best interests. In “Billions”, the characters’ choices and actions often cross paths with these moral guidelines. In this article we will explore the three main characters Bobby Axelrod, Chuck and Wendy Rhoades through the lens of the CFA Code of Ethics and Standards of Professional Conduct.

“Billions” main characters: Bobby Axelrod, Chuck and Wendy Rhoades
Billions main characters: Bobby Axelrod, Chuck and Wendy Rhoades
Source: Netflix.

Bobby Axelrod: the hedge fund manager

Bobby Axelrod is the main character of the series “Billions”. He is the CEO of the hedge fund Axe Capital. Bobby Axelrod possesses exceptional financial acumen (the ability to make good judgements and take quick decisions) but his actions often push the boundaries of ethical behavior. These actions are driven by the drive to always beat the market at whatever cost.

Insider trading

By definition, insider trading is the illegal practice of trading on the stock exchange to one’s own advantage using material non-public information (confidential information).

One important ethical concern surrounding Bobby is his open willingness to engage in insider trading for himself and his firm. Despite having a legal department at Axe Capital, insider trading has been normalized throughout the series and undetected in most cases by the Securities and Exchange Commission (SEC) – the US authority in charge of regulating the financial markets. Bobby Axelrod gets his information through his extensive professional network and from his spies. Insider trading is forbidden by CFA standards of professional conduct as it violates point II.A. of CFA standards of professional conduct.

II.A. Material Nonpublic Information. Members and Candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information.

Insider trading is also forbidden by law in the United States. According to Cornell Law School “Courts impose liability for insider trading with Rule 10b-5 under the classical theory of insider trading and, since U.S. v. O’Hagan, 521 U.S. 642 (1997), under the misappropriation theory of insider trading”.

An example of insider trading is in the Episode 1 Season 1: “Pilot”. Bobby Axelrod approves a short-sell on Superior Automotive based on insider information. In this scene, Bobby Axelrod listens to two points of view: a deduction based on public information from one of his employees and another point of view based on confidential information from the character Dollar-Bill. When Axe asks Dollar-Bill “his level of certainty” about the excess supply that wasn’t disclosed by the company, there is a cut scene that shows the bribing with cash & watches of an employee of Superior Automotive and Dollar-Bill directly looking at the physical inventories of the company. To which Dollar-Bills answers famously “I am not uncertain”. When in possession of insider information, professionals cannot share, or influence action based on that information according to CFA Code of Professional Standards. Although Dollar-Bill is the one that actively tried to act on insider information, Axelrod is also in fault because of his lack of due diligence and supervision of his employee.

Independence and Objectivity

Bobby Axelrod has been found to use financial incentives to influence other people’s decisions in his favor. For example, Axelrod tipped the policeman that was going to arrest his employee. This tip avoided legal charges for his employee and bad image for the firm. Axelrod is found to disregard point I.B of the CFA standards of professional conduct.

I.B. Independence and Objectivity. (…) Members and Candidates must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another’s independence and objectivity.

In season 1 episode 7 “The Punch”, Bobby Axelrod pays a police officer named Lonnie Watley to prevent the arrest of one of his employees, Donnie Caan. Donnie Caan is a key member of Axe Capital, and Bobby Axelrod takes measures to protect him from legal troubles related to an insider trading investigation. In a later episode this incident was discovered by Raul Gomez, New York City Police and Fire Department Pension Fund Manager that asks him to not “greed” his colleagues in the future.

Unethical behavior

Axelrod frequently engages in aggressive tactics to push his personal agenda. A major example of unethical behavior is the Ice Juice Scheme from Season 2. In this case Bobby Axelrod sabotaged the initial public offering (IPO) of a company called “Ice Juice.” He used insider information to short the stock and profit immensely when the stock price immediate crash due to his scheme. His plan was to have some people get instantly sick after drinking Ice Juice and profit from media coverage. His scheme tampered with the public opinion and destabilised the fair consideration of Ice Juice on its IPO day. This also impacted his colleagues in the investment profession and their clients. According to point 1 of the CFA Code of Ethics this behaviour is unethical.

Act with integrity, competence, diligence, respect and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.

Chuck Rhoades: the US Attorney for Southern district of New York

Chuck Rhoades is the United States Attorney for the Southern district of New York. During the first season Chuck attempts to take down Bobby Axelrod to protect fair competition in the markets. Bobby and Chuck both used their network to try and destabilize the other but ended in a stalemate in the 1rst season. It is important to note that Chuck Rhoades is not an investment professional, but the Code and Standards promotes ethical guidelines that can be interpreted in various professions.

Fraud

Chuck’s methods and ethical choices also raise concern. Chuck often bends the rules, manipulates evidence, and employs coercion to secure convictions and survive in his industry. Manipulating evidence goes against point II.D of the Code of standards of professional conduct regarding misconduct.

II.D. Misconduct. Members and Candidates must not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence.

Conflicts of interests

Additionally, Chuck’s relationship with Wendy Rhoades, who works as a performance coach for Axe Capital, raises ethical concerns regarding conflicts of interest and the appropriate boundaries between personal and professional relationships. While Chuck initially recuses himself from the Axe Capital case, he continued to work on the case behind the scene. This goes against the interest of the American people because he is biased in his work. Point VI.A. of CFA standards of professional conduct on conflicts of interests states the following.

VI.A. Disclosure of Conflicts. Members and Candidates must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients, and employer. Members and Candidates must ensure that such disclosures are prominent, are delivered in plain language, and communicate the relevant information effectively.

Wendy Rhoades: the middle woman

Wendy Rhoades is a performance coach at Axe Capital. She plays a key role in the series and is a powerful woman that often plays a role in resolving the fights between Axe and Chuck. Wendy tries to balance her professional responsibilities at Axe Capital while managing her personal relationship with Chuck Rhoades. Since Wendy Rhoades works in the finance industry she is therefore directly concerned by the Code of Ethics and Standards.

Whistleblowing

Wendy Rhoades is entrusted with confidential information, serving as a confidante to many within the organization. This fiduciary (involving trust) duty requires her to prioritize the interests and welfare of these individuals, acting with integrity and avoiding any conflicts that could compromise their trust. Across Season 2 we see that the information that Wendy has on the company is compromising and therefore we may ask ourselves if under national law she would be required to play a role of whistleblower. Indeed, Wendy has had knowledge of criminal activity and refused to whistle blow mostly due to her friendship with Bobby. This goes against point I.A of CFA standards of professional conduct.

I.A. Knowledge of the Law. Members and Candidates must understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing their professional activities. (…) Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations.

Wendy’s loyalty to Bobby Axelrod adds another layer of complexity. Bobby relies heavily on Wendy’s expertise and guidance, seeking her advice on critical business decisions and relying on her insight into the minds of Axe Capital employees.

Wendy’s dual loyalties place her in a delicate position, as her duty to uphold the best interests of Axe Capital and with her personal relationship with her husband Chuck Rhoades.

Importance of ethics in the investment industry and popular media’s influence

Ethics play an important role in the investment industry as it gives it reputation and trust. A Code of Ethics and Professional Standards as proposed by the CFA Institute helps to work towards a stable financial system while reducing the likelihood of wrongdoings.

The Netflix series “Billions” that started in 2016, almost 10 years after the financial crisis of 2007 portrays traders as greedy and unethical in many cases. “Billions” stays nonetheless a fictional representation of the financial industry. However, this portrayal could badly influence and create false impressions, especially for future analysts and viewers who aspire to these positions.

Television shows and movies have the power to shape public opinion. “Billions” contributes to the overall perception of the financial sector along with other films like the Wolf of Wall Street and The Big Short. The financial sector is often a sector that is unknown or known very little by the average person. The portrayal of ethical dilemmas in popular media could raise awareness and generate important discussions about the role of ethics in finance. It encourages critical thinking and prompts viewers to question the ethical boundaries they would be willing to cross in pursuit of success.

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▶ Akshit GUPTA Market manipulation

▶ Akshit GUPTA Securities and Exchange Commission

▶ Akshit GUPTA Short selling

▶ Akshit GUPTA Price fixing

▶ Akshit GUPTA Corner

Useful resources

U.S Securities Exchange Commission (SEC)

Cornell Law School Insider trading

CFA Code of Ethics and Professional Standards

About the author

Article written in July 2023 by William LONGIN (EDHEC Business School, Global BBA, 2020-2024).

My experience as a leisure tourism management assistant in the French Tourism Development Agency

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My experience as a leisure tourism management assistant in the French Tourism Development Agency

William LONGIN

In this article, William LONGIN (EDHEC Business School, Global BBA, 2020-2024) shares his experience as a leisure tourism management assistant at Atout France USA, which is the French Tourism Development Agency in the United States of America.

Atout France

Atout France is the official French National Tourism Development Agency. It is a government agency responsible for promoting France as a tourism destination to visitors and tourism professionals (tour operators and travel agents) from around the world.

Logo of the Atout France.
Logo of Atout France
Source: Atout France.

Atout France was created in 2009 through the merger of three existing organizations that focused on tourism promotion: Maison de la France, ODIT France, and France Tourism Development Agency. The name Atout France comes from “Atout” meaning asset and “France” the nation that it services. The agency’s main mission is to develop and implement strategies for promoting France as a tourism destination by working with French companies and tourism professionals from around the world. We will explore the strategies used by Atout France in more depth in this article.

Atout France objectives are set by the French government and reflect the needs of French businesses in the tourism sector. To attain the objectives set by the government, Atout France organizes and attends multiple business-to-business (B2B) events to create visibility and encourages French networking. Another key objective set by the French government is promoting the new offers for sustainable tourism called eco-tourism, still overlooked by many international travelers. For example, Atout France in the United States launched an e-learning platform covering eco-tourism in France.

I interned in the branch of Atout France located in New York, as a “leisure tourism manager assistant”. As a foreign worker in the United States, I was granted a diplomatic A2 Visa for my internship. Kind of cool! My experience in New York was really valuable in addition to the experience I had in the company as I was able to make many friends and discover the city through a new lens (a worker and not a tourist). Indeed New York is home to many international institutions such as the United Nations, many consulates, and schools such as New York University (NYU) and Columbia University. New York, also called the Melting Pot, has a developed French community and culture particularly in the areas of art, cuisine, and fashion. The numerous French restaurant venues in the city allows Atout France to showcase French cuisine when organizing events. We could almost call French restaurants the culinary consulates of France in New York!

My personal experience at Atout France

My experience at Atout France USA was very valuable as I learned about company culture, the tourism industry and about the various software used by the company.

My experience of the company culture and workplace at Atout France USA is very positive. As an intern I have been well received and helped in the beginning of my internship. However, I realized very early on that in order to be useful it was important to be proactive. I cannot emphasize enough on the word ‘proactive’ because it is central to understanding how to be a useful coworker in the trade and events department of the company. I learned that it is important to ask questions about tasks, especially that you could be unfamiliar with as an intern. For example, when building the slide show for an internal proposition I made, I went in a freestyle but learned afterwards that there was a corporate template that was essential to respect in order to keep things more organized.

The tourism industry was a completely new industry for me as I have never interned or leaned towards a career in this sector before. What attracted me the most for this internship was to learn more about the industry, have the opportunity to work in New York and serve the nation of France. Throughout my internship I learned about jobs and vocabulary that I was unfamiliar with before such as what travel writers do, what is MICE (which is an acronym for business tourism), or what is eco-tourism. My time in the industry allowed me also to learn about the importance of networking events for professionals and their ways of communicating. Overall, my experience at Atout France encouraged me to learn more about the different forms of tourism and how professionals operate.

The large number of valuable contacts (from the United States and from France) that Atout France possesses is a key asset that adds value for the local and French companies interested in developing businesses. In order to organize its contacts, Atout France uses a Customer Relation Management tool (CRM) called HubSpot. HubSpot is a cloud-based software platform that provides marketing, sales, and customer service tools for businesses. In the case of Atout France, the main purpose is to store data about its contacts. Data about area, domain of expertise and level of engagement with the company are useful for selectively picking the most adequate contacts when organizing events. For example, amongst the tour operator companies of the network, only a segment of them is already selling French packaged trips. This segment of tour operators is interesting for French companies because they already have an interest in the country and are more likely to create more deals or tailor new offers. Throughout my internship I was taught to get accustomed with the use of the software for searching information, creating spreadsheets for business analytics and creating invite lists for events.

Core missions and duties

Event planning

Part of my responsibilities as an intern at Atout France USA were to contribute to organizing events by finding venues, inviting business representatives and communicating with our clients to best build the event according to their needs. Atout France USA organizes events for its local partners and French institutions to increase their visibility on the American market and meet travel professionals that could be interested in doing business with them. Generally, the size of events ranges from dinners with 10 guests to larger events going over 100 guests. As an intern it was my duty to look for appropriate venues matching the style, theme, and logistical capability of the venue according to the needs of the client.

Market research

As part of my duties as an intern I was asked to perform market research for various missions notably to contribute to the updating of the market presentation of the United States created and regularly updated by Atout France. Atout France puts an emphasis on design and credibility of sources when gathering data. Performing such research is very enriching as it allows you to have a better understanding of the industry and analyze the industry better.

Must do tasks – Mindset

When preparing an event, there were many manual tasks that needed to be done. For example, it was imperative to set up the event space with a well-thought decor, and other necessary equipment. When preparing for the event it also involved managing vendors by making sure they delivered food, beverages, audio-visual equipment, or other services. During events interns were often asked to handle registration and troubleshooting during the event by handling any issues that arise, such as technical difficulties or unexpected changes to the schedule.

Required skills and knowledge

To perform well as an intern at Atout France in New York, there are several prerequisites that you should consider such as strong communication skills. Interns are asked to communicate with different stakeholders, including industry professionals, tourists, and colleagues. Therefore, having the ability to clearly communicate and proactively ask questions is a must. Knowledge of the French language is an excellent plus for talking to partners. It can ease communication and make it easier for both French and American partners. Familiarity with the events and tourism industry is largely valued by Atout France as it is a good indicator for adaptability. Atout France has a dynamic workplace, and as an intern, you may have to manage multiple tasks simultaneously so having good time management and a sense of organization can come in very handy.

Learned skills and knowledge

During my internship I have improved and worked on my hard skills and soft skills. Hard skills such as my knowledge of the industry, learned how to use HubSpot, perform market research in the tourism industry. Soft skills such as flexibility during events, bilingual communication and team empathy skills.

Key concepts

Cultural awareness

Cultural awareness is the ability to recognize and appreciate different cultures, values, and beliefs. It involves understanding and respecting differences between cultures and being able to navigate and communicate effectively with people from different backgrounds. Cultural awareness also involves recognizing one’s own biases and assumptions and being open to learning from and about different cultures. Cultural awareness involves developing attitudes of respect, openness, and curiosity toward other cultures, which can help to build stronger relationships and promote mutual understanding. When performing missions it is important to take into account the image that Americans have of France.

Customer Relationship Management (CRM)

Customer Relationship Management (CRM) tool is a tool that organizations use to manage and analyze their interactions with customers and improve customer relationships. CRM involves collecting and analyzing customer data from various sources, including sales, marketing, and customer service, to gain insights into customer behavior, preferences, and needs. The CRM was a very useful tool for analyzing email opening rates, network contracting and marketing data.

Ecotourism

Ecotourism is a type of tourism that focuses on responsible travel to natural areas that conserve the environment and improve the welfare of local communities. Ecotourism examples are visiting and experiencing natural areas, such as national parks, wildlife reserves, and cultural sites, while minimizing the negative impact on the environment and supporting local communities. Ecotourism is also characterized by responsible travel practices, such as reducing waste, etc.

Ecotourism is of growing interest to France in its pioneering mission of the eco touristic industry and carbon neutral objectives for 2030. At the same time ecotourism can provide economic benefits to the local community by promoting conservation efforts by providing financial incentives for protecting natural resources and wildlife.

MICE

MICE is an acronym that stands for Meetings, Incentives, Conferences, and Exhibitions. It refers to a type of tourism that involves the organization and hosting of business events, such as conferences, seminars, trade shows, exhibitions, and meetings. MICE tourism is a growing industry that often involves large groups of people traveling to a specific destination for a specific purpose, such as attending a conference or meeting.

MICE tourism is of interest to Atout France as it provides significant economic benefits such as revenue for French hotels, restaurants, transportation providers, and other businesses.

Travel Agent VS Tour Operator

A travel agent is an intermediary that personally helps clients plan and book their travel arrangements. On the other hand, a tour operator specializes in organizing and selling complete travel packages, which may include transportation, accommodations, meals, and activities. Both professions are both of interest to Atout France as a majority of Americans use their services to plan their travel to Europe.

B2B and B2C

B2B and B2C are abbreviations for “Business to Business” and “Business to Consumer” respectively. Indeed, different companies rely on different business models. Relations and commerce with different customers change the way companies do business. At Atout France, the company’s services are for companies, so it operates on a B2B model when organizing events. However, Atout France also interacts with the public through marketing campaigns. Whether that interaction is a B2C is arguable because the “product” sold by Atout France is the whole nation of France and the operation is made in the nation’s interest rather than in the businesses’ interest as the income gained from such an operation is not directly earned from the consumer.

Why should you be interested in this post?

My article about my experience as an intern for Atout France in New York should be of great interest to people who are interested in the travel and tourism industry, as well as those who are considering pursuing an internship or career in this field. The article provides valuable insights into what it’s like to work for a destination marketing organization and gives a behind-the-scenes look at the operations of Atout France in New York. Readers can learn about the different departments and functions within a tourism development agency, as well as the challenges and opportunities that come with working in this field. Readers can also learn about the vocabulary, skills and qualities that are important to excel in this industry.

Word of conclusion

In conclusion, my experience as an intern at Atout France in New York was an incredibly valuable opportunity for me. I had the chance to work with a talented and dedicated team, passionate about promoting France as a premier travel destination.

During my internship, I gained valuable insights into the operations of the government in the tourism area abroad and learned about the different strategies and tactics used to promote tourism. I had the chance to work on a variety of projects, from developing marketing materials to conducting research and analysis on industry trends.
Throughout my internship, I was impressed by the level of professionalism and expertise demonstrated by the Atout France team. I also had the chance to network with industry professionals and attend industry events, which provided me with valuable connections and insights into the travel industry.

Overall, my internship at Atout France in New York was an incredible learning experience and a valuable steppingstone in my career. It has provided me with a strong foundation in destination marketing and tourism. I would highly recommend an internship with Atout France to anyone who is passionate about travel and tourism and looking to gain valuable insights and experiences in this industry.

Related posts on the SimTrade blog

   ▶ All posts about Professional experiences

   ▶ Nithisha CHALLA My experience as a Risk Advisory Analyst in Deloitte

   ▶ Alexandre VERLET My experience as an investment banking analyst intern at G2 Capital Advisors

Useful resources

Atout France Organization website

Atout France USA LinkedIn group

HubSpot Firm website

About the author

Article written in March 2023 by William LONGIN (EDHEC Business School, Global BBA, 2020-2024).

My experience as a junior financial analyst at ACE

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My experience as a junior financial analyst at ACE

William LONGIN

In this article, William LONGIN (EDHEC Business School, Global BBA, 2020-2024) shares his experience as a junior financial analyst at ACE Finance et Conseil, which is a wealth management firm specialized in financial investments.

ACE Finance et Conseil

First, let me present ACE Finance et Conseil. It is a wealth management firm created by Gabriel Eschbach in 2002. It is located in Strasbourg in the East of France. ACE Finance et Conseil currently manages a portfolio of 230 clients who are individual investors. The profile of these investors varies in terms of wealth and investment objectives. Most of the clients of ACE Finance et Conseil are living in the East of France, especially in the Strasbourg area. The ambition of the company is to expand its base of clients at the national and even international level.

Logo of ACE Finance et Conseil.
Logo of ACE Finance et Conseil
Source: ACE Finance et Conseil.

The founder of the company, Gabriel Eschbach, is a graduate student from the University of Strasbourg. Gabriel also attended a program in wealth management at ESSEC Business School. Building on his past professional experience in large financial institutions and insurance companies, he has developed extensive skills and knowledge on financial markets and asset management.

My personal experience at ACE Finance et Conseil

My job was to find relevant information on the firms of interest for ACE. To find such information, I used the Bloomberg Terminal. Beyond the search of information about companies, I also spent time on building a portfolio based on our current knowledge of the market conditions. During my internship, the stock market was bullish (Summer 2021). ACE’s strategy was to find the most interesting stocks based on the risk level that the firm was willing to take on behalf of its clients.

Bloomberg – Terminal and keyboard
Bloomberg terminal and keyboard
Source: Bloomberg.

My most valuable experience in the firm was to be able to understand the investment philosophy of the firm, which relied on a rigorous analysis of the relationship between risk and (expected) return on the one hand, and on a clear understanding of the investors profile of its clients on the other hand.

Everything is planned! And what I came to realize is that investing has nothing to do with gambling. No technical analysis, no gibberish, only careful analysis of companies through the fundamental analysis of their financial accounts (balance sheet and income statement), financial ratios and company news. As we are unable to predict the future, ACE has an investment philosophy based on the rigorous investment process combining the analysis of the relationship between risk and (expected) return of financial assets and a clear understanding of the risk profile of its clients on the other hand.

The ACE Finance Conseil team.
The ACE Finance Conseil team
Source: ACE Finance et Conseil.

Core missions and duties

During my internship I had to do research on companies and create short presentations for ACE clients. For example, I prepared presentations on Chinese companies for a new client who was not familiar with the Chinese stock market. The Chinese companies involved were the so-called BATX that stands for Baidu, Alibaba, Tencent and Xiaomi. My presentations’ focus was on Tencent and Alibaba, two companies that stroked our interest at that time. The Bloomberg Terminal gave information about the profits made by each business units of the company, and its future estimates. Unlike other sources of information, Bloomberg standardizes information about the different drivers that generate revenue in a company. This gives an excellent overview of the current state of the company in addition to the existing important financial indicators such as the P/E and EPS ratios, the working capital, and the quick ratio (these financial indicators are defined below).

At ACE everyday was a different day, I had many types of missions. Every morning, I prepared a morning briefing. This allowed me to learn many things on the link between political news and companies. I really enjoyed the diversified aspect in my work, and I hope to find a job where I can thrive the same way I did at ACE Finance et Conseil.

About the skills and knowledge

For this type of internship, the prerequisites were to know how to read financial statements as well as knowing what the key financial indicators are, how they are calculated, and how they can be interpreted. Being able to browse the internet with ease and to be familiar with financial tools like the Bloomberg Terminal were important to be efficient in the job. Have an interest in the geopolitical field was an advantage to be able to interpret the news and extract the important information that would affect the economic world and the value of companies.

At ACE I understood that there is a whole other side to the iceberg, companies that are focused on b2b sales (business to business) that play a major role in the economy. These companies in the shadows are mostly part of a supply chain for major b2c (business to consumer) whose brand is known by the public. b2b businesses rarely make it on to the front pages of mainstream news medias but a lot of information is available on media for investors.

Unfamiliar with the region of the East of France I learned many things on the culture and way of living in an anchored European city. Strasbourg is considered as a capital of Europe as it hosts major European institutions such as the European Parliament and the Council of Europe. Because of its ties to both Germany and France after World War II, Strasbourg served as a symbol of reconciliation between peoples.

Key concepts

I present below some key concepts that are useful to understand the internship that I did at ACE Finance et Conseil.

Asset management

Asset management consists in managing capital in the best way by respecting the level risk decided to be taken by the manager, with respect to an estimated rate of return. The responsibility of asset management’s firm is to know how to invest and manage assets correctly and accurately.

ACE Finance provides private investors with more comprehensive advice as part of their investment advisory services and fully documents discussions. The objective is to create transparency regarding the costs and risks associated with their investments. With ACE, clients can module their portfolios and are able to express their preferences after receiving advise from the firm based on fundamental research.

Asset allocation

Asset allocation is a step-in asset management which consists in defining the weight to be given to each category of assets within an investment portfolio. Allocation is generally made by sector (cyclical, defensive, sensitive), by profile (growth, value), by geography and/or by asset class (equities, bonds, real estate, commodities, etc.)

In determining the best asset allocation, the key is to be able to balance between the expected return on assets and the riskiness associated with each of them. Asset allocation depends on the time the investor is intending to invest his/her assets, his/her tolerance for risk and the volatility of the various assets.

As mentioned earlier ACE accompanies clients in their investment and gives them the opportunity to have a say on the way of allocating assets. The level of risk, the geographical or sectoral distribution of the portfolios and the type of products used, or the time horizon of the investments is different specific to each client.

Example of equity portfolio.
Example of equity portfolio
Source: ACE Finance et Conseil.

Active and passive asset allocation

There are two types of asset allocation management styles: passive and active. Passive management is management based on a buy-and-hold strategy. Active management is based on rebalancing of the portfolio via discretionary decisions or decisions based on quantitative models. Stock picking and market timing are key to a successful active management.

ACE is mostly focused on active management of assets. The goal in active management of assets is to be able “beat the market”, the benchmark. The work done by ACE is to select the assets, using various analysis tools, the mostly likely assets that are likely to grow faster than the benchmark and market in general. This management method, as opposed to passive management, concerns all funds and portfolios that do not aim to reproduce the performance of a reference market, but to do better than the reference market.

Stock picking

Stock picking is a methodic process were an investor searches for stocks that are likely to bring future cash flows. The analyst’s or investor’s view for the price of the stock will determine whether the position is long or short.

When it comes to stock picking ACE does research on various companies and keeps track of the news. The financial statements (balance sheet, income statement and cash flow statement) with the focus on key business indicators (sales and profits) are important to understand the structural investments in the company. ACE also pays great attention to key financial ratios such as: P/E, EPS, working capital, quick ratio, and the EBITDA.

ACE also has partner companies such as JP Morgan and Gemway Equity that collaborate with ACE in this process. Getting insight and trying to understand other people point of view is part of the culture at ACE and how it has done so well for these past 20 years.

Financial indicators

EPS ratio

The Earnings Per Share (EPS) ratio is a financial ratio that shows the amount of net profit that a stock can generate. To calculate the EPS, we divide the total earnings (net income) of the company by the number of outstanding shares issued by the company (or average of outstanding shares).

Earnings per share formula

Note that if the company issued common and preferred shares, the EPS ratio is adjusted to take into account the preferred dividends. The EPS can be positive or negative based on the positive or negative earnings (profits or loss). In case of a negative EPS the company in question does not present a profitable overall activity. However, having a negative EPS is not as rare as you might think. As firms are not always making a profit due to heavy investment (start-ups for example). A company which presents a very fluctuating EPS from one year to another or an EPS which does not stop decreasing from year to year, could cause the downfall of the stock price.

At ACE, the EPS is a ratio that we looked at as an indicator of where the wind was blowing but did not base our decisions uniquely on this ratio since it does not look at the investments made by the firm that could generate important future cash flows.

P/E ratio

The price to earnings ratio (P/E or PER) is an indicator used in stock market analysis. The calculation of PER is very straightforward, divide the market capitalization by the net earnings or by dividing the market price of a share by the earnings er share (EPS). Another way of calculating it is by dividing the individual price of a share by the net income per share. You can calculate PER based on quarterly and yearly results and even projected results which would give the expected PER ratio.

Price earnings ratio (PER)

The PER represents the number of years it would take for a company to buy all its stocks. For example, a PER of 20 means that a company would take 20 years to “redeem” all its floating capital with constant profits.

This indicator can be used to evaluate a company to its competitors despite their differences in size as it looks at firm valuation according to their profits. A lower PER indicates a cheap stock, a higher PER an expensive stock.

Analysts may consider two types of PER: the trailing PER and forward PER. Simply put, the trailing PER looks at historical earnings to calculate PER. The forward PER considers expected earnings.

Bloomberg Terminal – Relative value function (RV) – Baidu – 14.06.2021
Bloomberg RV function
Source: Bloomberg.

The RV function on the Bloomberg Terminal gives us indications on the relative value of the firm. At ACE when doing some research on Baidu, the PER was one of lowest amongst its competitors. The value of the PER is important as it reflects investors’ expectations. Thus, the PER can reveal the speculations of investors, who anticipate a strong increase in future profits: in which case, the higher the PER, the greater the expected increase in profits. So it is important to monitor and the progress of the PER.

Working capital

Working capital is an accounting concept which represents the amount the business has available to pay total operating expenses such as suppliers and employees. This indicator gives information on the company’s ability to cover its expenses.

Working capital

Quick ratio or Acid test

The quick ratio, or acidity test, is used to determine short-term liquidity in a company. To calculate this ratio, the value of the company’s current assets, excluding inventory, is divided by the company’s current liabilities (see formula). The goal of an acid test is to estimate the financial stability of a firm by measuring the company’s ability to immediately pay its debts using cash.

Acid test ratio

Assets used to calculate the quick ratio include cash and other very liquid assets such as marketable securities and accounts receivables. Inventory is also excluded from the quick ratio formula because it cannot be sold immediately to generate cash flow.

EBITDA

EBITDA (earnings before interest, taxes, depreciation, and amortization) is an indicator that is used to compare companies on their potential ability to generate wealth regardless of the balance sheet differences. EBITDA does not consider the investment and financing policy and the impact of taxes. On the contrary, a negative EBITDA means that the company is not profitable. The EBITDA is computed as follows:

EBITDA

EBITDA is a financial indicator that measures a company’s revenue before subtracting interest, taxes, depreciation and amortization charges and provisions on fixed assets.

Why should you be interested in this post?

If you are looking at getting an internship in an investment firm, this post will surely be interesting to you. This post provides a little reminder of the basics of asset management. There are plenty of investment firms in the world however ACE is unique by its approach to understanding the markets and counselling its clients. In this post I detail some of the core missions that I had as a newcomer to the professional investing field.

Word of conclusion

As my first internship inside of an asset management firm, this initiation to the financial world was exactly what I was looking for before applying at ACE Finance et Conseil. ACE Finance et Conseil differentiates itself from other companies by its simplicity in functioning and the richness of its experience. This unique experience has made me want to explore the financial world even more.

Related posts on the SimTrade blog

   ▶ All posts about Professional experiences

   ▶ Alexandre VERLET Classic brain teasers from real-life interviews

   ▶ William LONGIN How to compute the present value of an asset?

Useful resources

ACE Finance et Conseil

Bloomberg terminal

Bloomberg market concepts

About the author

Article written in March 2022 by William LONGIN (EDHEC Business School, Global BBA, 2020-2024).

How to compute the present value of an asset?

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How to compute the present value of an asset?

William Longin

In this article, William LONGIN (EDHEC Business School, Global BBA, 2020-2024) elaborates on the concept of Present Value.

What is present value?

The present value (PV) of an asset is usually computed as the value of the stream of its future cash flows discounted at a given rate of return. In the calculation of the present value of an asset, there are two inputs: the expected future cash flows generated by the asset and the discount rate which takes into account the risk on the future cash flows.

The discounting operation takes into account that an amount of money today is worth more than the same amount tomorrow. €100 lent or invested today at an interest rate of 10% is equal to €110 in one year. If you are to receive €100 in one year, you can borrow €90.90 to get this money today. In one year, you will have to repay the amount borrowed €90.90 and the interests €9.10, that is a total cash flow of €100 (that you will pay with the €100 that you are supposed to receive in one year). This refers to the concept of time value of money, best illustrated by the following quote: “Remember that time is money” – Benjamin Franklin (1748).

How is present value computed?

The formula for the present value (PV) of a cash flow occurring at time t, denoted by CFt, discounted with the discount rate r, is given by:

Present value of a cash flow

The above formula can be used to illustrate the time value of money. What is the present value of €100 obtained in 1 year, 5 years and 10 years? The table below gives the present value by discounting €100 obtained in 1 year, 5 years and 10 years with a discount rate of 10%. Present value shows that money received in the future is not worth as much as an equal amount received today.

Present value of a cash flow

Download the Excel file to compute the present value of a cash flow

This formula can be generalized for a series of cash flows, CFt, from t=1 to t=T:

Present value of a series of cash flows

Application 1: Computation of the present value of a stock

The concept of present value can be applied to value a stock.

For a stock, the series of cash flows corresponds to the dividends paid by the firm to its stockholders at the end of each period t (DIVt) and the price PT at which the stock is supposed to be sold at time T (the horizon of the investor). The present value (PV) is then equal to the discounted value of this series of cash flows at the discount rate r.

Present value of the series of cash flows for a stock

Let us take the example of the valuation of a stock paying a dividend every year. The expected cash flows for dividends is €4 in Year 1, €4 in Year 2, €5 in Year 3, €5 in Year 4, €7 in Year 5 (end of year). The expected resale price in Year 5 is €110 (end of year). Using a discount rate of 10%, the present value of this stock is equal €94.41.

Excel file to compute the present value of a stock

Download the Excel file to compute the present value of a stock

In practice, there are three steps to compute the present value of a stock:

  • Step 1: Estimate the expected value of future dividends and of the future price
  • Step 2: Estimate the discount rate given the risk characteristics of the stock
  • Step 3: Compute the present value

Application 2: Computation of the present value of a bond

The concept of present value can be applied to value a bond. For a fixed-rate bond, the series of cash flows corresponds to the interest paid at the end of each period t (coupon Ct) and the principal value (V) reimbursed at maturity T. The present value (PV) is equal to the discounted value of the series of cash flows at the discount rate r.

Present value of the series of cash flows for a bond

Let us take the example of the valuation of a bond with a nominal value of €1,000, a nominal interest rate of 5%, payment of interests on a yearly basis at the end of the year, and maturing in 5 years. The annual interest is computed as follows: 0.10*1,000 = €100. The last payment corresponds to the interest of the last year (€50) and the reimbursement of the initial capital (€1,000). The series of cash flows is then given by +50, +50, +50, +50, +1,050. Using a discount rate of 5%, the present value of this bond is equal €1,000.

Excel file to compute the present value of a bond

Download the Excel file to compute the present value of a bond

In practice, there are three steps to compute the present value of a bond:

  • Step 1: Find the characteristics of a bond to compute the cash flows associated to the bond
  • Step 2: Estimate the discount rate given the risk characteristics of the bond
  • Step 3: Compute the present value

How to properly compute cash flows?

The future cash flows may be certain or uncertain. When the future cash flows are uncertain, the expected value of the future cash flows, computed as the average of the possible values weighted by their probability, enters the formula for the present value.

Who is using present value?

In financial markets, it is used by traders and investors to estimate the value of financial securities like stocks and bonds.

In the asset management industry, it is also used by asset managers in investment firms (like private equity) to value firms to buy or sell.

In the corporate world, it is used by project managers to estimate the value of the future investments by the firm.

In the accounting context, it is used by accountants to compute the model value of some elements of the balance sheet according to the International Financial Reporting Standards (IFRS).

So, we can see that the concept of present value is useful to a large range of professionals needing to calculate and estimate the value of assets.

Related posts

   ▶ William LONGIN My experience as a junior financial analyst at ACE

   ▶ Maite CARNICERO MARTINEZ How to compute the net present value of an investment in Excel

   ▶ Jérémy PAULEN How to compute the IRR in Excel

   ▶ Sébastien PIAT Simple interest rate and compound interest rate

About the author

Article written in May 2021 by William LONGIN (EDHEC Business School, Global BBA, 2020-2024).