Netflix announced on March 2 an agreement to buy Finland-based mobile game developer Next Games in a deal valued at around $72 million (65 million euro) as the company looks to strengthen its games business.
The move also comes amid increased consolidation in the games industry with Microsoft's purchase of Activision Blizzard, Take Two Interactive's acquisition of Zynga and Sony buying Bungie in recent weeks.
Founded in 2013, Next Games is the first publicly listed mobile game developer and publisher in Finland, specializing in games based on entertainment franchises, such as movies, television series or books.
In October 2021, the company had released 'Stranger Things: Puzzle Tales', a role-playing game based on the streaming giant's hit 80s horror drama series.
As per the deal, Netflix said that existing shareholders will receive around $2.3 (2.1 euro) in cash per share of Next Games, a 125.6% premium from its closing price of $1.03 (0.93 euro) on March 1.
The transaction is expected to close in the second quarter of 2022.
"We are excited for Next Games to join Netflix as a core studio in a strategic region and key talent market, expanding our internal game studio capabilities. While we're just getting started in games, I am confident that together with Next Games we will be able to build a portfolio of world class games that will delight our members around the world" said Michael Verdu, Vice President of Games, Netflix.
Led by Teemu Huuhtanen, Next Games reported sales of around $30.2 million (€27.2 million) in 2020, with 95% of revenues coming from in-game purchases. Apart from Stranger Things, the company has also developed games based on the popular television series The Walking Dead. It started publicly trading on NASDAQ First North Finland in 2017 and had around 120 employees at the end of 2021.
"Joining forces with Netflix presents an opportunity for a logical and exciting continuation of our strategy to craft interactive experiences for the world to enjoy. Our close collaboration with Netflix on Stranger Things: Puzzle Tales has already proven that together we create a strong partnership. This is a unique opportunity to level-up the studio on all fronts" said Huuhtanen.
Next Games said this deal will enable them to utilize Netflix's global infrastructure to gain access to new customers in other markets. Netflix will also help the company to improve its core strengths of developing entertainment franchise-based mobile games and live services, as well as invest in new business opportunities.
Netflix forayed into mobile games in November last year and stated plans in January to expand its games portfolio across both casual and core gaming genres in 2022.
One of the key ways of accelerating this process is through acquisitions to build an internal development capacity for its own game studio. During the company's earnings conference call in January, Netflix COO Greg Peters had termed it as “a huge long-term multi-year opportunity.”
That said, Netflix has traditionally been very selective about acquisitions, with only four publicly disclosed deals across more than two decades, including the purchase of its first games studio 'Night School Studio' in September 2021."This will be one of the tools that we use and we'll use it opportunistically when we find a great opportunity out there. So don't expect us to go on a tearing buying spree," Peters said in October last year.