As Finland mulls joining Nato in the wake of Russia’s unprovoked invasion of Ukraine, another bit of M&A is going down in the country. Today Netflix announced that it would be acquiring Next Games, a developer of mobile games in the country for a total value of €65 million ($72 million). Next Games is listed on the public markets in Helsinki, and the deal is being done as an all-cash share purchase at €2.10 in case per share. The board of the gaming company has already approved the deal and is recommending it to shareholders although it has yet to be completed but is expected to close in Q2 2022.
The deal is part of Neflix’s bigger strategy to build out its gaming content as a complement to its video catalogue and Next Games is a perfect fit. THE free-to-play mobile games publisher already has developed titles related to some of Netflix’s biggest draws, such as Stranger Things and The Walking Dead — meaning the two companies already had a strong relationship. This deal will cement that, and improve Netflix’s margins beyond simply licensing the brands, by bringing Next Games’ IP, talent, and existing business selling in-app purchases, in house.
“Next Games has a seasoned management team, strong track record with mobile games based on entertainment franchises, and solid operational capabilities,” said Michael Verdu, VP of games at Netflix, in a statement. “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.”
Next Games had 120 employees at the end of 2021 and its last annual results showed €27.2 million in revenues 2020. Some 95% of its sales came from in-game (in-app) purchases that year. Now it will have more investment to double down on existing titles and build out more on Netflix’s catalogue.
Teemu Huuhtanen, who founded Next Games in 2013 and is its CEO, is an alum of Finland’s extensive gaming ecosystem, which has played a big role in breaking new ground in gaming over the years. Right before Next Games, he was an exec at Rovio, the Angry Birds publisher (this was at a time when it was still a formidable presence on app stores). Before that he was at Sulake for about a decade. spent almost a decade at Sulake, a trailblazer in the online virtual worlds category with the creation of Habbo Hotel (now called Habbo, having weathered many a controversy in intervening years).
“We have had an unwavering focus to execute on our vision: to become the partner of choice for global entertainment businesses and craft authentic and long-lasting interactive entertainment based on the world’s most beloved franchises,” said Huuhtanen in a statement. “Joining forces with the world’s largest streaming service, 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 and continue on our mission together.”
For all its size, Netflix has only made a handful of acquisitions over the years — five in all according to CrunchBase data. Next Games is its first specifically in gaming, although the others include a visual effects studio, two interactive content makers for younger audiences, an anime comics publisher and the Roald Dahl estate, so arguably, there’s been a gaming angle in its M&A strategy all along.
And at a time when companies like Disney can continue to pull the rug from under Netflix’s by yanking away key video content to improve the selection on their own streaming video platforms, this is also one way for Netflix to fertilize its own walled garden. Buying something like Next Games underscores a strategy to produce or buy in its own exclusive work, and now build out bigger franchises based on it across multiple screens and experiences.