Netflix announced on Wednesday that it would purchase Next Games, a mobile game developer based in Finland, for €65 million ($72 million). Next Games is a publicly traded company in Helsinki, and the transaction is structured as an all-cash share purchase for €2.10 per share. Despite the fact that the purchase has yet to be consummated, the gaming company’s board of directors has already approved it and is recommending it to shareholders. It is expected to close in the second quarter of 2022.
The free-to-play mobile games publisher has already worked on products based on some of Netflix’s most popular shows, like “Stranger Things” and “The Walking Dead,” indicating that the two businesses have a solid working connection. By bringing in-house Next Games’ IP, skills, and established business selling in-app purchases, this agreement will entrench that and enhance Netflix’s profitability beyond simply licencing the brands.
“Next Games has a seasoned management team, strong track record with mobile games based on entertainment franchises, and solid operational capabilities,” Michael Verdu, VP of games at Netflix, shared 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, with €27.2 million in revenue in the previous fiscal year. That year, in-game (in-app) purchases accounted for nearly all of its sales. It will now be able to increase its investment in existing titles and expand Netflix’s collection.
“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,” Huuhtanen stated in a report.
“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.”
Teemu Huuhtanen, the CEO of Next Games, is a part of Finland’s thriving gaming ecosystem, which has been important in breaking new ground in the industry over the years.
He was an executive at Rovio, the Angry Birds publisher, before joining Next Games (this was at a time when it was still a formidable presence on app stores). Prior to that, he worked for over a decade at Sulake, a pioneer in the online virtual worlds market with the launch of Habbo Hotel (now called Habbo, having weathered many a controversy in intervening years).
Netflix, despite its size, has only made a few acquisitions throughout the years – five, according to crunchbase data. Next Games is the company’s first game acquisition, though it has previously acquired a visual effects studio, two interactive content creators for younger audiences, an anime comics publisher, and the Roald Dahl estate, so there has arguably always been a gaming component in its M&A strategy.
This is also one method for Netflix to cultivate its own walled garden at a time when firms like Disney can continue to pull the rug out from under Netflix by grabbing major video material to increase the offering on their own streaming video platforms. Purchasing Next Games exemplifies the company’s strategy of producing or acquiring exclusive content, then expanding franchises based on it across numerous screens and experiences.