Netflix has swooped in to buy Next Games, the Finnish developer behind mobile games based on its hit show Stranger Things, extending Silicon Valley’s push into video games.
The California-based streaming service will pay €65mn in cash for Next Games, which alongside Stranger Things has also created adaptations of The Walking Dead television show.
The offer follows Microsoft’s planned $75bn acquisition of Activision Blizzard and comes as Big Tech companies Amazon, Facebook-owner Meta and Apple all step up their investment in video games, driving accelerating consolidation across the industry.
The deal is Netflix’s largest in gaming since announcing its expansion into interactive entertainment last July. Netflix has said it plans to bundle games into its existing TV and film subscription service. It acquired its first games developer, Night School Studio, in September.
The two deals point to Netflix’s strategy of releasing games with narrative ties to its existing content portfolio. Next Games also gives Netflix a foothold in one of the most successful countries for mobile games development, making it a neighbour of Clash of Clans maker Supercell and Angry Birds creator Rovio.
Netflix will pay €2.10 a share for Next Games, more than double the company’s closing price on Tuesday.
Jari Ovaskainen, Next Games’ largest shareholder, and AMC Networks, the US media group that partnered with the developer on its Walking Dead games, have both said they back the deal, representing about 43 per cent of the shares.
Shares in Next Games lost more than a quarter of their value over the course of two weeks last December after it said it would not be able to hit the revenue targets it had set at the beginning of 2021. On Wednesday, it reported annual results for the second half of 2021 that showed revenues grew 1 per cent to €12.9mn. Pre-tax losses for the full year widened 37 per cent to €5.6mn.
The deal comes as Netflix prepares to release the fourth season of Stranger Things, the 1980s horror drama that is one of its most popular homegrown franchises, in May.
After going public at €7.90 a share in 2017, Next Games saw its shares lose more than three-quarters of their value during 2018. While it benefited from the boom in gaming during the first wave of coronavirus pandemic lockdowns in 2020, its shares had fallen almost two-thirds in the past 12 months, until news of Netflix’s bid saw them almost double on Wednesday.
Mike Verdu, the former Facebook and Electronic Arts executive who is now Netflix’s vice-president of games, said Next Games had “a seasoned management team, strong track record with mobile games based on entertainment franchises, and solid operational capabilities”.
“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,” he said. “Next Games will help us build a world-class portfolio of games that our members around the world can enjoy.”
Petri Niemi, chair of the board at Next Games, added: “The speed of consolidation in the games and entertainment industry is accelerating and the board of directors see a clear benefit for Next Games in joining forces with one of the largest entertainment companies in the world.”