Weekly News Digest #1
# of announced deals
announced deals’ size
# of closed deals
Hope you’ve had wonderful holidays! Here’s the first Weekly InvestGame digest of the year of 2023.
NetEase Acquires SkyBox Labs
China-based game giant NetEase (NASDAQ: NTES) has announced the acquisition of Canada-based PC & Console co-development studio SkyBox Labs for an undisclosed sum.
Founded in 2011, SkyBox Labs is a full-service game development studio, experienced in all major disciplines of game development, including art, engineering, design, production, and QA. The studio has a strong focus on AAA titles, and has had experience collaborating with large publishers like Xbox Game Studios, Wizards of the Coast, and Electronic Arts. Today, SkyBox Labs is best known for co-developing such titles as Halo: Infinite, Minecraft, and Fallout 76.
After the acquisition, the studio will not only continue working with existing partners, but will also be open to new third-party contracts. Besides, with more resources at hand, SkyBox Labs will be able to accelerate its growth in the domestic Canadian market, by hiring new employees and establishing new partnerships.
This deal is a mark of at least two ongoing trends we have been seeing recently: the Chinese gaming publishers going West, as well as the work-for-hire studios getting acquired more often. First, we can observe the increased interest from the Chinese publishers in the Western market, especially when it comes to the (mostly) Console segment. We have written about it in one of our previous digests, but let’s have a look at the key points once again. Consoles had been banned in China for around 14 years, until 2014. This is why the Chinese market has been historically built around PC and Mobile segments: according to the market reports, in 2021 China had 706 million PC and mobile gamers, while having only 15.9 millionConsole gamers. Thus, it is clearly a challenge for the gaming companies to bring more Chinese gamers to Consoles, but it is also an opportunity, since Nintendo, Sony, and Xbox consoles are already present in the market (including the new-gen versions). However, the reason for the Chinese companies going West also lies beyond the Console market expansion. China is famous for its strict regulations, which both tie the developers’ hands, and limit creativity — meanwhile, the Western gaming markets are far more predictable and stable, which makes them more than worth diversifying into.
In this context, acquiring the expertise of their Western colleagues seems like a logical step for the Chinese publishers. This is why NetEase has earlier acquired Quantic Dream, as well as invested in Something Wicked Games, Liquid Swords, Astrid Entertainment, and Rebel Wolves. As for Tencent (SEHK: 700), the closest competitor of NetEase, it is also hunting for the PC & Console premium games market, and is reported to be working on a AAA Console title for the Western audiences. Moreover, last year the company went on a shopping spree, acquiring UK-based third-party development company Sumo Group for $1.3B, getting a 49.9% stake in Guillemot Brothers, which stands behind Ubisoft (EPA: UBI), as well as increasing its stake in Japan-based FromSoftware, which is not Western, but is still a highly acclaimed gaming studio in the West. Continuing the trend, we are likely to see more acquisitions of Western studios with relevant AAA expertise in PC & Console space from Chinese publishers this year.
Second, we are observing more acquisitions of work-for-hire studios. The times, when a single small studio could have created a great AAA game on its own, have long gone. Each year, game development is getting more expensive, and requires more resources. This is why a lot of the currently available AAA-development experience on the market lies within the scope of the co-development studios. They usually know the ins-and-outs of the technical side of AAA development, and are well familiar with the various platforms’ specifics and requirements — which may be especially crucial today, when games are often postponed, and always require the post-release support. Moreover, with both creative and financial support of a larger publisher, they could become a valuable source of expertise and even try to develop their own original IPs. F. ex., the above-mentioned Sumo Group acquisition goes in line with both trends, but there are more deals to have a look at. Pipeworks was acquiredby Jagex, Bytex was acquired by Embracer, and Valkyrie Entertainment was acquired by Sony — those are all just a few examples of the work-for-hire studios being bought for all the valuable experience they’ve got. So, with the growing complexity and the ever growing emergence of AAA games, we might expect more deals like this on the market.
2023 Predictions By Our Colleagues
Last year turned out to be game-changing for the gaming industry as a whole. There are now many reasons happening for the ongoing correction, but we will focus on them further in our upcoming Gaming Deals Activity Report 2022. For now, let’s have a look at some of the most interesting predictions for the year of 2023:
vgames: 5 Trends to Watch in the Gaming Industry of 2023
Naavik: 2023 Mini Predictions
Elite Game Developers: 2023 Predictions for Gaming Startups
Mobile Dev Memo Content: 2023 Predictions for Mobile Gaming
Niko Partners: Predictions for Asia and MENA Markets in 2023
We want to thank MGVC, Hiro Capital, and The Games Fund for supporting this digest.
MERGERS & ACQUISITIONS
China-based tech giant Tencent has acquired a 20% stake in the South Korea-based mobile games developer Shift Up. Financial terms of the deal are not disclosed. The studio is known as the developer of Goddess of Victory: Nikke, which was published by Tencent’s subsidiary, Level Infinite. The deal will allow Tencent to further expand its market presence within the global games market.
UK-based VR games developer and publisher nDreams has acquired UK-based VR games developer Near Light. Financial terms of the deal were not disclosed. This is the first acquisition of nDreams after its $35m raise in Apr’22. Near Light has developed Shooty Fruity, and Perfect, which were published by nDreams. The acquisition will allow nDreams to increase its production and expertise capabilities.
Sweden-based video game holding company Embracer Group (SSE: EMBRAC B) acquiresUS-based tech company Captured Dimensions via its subsidiary Gearbox Software. Financial terms of the deal were not disclosed. Captured Dimensions specialize in 3D capturing and scanning tech. The company worked on several movies and games, including some projects for Gearbox, which were not revealed. The acquisition will allow Gearbox to increase its expertise in 3D capturing, as well as bring an experienced team in this field onboard.
Israel-based mobile games developer Moon Active is acquiring tile-matching mahjong puzzle game Zen Match from Turkey-based mobile games developer Good Job Games. Financial terms of the deal were not disclosed. Zen Match was released in Sep’21, and currently has about 1 million DAU. The acquisition will allow Moon Active to add a strong IP to its pipeline.
US-based P2E gaming platform Rainmaker Games has raised $4.7m in Seed funding. The round was co-led by Placeholder and Hivemind Capital. Shima Capital, Peer Ventures, Coinfund, Side Door Ventures, and others have participated in this round. The funds will be used to further develop the platform, since the company aims to focus more on gaming aspects and attract more players.
Australia-based tech service provider Radian Arc has closed a new round of funding. The amount of funding was not disclosed. The round was led by CPS Capital Group, with participation from Advanced Micro Devices and Seed fund TEC. The funds will go towards the expansion of the company’s cloud gaming and edge computing technologies globally.
Turkey-based mobile games developer Ace Games has received an $8m investment from Turkey-based investment fund Re-Pie as part of the same funding round when Playtikapurchased a minority stake for $25m. The funds will go towards further growth of the company and development of new titles.