This article is based on our Weekly News Digest #21 from 27.05.2024. If you want to receive such analyses first, subscribe to our weekly newsletter. There, we analyze the most significant deals, elaborating on the financials and strategy behind them, while also covering the smaller transactions of the week.
Japan-based gaming giant Nintendo (TYO: 7974) has announced the acquisition of US-based work-for-hire studio Shiver Entertainment from Embracer Group (STO: EMBRAC B). The sum of the deal remained undisclosed.
Founded in 2013, Shiever is a third-party games developer responsible for the recent ports of Mortal Kombat 1 and Hogwarts Legacy on Nintendo Switch. The studio has also worked on popular game series for other platforms, including Madden NFL, FIFA, Need for Speed, and Guitar Hero. According to the press release, Shiver will continue to focus on porting and development for multiple platforms. The company did this before and after Embracer acquired it in Dec’21.
The press release also states that Shiver will port and develop software for multiple platforms, including Nintendo Switch. Still, whether this means continuing to work with existing clients or porting Nintendo games to other platforms is unclear. However, considering the Japanese company’s history, it seems unlikely that it will pursue the cross-platform release strategy currently being practiced by Sony and Microsoft. The same can be said about its M&A activity, which aligns with this. While Microsoft and Sony were among the most active buyers of the market, Nintendo made only three deals: Next Level Games, SRD, and Dynamo Pictures.
Source: Nintendo 2024 FY Financial Results Report
The challenges in the gaming industry haven’t dramatically influenced Nintendo’s financials. Although financial performance has declined, this aligns with the overall market dynamics. The figures have returned to near pre-pandemic levels and appear to be stable at this point.
Nevertheless, the company was showing tremendous growth even before the pandemic. The release of Nintendo Switch in 2017 was a game changer, and Nintendo grew from $4.4B in Revenue in FY’17 to $10.9B in FY’19. That’s why Nintendo’s new growth strategy will likely focus on further developing its exclusivity and ecosystem rather than adopting a multiplatform approach. The model proved successful, and the new console will likely utilize the same approach. As for the acquisition of Shiver, it seems to be part of the preparation for the release.
Strategic Rationale
The acquisition comes soon after the success of Hogwarts Legacy on Nintendo Switch. According to Statista, the number of copies sold increased from 15 million in May’23 to 22 million in Dec’23. While we don’t have the exact numbers, the release of the Switch version was in Nov’23, which undoubtedly contributed to this significant spike in sales.
Hogwarts Legacy copies sold worldwide as of Jan’24. Source: Statista
The port is also a technical success. Porting a massive open-world game, initially designed for the powerful ninth-generation consoles, to the much weaker hardware of the Nintendo Switch was a significant challenge that the team has successfully overcome.
The port of Hogwarts Legacy to the Nintendo Switch, in particular, showcases Shiver’s ability to transfer large-scale games with minimal quality loss, allowing players to enjoy complex titles on handheld hardware. This seems especially important considering the upcoming release of the new Nintendo console, often referred to as “Switch 2”.
The console is confirmed to be shipped within this fiscal year, which ends March 31, 2025. With a likely significant hardware upgrade, we expect more existing and future games to be planned for porting to the next Nintendo console. In theory, bringing games to Switch 2 might be faster and easier than porting to the original Nintendo Switch, which requires more effort to keep up with the increasing hardware demands of new games.
Overall, the deal is a win-win for all parties involved. Embracer continues to streamline and optimize its structure, Nintendo gains a reliable partner with a proven track record of porting games to Switch, and Shiver benefits from joining one of the industry’s most stable and reputable gaming companies.
