This article is based on our Weekly News Digest #36 from 11.09.2023. If you want to receive such analyses first, be sure to subscribe to our weekly newsletter. There, we analyze the largest deals, elaborating on the financials and strategy behind, while also covering the smaller transactions of the week.
UK-based work-for-hire gaming company Sumo Group, a subsidiary of China-based tech giant Tencent (SEHK: 700), has acquired UK-based mobile games developer Midoki, for an undisclosed sum.
Founded in 2011, Midoki is primarily known for Plunder Pirates, a strategy MMO mobile game released in 2014, and Knighthood, a turn-based mobile RPG released in 2020. The latter is a flagship title of the company, generating the majority of its Revenue.
Midoki is yet another studio purchased by Sumo in recent years: the company has been using M&A as one of the key instruments of growth and improvement. In Oct’20, Sumo made its largest deal to date: acquisition of Pipeworks Studio for up to $99.5m. However, this is the first announced acquisition by Sumo after being acquired by Tencent in Jan’22 for $1.3B. The previous deal we saw from Sumo was back in Sep’21, when it acquired UK-based games developer Auroch Digital for a total amount of $8.3m.
So why acquire Midoki now? Let’s delve into the performance of the company’s games to try to find out. According to AppMagic, Knighthood has generated a total Revenue of ~$20.7m and ~8 million downloads since its release. Plunder Pirates shows more modest numbers, with ~$7.5m in Revenue and ~3.2 million downloads during the period from Jan’15 to Sep’23. While Plunder Pirates is noticeably losing its popularity, Knighthood remains relatively stable in terms of Revenue, bringing its developers around $0.5m monthly for the last 1.5 years. It should also be mentioned that the numbers represent Net Revenue from IAP purchases, excluding any sort of ad monetisation.
Source: AppMagic
Speaking of the performance of Knighthood, we can’t help but mention one loose end: in Jun’21, Germany-based games publisher Phoenix Games acquired a minority stake in Midoki, along with the rights to Midoki’s flagship title Knighthood from King, which published the game back then. Today, we see that the initial press release by Phoenix is not available any more, and there is no mention of Sumo Group acquiring the rights from Phoenix Games.
Whatever happens with the rights for Knighthood, it doesn’t change the fact that Midoki knows what to do with the game to support players’ interest. And this may well be the main reason for Sumo to go for the deal. Though Midoki haven’t released many titles so far, the studio proved it can play long-term, constantly supporting their games and making a strong emphasis on LiveOps.
These days, when even huge gaming companies like Playtika stop launching new games because of the challenges the mobile market presents in the post-IDFA era, as well as an oversaturated market, while many gaming companies focus on ‘housekeeping’, reassessing their portfolio, reviewing their assets and trying to make a maximum of already performing titles, this is where LiveOps expertise becomes especially important. We believe Sumo sees how much benefit Midoki can bring to its partners in the current market, and this is why this deal is happening.
A few more comments about the market, before we jump to Notable Transactions. The deal with Midoki is particularly interesting since we saw only 11 mobile games developers acquisitions in 2023 so far. For comparison, during the same period of 2022 a total of 30 mobile games developers were acquired, with 12 deals having disclosed sums, unlike just one deal in 2023. This is another proof that more companies are focusing on their internal studios and their own IPs, rather than on external expansion. More data on that can be found in our latest Global Gaming Activity Report.
