Netflix has entered into an agreement to acquire Finnish mobile games developer Next Games, a studio focused on creating titles based on popular entertainment IP. The Board of Directors of Next Games has unanimously recommended that shareholders accept the tender offer, and it is set to close in Q2 2022.

This is Netflix’s second games studio acquisition, and forms part of a wider games strategy designed, in part, to boost engagement. Ampere Consumer research indicates Netflix in the US is coming under increasing competitive pressure, particularly among younger demographics, and is likely seeking to re-establish itself as the primary entertainment destination for those age groups.

Next Games bridges the gap between games and entertainment

Next Games has previously worked on titles related to high-profile Netflix IP such as Stranger Things and The Walking Dead, and has a strong track record in the free-to-play mobile arena. As such, there is clearly an existing relationship between the two companies, and the deal signals Netflix’s confidence in the ability of the developer to deliver.

With expected 2021 revenues of €25.2m ($27.4m) , following 2020's €27.2m ($29.5m) and a roster of around 120 staff, Next Games is a consistently performing game developer in revenue terms. However, its operating profit has come under pressure in 2021 with an increase in R&D costs and it recently announced it would discontinue operation of Blade Runner Rogue, its most recent game release, in the first half of 2022 due to under-performance against agreed targets. Having the support of Netflix is a clear win for the company as competition increases.  

This deal represents a logical strategic move for Netflix, whose strength – in part –  is in its portfolio of popular video IP. Its raw content carries significant potential, but the true challenge lies in successfully converting its high-profile film and TV franchises into games.

Bringing successful studios in-house extends expertise beyond video content production 

In the increasingly-crowded (and lucrative) games space, Netflix has something of an advantage over the more tech-focused players like Google and Amazon because of its established content library. However, games development, and perhaps more importantly, the ongoing support of live-service games, represents a significant departure from video content production and requires deep, specific expertise.

With limited experience in game development, Netflix is seeking out studios who align with and bolster its strengths. It acquired Oxenfree creator Night School Studio late last year, whose flagship title is a story-driven, graphic adventure – content which sits near the boundary between games and video. With the acquisition of Next Games, Netflix is striving to realise its vision of a holistic entertainment platform, and to further intertwine games and video.