Reporters Chen Yibo and Wu Kezhong reported in Beijing

American streaming giant Netflix (NASDAQ tickery code NFLX) has finally made substantial moves in the field of gaming.

On March 2, Netflix announced a tender offer for Finnish game developer Next Games (NXTGMS) for approximately €65 million. For the acquisition, as of press time, neither Netflix nor Next Games has replied to the reporter of China Business Daily.

Industry insiders said in an interview with reporters that since Netflix is a subscription service profit model that charges membership fees, the game business can be seen as a new form of content in addition to the film and television content provided to subscribers. In the case of non-increased membership fees, this helps to attract more subscribers, and the game content can also get traffic imports from the audience of film and television works. Game content is a form of content in the entertainment content service package it provides to subscribers, whether the game content is good or not, whether the subscriber plays or not, because the subscription fee has been charged in the early stage, it is actually not too important for Netflix.

65 million euros to acquire Next Games

In July 2021, there were media reports that Netflix would venture deeper into video games as it expected weak subscriber growth for film and TV streaming services. At that time, it was reported that Netflix, which was preparing to enter the game field, already had relevant talent reserves in some important positions. In March 2022, Netflix's previous plan began to have a more practical landing.

According to the news released by the Next Games official website on March 2, 2022, Netflix announced that it will launch an acquisition offer for Next Games. Under the Offer, Next Games shareholders will receive €2.10 per share of Next Games in cash, with a total value of approximately €65 million. Next Games' Board of Directors unanimously decided to recommend to shareholders accept the Tender Offer. The transaction is expected to close in the second quarter of 2022.

Perhaps spurred on by the news of the acquisition, Next Games' share price rose significantly. According to yingwei finance data, after the announcement of the above acquisition, Next Games rose nearly 120% on the Finnish exchange on the same day.

According to public information, Netflix is an online film rental provider in the United States, providing customers with DVD movie rental services, and can provide customers with online viewing services for movies or TV series. Listed on the NASDAQ in 2002, Netflix had a market value of $163.4 billion as of the close of U.S. stocks on March 3, 2022.

Next Games is Finland's first publicly available mobile game developer and publisher. According to Next Games' official website, its game works are mainly based on movies, TV series or books. The company's latest game, Strange Things: A Riddle Story, is based on Netflix's hit horror drama of the 1980s. Next Games' previous game work, The Walking Dead: No Man's Land, is also reported to be based on AMC TV's TV series The Walking Dead.

According to previous reports, Next Games mainly relies on third-party authorization to obtain IP, in addition, Next Games also hopes to have its own native IP games.

In terms of performance, according to previous media reports, in the first half of 2018, the market performance of the game "The Walking Dead: Our World" did not perform well, resulting in Next Games' revenue decline of 46% year-on-year in the first half of 2018. Revenue for the full year 2018 was US$12.28 million (approximately RMB83.1245 million), a significant decline from US$22.8 million (approximately RMB154 million) in the same period of 2017.

"China Business Daily" reporter saw on the official website of Qimai Data that under the search setting of Apple's iOS mobile phone in the United States, Next Games has 7 games, but 4 have been removed, including the native IP game Compass Point: West, which was launched on October 1, 2014 (it has been removed on August 31, 2021). Only The Walking Dead: No Man's Land (290th on the free role-playing list), The Walking Dead: Our World (154th in the free adventure category) and the new RangeRs: Puzzle Tales (outside the 1500 list) are still online.

The logic behind the acquisition

In the game industry, a relatively common consensus is that game products that emphasize more "player perspective" will be adapted into films, television and other forms of works with a stronger "sense of authorship", and there are few very successful cases. What about next Games, if you change the direction and mainly adapt the film and television IP into a game? Will it also be less likely to be sought after by the market?

Game industry commentator Zhang Shule mentioned in an interview with the "China Business News" reporter that the film-game linkage is actually a two-way obstacle, from film and television adaptation to the game of many works, but the popularity is general, there are few hits, film and television fans are precisely the box office guarantee of the adapted game, but also why the basic stable profit is not lost, and after a moment of popularity, due to the mismatch between the game content and structure and film and television, it is difficult to get sustained praise from film and television fans, so it is difficult to become a blockbuster.

But Zhang Shule added that this adaptation is not completely unprofitable. In general, the innovation drive of game adaptation film and television is insufficient, because even if the film and television are popular, the income is only a fraction of the game, and if the hot film and television is adapted into a game, even if it is a small profit, it is often more than the film and television itself, so many film and television animation and online TEXT IP have been adapted into games in large quantities.

In the view of He Xin, an analyst familiar with the US stock market, Netflix's entry into the game business, in fact, from the perspective of the industrial extension of film and television IP, is a natural thing, which can provide Netflix subscribers with other forms of content in addition to film and television drama works and expand its content library resources. Moreover, Netflix is positioned as a one-stop integrated entertainment solution provider, and games are a very important form of entertainment.

He Xin mentioned that because Netflix is a form of subscription service that charges membership fees, it is estimated that after Netflix acquires Next Games, Netflix's registered users can play games for free in the content library as long as they pay the membership fee, there will be no ads in the game, and there should be no in-app purchase settings. However, on distribution channels other than Netflix, games developed by Next Games may have a monetization model of in-app purchases or in-game advertising.

In He Xin's view, Netflix brings more forms of entertainment content to users under the condition that the membership fee is unchanged, which actually feels like a profit for users, so it is likely to attract more subscribers and bring more attention to its film and television works. In addition, in the vast number of subscribers of Netflix or the resulting strong content distribution capabilities, this adapted game can also obtain diversion from its film and television content users, and even if the game adapted from film and television can not become a continuous blockbuster product, it is still estimated to bring some revenue.

For Netflix's game business, He Xin believes that Netflix does not need to directly compete and compete with any other external company, although it is the same content platform and a latecomer in the game market, but Netflix is not the same as China's B station and ByteDance's model, and the game is only one of the forms of content services provided by Netflix for its members after users pay the subscription fee. Users contact this game, in most cases because of the first contact with the relevant film and television works, regardless of whether the adapted game content is good or not, whether the user plays or not, Netflix has actually charged the user's membership fee in the early stage.