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[Usobuko]

Tencent Holdings Ltd. is discussing the purchase of SoftBank Group Corp.’s majority stake in Supercell Oy in a deal that may value the Finnish gamemaker at $9 billion, higher than previously thought, according to people familiar with the matter.

The talks are at an early stage and the acquisition may still fall apart, said the people, asking not to be identified because the matter is private. SoftBank acquired a majority interest in Helsinki-based Supercell for about $1.5 billion in 2013, and increased that to 73 percent last year. Bloomberg News reported last month that SoftBank was considering a sale of Supercell, which makes Clash of Clans and other mobile games, and that the deal would value the company at more than $5 billion.

Some context:

Microsoft bought Minecraft for $2.5 billions
Facebook bought Oculus Rift for $2 billions
Activision Blizzard bought King for $5.9 billions

This valuation is also many times ahead of market cap of gaming companies, even for some AAA western publishers. Softbank made like 3-4 billions in 3 years if this deal go through at that price.

Source: Bloomberg

 

[Paz]

Tencent is silently going to own everyone in gaming soon.

 

[kadotsu]

That's Star Wars and Marvel combined and you would still have a billion left to spend.

 

[Kordelle]

I need to watch that video again where they explain how evil Tencent is.

 

[Machina]

Good god, this is depressing

 

[1st Course]

That's Star Wars and Marvel combined and you would still have a billion left to spend.

Video game companies valuations really ballooned in the recent last years.

Less than 15 years ago, when Microsoft bought Rare for $375 million it was considered a record breaking deal and many deemed it very expensive. Now $375 million probably doesn't even get you a mid tier developer.

 

[Trace]

That's Star Wars and Marvel combined and you would still have a billion left to spend.

Yea it's a reminder that there are companies out there with more money than 50% of the game industry combined.

 

[element]

That's Star Wars and Marvel combined and you would still have a billion left to spend.

That is true, but it makes sense because the profitability is better. SuperCell has around 200 employees. They make billions with in the grand scheme of the things zero overhead. Compare that to Star Wars or Marvel, while those are amazingly important and prolific properties, you have to have the money to invest to do anything with the properties. Make a movie? Spend $200m on production alone and another $200m on marketing. That is a huge amount of risk. SuperCell probably spends 5% of that to make their game, which given their track record will end up making $1b.

Now $375 million probably doesn't even get you a mid tier developer.

Totally not true. I'd say most mid-tier developers and even some AAA devs could be bought for under $50m and perhaps as low at $10m. There is a HUGE difference between someone like Riot Games or Epic Games and companies like 5th Cell (RIP), Undead Labs, Motiga, Obsidian Entertainment, Turtle Rock. There is IP ownership, operational costs, legacy debt and future earnings. To give you an idea 2k bought Irrational Games for under $15m.

 

[Mr. Mister]

That is true, but it makes sense because the profitability is better. SuperCell has around 200 employees. They make billions with in the grand scheme of the things zero overhead. Compare that to Star Wars or Marvel, while those are amazingly important and prolific properties, you have to have the money to invest to do anything with the properties. Make a movie? Spend $200m on production alone and another $200m on marketing. That is a huge amount of risk. SuperCell probably spends 5% of that to make their game, which given their track record will end up making $1b.

Exactly. And it's clear that will last forever. 9 billion is a no brained.

 

[Triggerhappytel]

Video game companies valuations really ballooned in the recent last years.

Less than 15 years ago, when Microsoft bought Rare for $375 million it was considered a record breaking deal and many deemed it very expensive. Now $375 million probably doesn't even get you a mid tier developer.

This is massive hyperbole. Do you seriously believe that you couldn't buy a developer like, say, Obsidian, Media Molecule or Platinum for two fifths of a billion dollars?!

 

[Mistouze]

Good god, this is depressing

Well Clash Royale is pretty dope and Supercell has been pretty good at releasing consecutive hits as opposed to the "release a ton of shit and see what sticks" strategy other devs in that space follow.

 

[Blastoise]

That's a lot of user data for the Chinese.

 

[Qvoth]

Almost 10 billion for a phone game
Sad sad world we're living in

 

[Delusibeta]

Exactly. And it's clear that will last forever. 9 billion is a no brained.

Zynga, and to a lesser extent King, demonstrates that assuming that your market for your stuff will last for ever is extremely foolish.

 

[1st Course]

That is true, but it makes sense because the profitability is better. SuperCell has around 200 employees. They make billions with in the grand scheme of the things zero overhead. Compare that to Star Wars or Marvel, while those are amazingly important and prolific properties, you have to have the money to invest to do anything with the properties. Make a movie? Spend $200m on production alone and another $200m on marketing. That is a huge amount of risk. SuperCell probably spends 5% of that to make their game, which given their track record will end up making $1b.

Totally not true. I'd say most mid-tier developers and even some AAA devs could be bought for under $50m and perhaps as low at $10m. There is a HUGE difference between someone like Riot Games or Epic Games and companies like 5th Cell (RIP), Undead Labs, Motiga, Obsidian Entertainment, Turtle Rock. There is IP ownership, operational costs, legacy debt and future earnings. To give you an idea 2k bought Irrational Games for under $15m.

This is massive hyperbole. Do you seriously believe that you couldn't buy a developer like, say, Obsidian, Media Molecule or Platinum for two fifths of a billion dollars?!

Probably a bit of hyperbole yeah. I guess when I was thinking of mid tier I was thinking more of "upper mid tier" e.g: Gameloft, CDPR, Paradox (all have $400m+ valuations).

 

[element]

Zynga, and to a lesser extent King, demonstrates that assuming that your market for your stuff will last for ever is extremely foolish.

The issue that hurt Zynga is they exploded in size hitting almost 3,000 employees and King has about 1,500. Each of them also building and supporting tons of games. Each of their costs are exponentially higher due to having so many games and needing the staff to support them. SuperCell business model is to keep the company small and lean, release only games that are going to be HUGE and not be scared to kill anything that won't work.

 

[Aselith]

Makes sense. They've shown they can make more than one super popular game on mobile which is not easy. Clash of Clans and Clash Royale are both incredibly popular seems like.

 

[Paz]

Video game companies valuations really ballooned in the recent last years.

Less than 15 years ago, when Microsoft bought Rare for $375 million it was considered a record breaking deal and many deemed it very expensive. Now $375 million probably doesn't even get you a mid tier developer.

Nah you're wrong, 375 could totally buy you a mid tier developer - Like Rare. Kekeke.

But I think people are clueless about Supercell in this thread, their profitability is incredible.

 

[element]

Probably a bit of hyperbole yeah. I guess when I was thinking of mid tier I was thinking more of "upper mid tier" e.g: Gameloft, CDPR, Paradox (all have $400m+ valuations).

All of which are publishers with development teams. I really can't think of many private/independent developers that couldn't be acquired for over $100m.

 

[Aselith]

But I think people are clueless about Supercell in this thread, their profitability is incredible.

http://www.gamesindustry.biz/articles/2016-03-09-supercells-2015-financials-impress

Yeah earnings of 2.3 billion last year

 

[Triggerhappytel]

Good god, this is depressing

Almost 10 billion for a phone game
Sad sad world we're living in

Why is this "depressing" and "sad"? Is it because they're incredibly successful in a marketplace you don't care for?

Zynga, and to a lesser extent King, demonstrates that assuming that your market for your stuff will last for ever is extremely foolish.

I'm pretty sure Mr. Mister was being sarcastic.

All of which are publishers with development teams. I really can't think of many private/independent developers that couldn't be acquired for over $100m.

Precisely. CDPR, for example, are a top-tier developer, a publisher and own one of the most prominent digital storefronts on PC. To suggest they are mid-tier in any capacity is fucking ridiculous.

 

[Ninja Dom]

Almost 10 billion for a phone game
Sad sad world we're living in

I don't get it, why are you upset?

 

[darkinstinct]

http://www.gamesindustry.biz/articles/2016-03-09-supercells-2015-financials-impress

Yeah earnings of 2.3 billion last year

No, revenue. Earnings were 900 million. Which means 9 billion would be a fair price if it were a traditional company. For a mobile game company only a moron pays 10x earnings when it is already big.

 

[SolidChamp]

Almost 10 billion for a phone game
Sad sad world we're living in

My sentiments exactly.

 

[1st Course]

Why is this "depressing" and "sad"? Is it because they're incredibly successful in a marketplace you don't care for?



I'm pretty sure Mr. Mister was being sarcastic.



Precisely. CDPR, for example, are a top-tier developer, a publisher and own one of the most prominent digital storefronts on PC. To suggest they are mid-tier in any capacity is fucking ridiculous.

I'm comparing by financials, and they are indeed mid tier by that metric. They made ~200 mln USD revenue last year. That 1/20 what EA/Acti/Ubi made and significantly less than even JPN publishers like Koei/Marvelous.

 

[TheChewyWaffles]

That's crazy. No way it's worth that much.

 

[Aselith]

No, revenue. Earnings were 900 million. Which means 9 billion would be a fair price if it were a traditional company. For a mobile game company only a moron pays 10x earnings when it is already big.

Yeah

 

[down 2 orth]

There's a lot of funny money in China, but all good bubbles must come to a pop.

 

[Aselith]

There's a lot of funny money in China, but all good bubbles must come to a pop.

What leads you to believe it's a bubble F2P has been huge in China for like what 15 years?

 

[down 2 orth]

What leads you to believe it's a bubble F2P has been huge in China for like what 15 years?

I mean the Chinese economy.

 

[hemo memo]

Why is this "depressing" and "sad"? Is it because they're incredibly successful in a marketplace you don't care for?

The marketpalce I don't care for is extremely affecting the marketplace I care for.

 

[Triggerhappytel]

I'm comparing by financials, and they are indeed mid tier by that metric. They made ~200 mln USD revenue last year. That 1/20 what EA/Acti/Ubi made and significantly less than even JPN publishers like Koei/Marvelous.

Again, you're mixing up developers and publishers. You've gone from suggesting CDPR are a "mid tier developer" to comparing them to the largest videogame publishers.

 

[Mario]

The issue that hurt Zynga is they exploded in size hitting almost 3,000 employees and King has about 1,500. Each of them also building and supporting tons of games. Each of their costs are exponentially higher due to having so many games and needing the staff to support them.

IMO Zynga's main problem was when they transitioned to mobile they didn't revamp their development and publishing process enough creating massive technical problems and inefficiencies.


SuperCell has proven an incredibly bankable developer and publisher, perhaps having the most successful successive hit rate and ROI across a portfolio of content of any gaming company, ever. It is not surprising they are sought after, and if any gaming company can continue such a winning streak its them.

 

[Lucumo]

Why not just use this thread?

http://www.neogaf.com/forum/showthread.php?p=206172447

 

[element]

Again, you're mixing up developers and publishers. You've gone from suggesting CDPR are a "mid tier developer" to comparing them to the largest videogame publishers.

yeah, waiting for a independent/privately owned developer that could command over $100m.

That's crazy. No way it's worth that much.

Come on. Snapchat has an valuation of $20b and they have never turned a profit. Whatsapp never turned a profit and was bought for $19b.

IMO Zynga's main problem was when they transitioned to mobile they didn't revamp their development and publishing process enough creating massive technical problems and inefficiencies.

Very true. They stumbled hard on the transition to mobile and missed that window entirely. But in doing so, they increased the size of the company and started pumping out games in the attempt to find gold. It was almost as if they had no idea what worked or why it worked.

SuperCell by all accounts are much more controlling and detailed on games they actually spend marketing dollars on. Games much go through a number of gates to make sure that the game hits a quality bar that will make it successful. The last round had 10 games, 7 were killed as prototypes, 2 were killed at soft launch and 1 global launch which ended up being Clash Royale. They just have a much different way of doing business than any other F2P mobile company out there.

 

[Triggerhappytel]

yeah, waiting for a independent/privately owned developer that could command over $100m.

Yeah; there aren't many. Maybe Epic, maybe Techland, probably some others who will in hindsight seem stupidly obvious, but no-one I can think of approaching $375 mil.

 

[ashecitism]

Reuters is reporting it too

$6.6B deal

 

[IAmAnAgnostic]

No, revenue. Earnings were 900 million. Which means 9 billion would be a fair price if it were a traditional company. For a mobile game company only a moron pays 10x earnings when it is already big.

I think you underestimate the value of having a developer whose ever game has made more than half a billion dollars. (and some a lot more) They show no signs of slowing down either, their newest game Clash Royale is their most successful launch by far.

 

[Slayer-33]

We are in the wrong business boys...

Time to develop games...

 

[mieumieu]

Let me tell you how evil Tencent is.

A significant percentage of experienced (10 year+) game programmers in Shanghai are at Tencent. Other companies just cannot compete with them because of the package.
They can develop multiple MMO/mobile projects at once. These projects can be in indefinite closed beta because they have the money to burn. The overtime culture is horrible also.
They acquire important IP just for the sake of crushing competition. They may not use them well, but they gotta not have others use them!

They are a tech conglomerate that is difficult to imagine if you are not Chinese.

 

[Interfectum]

Let me tell you how evil Tencent is.

A significant percentage of experienced (10 year+) game programmers in Shanghai are at Tencent.
They can develop multiple MMO/mobile projects at once. These projects can be in indefinite closed beta because they have the money to burn!
They acquire important IP just for the sake of crushing competition. They may not use them well, but they gotta not have others use them!

They are a tech conglomerate that is difficult to imagine if you are not Chinese.

Not sure what's evil about these.

- They attract a lot of the good talent.
- They have multiple irons in the fire.
- Capitalism.

 

[StereoVsn]

Yeah; there aren't many. Maybe Epic, maybe Techland, probably some others who will in hindsight seem stupidly obvious, but no-one I can think of approaching $375 mil.

Valve! What? They are a developer... kind of....

 

[Twilight Princess]

Not sure what's evil about these.

- They attract a lot of the good talent.
- They have multiple irons in the fire.
- Capitalism.

Evil cause of China. /s

 

[StereoVsn]

Evil cause of China. /s

Well, Tencent does some shady shit separate from this like their credit worthiness plan but stuff being described here could be EA from a few years back.

 

[kswiston]

You'd think that Zynga would be a warning against overspending on a mobile dev.

If Supercell was clearing $900M after expenses last year, I could see something in the $4-5B range, but there's no real guarantee that they will continue to grow for much longer, or that they will even be making half of that in 3-4 years.

F2P games and apps aren't going anywhere, but I think we are going to see a bubble burst on some of these super high valuations, similar to what happened with the Dot Com craze 15 or so years ago.

 

[ashecitism]

Yeah; there aren't many. Maybe Epic, maybe Techland, probably some others who will in hindsight seem stupidly obvious, but no-one I can think of approaching $375 mil.

Tencent almost owns 50% of Epic btw and that was more than $300m. And then we have Valve...