SoftBank enters mobile game space, buys $1.5bn Supercell stake

SoftBank enters mobile game space, buys $1.5bn Supercell stake

Summary: The days of Zynga may be over, but can SoftBank profit by investing in smaller makers of mobile games?

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TOPICS: Tech Industry
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Japanese firm SoftBank has purchased a stake in mobile games maker Supercell for 150 billion yen ($1.53 billion).

The deal, announced on Wednesday, gives the telecoms group a 51 percent stake in Finnish firm Supercell. The small company -- supporting roughly 100 employees -- has few mobile games on the market, but the only two on offer have proved popular -- as "Clash of Clans" and "Hay Day" are now valued at $3 billion.

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Supercell has a daily revenue of roughly $2.4 million. The company's games are free, but in-app purchases provide a high amount of revenue. The two free-to-play games alone make the firm more valuable than the social media-dependent game maker Zynga, which is valued at $2.8 billion.

Zynga, maker of games such as 'Farmville' and 'Cityville,' is facing a tough financial time, recently reporting that it would cut 520 jobs from its global workforce and close game studios in Los Angeles, Dallas and New York, amid poor consumer demand outside of the aforementioned online games.

SoftBank's stake in Supercell will come from its mobile games maker subsidiary, GungHo Online Entertainment.

Ilkka Paananen, who will remain CEO of Supercell, reassured the company's users in a blog post, saying:

"This new partnership will accelerate Supercell towards our goal of being the first truly global games company, and gives us enough time to get there."

Paananen believes that a new market for games has been created through the free-to-play model and the explosion of mobile devices, and as these games are available to "billions of consumers," a new "era" for gaming now exists.

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Credit: Supercell

"At Supercell, one of our greatest aspirations is to become the first truly global games company," the chief executive writes. "Although we now have a major new investor in SoftBank, it is extremely important to understand that we are still in full control of our future and will continue to operate independently. In fact, and this may sound surprising to some, I feel that with this deal, we're now more independent and in control of our future than we ever have been."

Paananen says that the investment will help in two major ways -- an increase in resources provided by SoftBank to help the firm expand, and the support of founder Masayoshi Son, who is "all about the long term."

Son commented:

"In our quest to become the #1 mobile Internet company, we scour the globe in search of interesting opportunities and right now some of the most exciting companies and innovations are coming out of Finland. Supercell is one of those rare and special companies."

Market researcher Newzoo estimates that by 2016, global game revenues across all platforms will reach $86.1 billion.

Topic: Tech Industry

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