I wrote for Naavik about Netflix’s acquisition of Helsinki-based mobile studio Next Games. Read the full article here.

Why I wrote about this

Next Games is based in Helsinki, and in fact all four other Lightheart founders are ex-Next. This is why this topic was extra juicy.

What I left out from the Naavik article was my admiration for feat in negotiation that CEO Teemu Huuhtanen and his team did. Yes, the exit is meager, considering the total amount Next raised. But there was also the very real scenario that there are simply no buyers for Next.

The gist of it

Netflix announced it would acquire Next Games for €65 million ($70 million), offering €2.1 per share, a 125% premium over market price and roughly a 2.6x revenue multiple. For a company that had accumulated €45 million in losses over five years and struggled to turn its licensed hits into sustainable profitability, this was a strong outcome. Five years earlier, expectations had pushed its market cap above €200 million. The reality turned out more modest.

However, this deal tells a lot more about Netflix than Next. Netflix’s gaming model resembles Apple Arcade: subscribers get access to a catalog of games with no ads or in-app purchases. So far, traction has been limited compared to Netflix’s 200+ million streaming subscribers. But the company is clearly assembling capability, following its acquisition of Night School Studio and hiring of industry veteran Mike Verdu.

The real question is how Netflix reconciles two opposing forces: modern gaming’s shift toward live-service, evergreen experiences, and Netflix’s commitment to “no ads, no IAP.” Running live games without a game-specific monetization engine is difficult. Even a single successful free-to-play title can out-earn a $9.99-per-month subscription model on a per-user basis. Netflix may attempt to swim against the tide with smaller, series-adjacent games; or it may try to reinvent how live games are funded under a subscription umbrella. The direction will become clearer once the first true Netflix-era titles ship.

Key takeaways

  • For Next Games, €65M was a solid exit after years of losses and declining revenues.
  • For Netflix, this is about the long-term.
  • Netflix’s “no ads, no IAP” stance puts it at odds with how most successful live games monetize.
  • Subscription revenue alone can’t really support compelling live-service games.
  • Netflix is serious about games but its exact endgame remains unclear.