Japanese telecommunications giant SoftBank made U.S. headlines when it bought most of Sprint for $21.6 billion earlier this year, but the company isn’t out of cash yet. Now it has partnered with its subsidiary GungHo Online Entertainment to buy 51 percent of a Finnish mobile game maker called Supercell Oy for $1.53 billion.
Supercell will continue to operate independently while leveraging SoftBank's strategic resources, and will also officially become a subsidiary. The mobile gaming company is best known for popular apps like Clash of Clans and Hay Day, which have reached top grossing status in Apple’s App Store in 137 and 96 countries respectively.
“From February 2013 to August 2013, Supercell was the number one publisher in the world among the apps in the games category of the App Store,” Softbank said in a statement. “This new strategic partnership with SoftBank and GungHo will help accelerate Supercell's goal of becoming the ‘first truly global games company.’”
The Smell of Opportunity
Of course, SoftBank has a clear agenda here. With GungHo and Supercell as drivers in content services, the company is moving closer to its goal of becoming the number one mobile Internet company. It looks like one hand is truly washing the other in this mega-deal. Here is some of Softbank’s reasoning for choosing Supercell over another mobile gaming company:
“In our quest to become the number one 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,” said SoftBank founder Masayoshi Son. “Supercell is one of those rare and special companies.”
For his part, Ilkka Paananen, Supercell’s founder and CEO, said the “combination of tablets, mobile and the free-to-play business model has created a new market for games -- one that will be accessible to billions of consumers…” The bottom line here: all three companies smell opportunity.
Overcoming a Mobile Challenge
We caught up with Billy Pidgeon, an independent video games analyst, to get his thoughts on the blockbuster gaming acquisition. He told us the investment should help Supercell penetrate more Asian markets. But he’s surprised that the company didn’t seek a Chinese investor that could help it drive into China, where much of the gaming growth is occurring.
“There is still money to be made in Japan and Korea, even though they are mature markets,” Pidgeon said. “Everybody has a phone and they are moving from feature phones to smartphones rapidly and that may help as well because Supercell’s strength is in smartphones.”
Pidgeon said this wasn’t just an empty investment. Supercell’s margins are high and the company has some outrageously successful games. SoftBank could have gone after companies with great tech or great teams but that may not have yielded short-term impact. He concluded, “Supercell is making money in the free-to-play market, which is a challenge.”